By Tim Garton ByThe Financial TimesFinancial markets are under pressure again, with the global economy now in recession and a global capital outflow of $16 trillion, according to the Bank of Japan (BOJ).
The BOJ said it expects GDP growth to slow to 0.6 per cent this year and 0.7 per cent in 2018 from 0.9 per cent and 1.1 per cent respectively in 2019.
“The central bank will continue to hold the policy rate unchanged until the economic situation improves,” BOJ Governor Haruhiko Kuroda said on Wednesday.
He said the central bank’s goal was to avoid a “severe financial shock” and “keep the economy in a sustainable mode”.
Inflation is set to reach the 2-per-cent target in 2019 and then rise to 3.5 per cent by the end of the decade.
The BOE said its inflation target for 2019 was set at 1.5 to 2 per cent.
“Inflation expectations remain high, with expectations of further increases,” the BOJ’s chief economist, Yuriko Koike, said in a statement.
“However, the central Bank should not overreact to a sharp drop in inflation and should wait for more evidence of a sharp recovery.”
The BOI’s latest report on the global economic situation said the global financial system was in a financial crisis.
The world economy is now in a recession and in a state of crisis.
The world’s debt-to-GDP ratio, which measures debt to income, has reached a record high of 190 per cent of gross domestic product (GDP), according to a Reuters poll.
The global economy is the fifth largest in the world.
The current economic outlook for 2019 shows the global recession is intensifying.
“We have seen an acceleration of economic contraction since the end (of) the financial system crisis, which has led to a significant drop in global economic growth and economic activity,” the BoJ said in its latest outlook.
“This has had a profound impact on global demand and has been reflected in a reduction in global growth.”
It said that global demand has fallen by 0.4 per cent since June 2015.
In a separate report, the International Monetary Fund said it is more likely that the global crisis will hit the UK than other European Union member states.
The IMF said that as well as its own economic problems, the UK has been hit by a slump in consumer confidence and a drop in household wealth.
“For the UK, the current crisis could have a negative impact on consumer spending, financial stability, and employment prospects,” the IMF said.
The IMF forecast a contraction of 1.4 percentage points to 2.1 percentage points in the UK’s GDP in 2019, compared to a contraction in its economic growth of 0.5 percentage points.
“It is likely that growth will remain subdued in the short-term and will slow in 2019,” it said.