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Japan presenting Highest Quarterly Growth Rate in 3 Years

The expectations that Japan`s Central Bank will raise interest rates has grown, after it has been reported that during the last quarter of 2006 the Japanese economy grew in the fastest rate in the past 3 years. These expectations have caused the Yen the biggest gain against the Dollar, since May. From October to December the Japanese economy grew 1.2% faster than the earlier quarter, July to September. In comparison to October to December 2005, Japan`s GNP growth rate grew by 4.8%, the sharpest growth rate in the past 3 years.

The GNP data, gave the Yen an immediate pep shot, sending the Yen to 119 Yen to the Dollar, although it has since lost some ground. The data also had a positive effect on the Japanese stock market, the Nikkei 225, Japan`s leading index, reached a new seven year record. Some analyst feel that the Japanese economy is just about to reach full recovery and begin growing as it did before the Asian market crash.

The Japanese government is doing its best not to raise interest rates prematurely, out of fear that such a move may hinder economic recovery. ``The BOJ may not do anything next week,`` Michael Woolfolk, senior currency strategist at the Bank of New York in New York. ``They are still under political pressure.`` Last month, The Bank of Japan avoided raising interest rates, leaving interest rates at 0.25%. The bank mentioned the motivation for leaving the interest rates as they are were the weak Japanese private consumption.