BOJ board sticks with interest rate policy

by Jun Hongo

Staff Writer

The Bank of Japan Policy Board said Friday it will maintain its virtually zero-interest rate policy while putting off additional monetary easing to cope with impact from Europe’s debt crisis and the yen’s sharp rise.

As a result of the unanimous agreement reached by the nine board members, the BOJ will leave unchanged its credit and asset-purchasing programs totaling ¥50 trillion that were announced as additional monetary easing measures in August.

Following the two-day board meeting, BOJ Gov. Masaaki Shirakawa said uncertainty over Europe’s debt crisis has begun affecting the actual economy of the region.

Sluggish improvement of the employment rate in the U.S. is also of global concern, he added.

“The yen is being purchased as a relatively safe currency,” Shirakawa said, explaining that such conditions of the global economy are clearly affecting Japan.

“We will continue to carefully examine the outlook for economic activity and prices and take appropriate actions,” Shirakawa told reporters.

Meanwhile, the BOJ released a statement saying it “is steadily implementing its decision in August to further enhance monetary easing, especially through the purchase of financial assets.”

The central bank also revealed it will continue its assistance to quake-hit areas in the Tohoku region by extending a ¥1 trillion loan scheme for banks in the area for another six months until the end of April.

Touching on the domestic outlook, the BOJ said it expects the economy to return to a “moderate recovery path, backed by a moderate increasing trend in exports and by a rise in domestic demand for restoring capital stock.”

The bank also noted that business investment has been increasing while private consumption has been picking up on the whole.

However, the BOJ also said the consequences of the sovereign debt problem in Europe and the effects of balance-sheet adjustments on the U.S. economy in the wake of the 2008 financial crisis “continue to warrant attention,” calling it a “risk to the economic outlook.”

While the board unanimously agreed the situation does not demand that they act again and initiate new monetary policies, the BOJ said it will continue to carefully monitor how the domestic economy will be affected by such risks in order to ensure financial market stability.