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BOJ stands pat on monetary easing, ups assessment

by Jun Hongo

Staff Writer

The Bank of Japan on Thursday put off additional monetary easing while raising its assessment of the economy, saying it appears to have stopped weakening.

After its two-day Policy Board meeting drew to a close, BOJ Gov. Masaaki Shirakawa told a news conference that signs of the economy picking up have become observable.

“We’ve upgraded our economic assessment by one step and agreed that the weakening has stopped,” Shirakawa said, citing such factors as an upward trend in public and housing investment.

While developments in overseas economies continue to require attention, the Japanese economy is expected to “level off more or less for the time being, and thereafter it will return to a moderate recovery path as domestic demand remains resilient,” the BOJ said.

The Policy Board agreed in a unanimous vote to maintain the bank’s virtually zero interest rate policy. It turned down a proposal by board member Ryuzo Miyao to maintain the zero interest rate up until the 2 percent inflation target is in sight, by a vote of 8 against 1.

In a statement released after the meeting, the BOJ named Europe’s sovereign debt issues and the impact of the soured ties between Tokyo and Beijing as some of the risks facing the domestic economy.

Earlier this month Shirakawa revealed his intention to resign on March 19 instead of April 8, when his term officially ends.

Asked if there was anything he would have done differently, Shirakawa said it would be inappropriate to comment before his term officially ends.

The governor also didn’t go into who should succeed him, but said the new chief should have a balanced opinion, possess a wide range of knowledge, including global perspectives, and be humble enough to listen to different opinions.

Last month, the BOJ doubled its inflation target to 2 percent and revealed that it would launch an “open-ended” asset purchase program next January in further easing its monetary policies. The bank and the government also released a rare joint statement in which they agreed to coordinate closely to fend off deflation.

But the BOJ said Thursday the year-on-year rate of the consumer price index is expected to turn negative for the time being.

The policy meeting was held at a time when the yen has weakened considerably against other major currencies amid expectations generated by aggressive monetary easing pursued by Prime Minister Shinzo Abe.

Some developed and emerging economies have criticized the monetary easing policies as intentionally driving down the yen, which could spark debate on a “currency war” at a meeting of Group of 20 financial chiefs starting Friday in Moscow.

Information from Kyodo added