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The Bank of Japan’s decision-making panel opened a two-day meeting Monday as analysts widely expect the central bank to maintain its zero-interest rate policy by holding the overnight call money rate near zero.

The market is now focusing on when the BOJ will raise the benchmark short-term interest rate, and a semiannual economic outlook report to be issued April 28 is likely to provide a clue.

Market players are also likely to scrutinize remarks by BOJ Gov. Toshihiko Fukui on the future direction of monetary policy at a news conference scheduled for Tuesday afternoon, following the two-day meeting.

In light of the economic recovery and Fukui’s upbeat views on consumer prices, an increasing number of BOJ watchers anticipate that the central bank will raise the overnight call rate by 0.25 percentage point in the summer, possibly on July 14 when the nine BOJ policymakers wrap up another two-day meeting.

Fukui has suggested the central bank will maintain the zero-interest rate policy at least until it lowers the outstanding balance of current account deposits held by financial institutions at the central bank to the legally required levels of around 6 trillion yen.

BOJ assets down

Total assets held by the Bank of Japan at the end of fiscal 2005 marked their first decline in seven years as a result of a change in monetary policy in March, according to a BOJ report.

The outstanding balance of assets at the central bank totaled 144.6 trillion yen at the end of March, down 3.9 percent from a year earlier, the first year-on-year drop in bank assets since the end of fiscal 1998.

The decrease was led by a drop of 5.9 trillion yen in government bond holdings to 93.27 trillion yen due to the March 9 termination of the so-called quantitative easing monetary policy. Such bonds make up the largest portion of assets held by the BOJ.

Assets at the BOJ rise when the central bank supplies cash to the market by buying government bonds and other instruments, but large purchases have not been necessary since the policy shift.

Meanwhile, the balance of current account deposits held by the BOJ on behalf of financial institutions, which represent liabilities to the central bank, also fell 4.6 trillion yen to 31.20 trillion yen.