The Bank of Japan opted Friday not to do anything with interest rates, after the central bank determined that economic activity and price developments had little changed.

“The Bank of Japan will encourage the uncollateralized overnight call rate to remain at effectively zero percent,” the central bank said in a statement, referring to its call market operations, where financial institutions borrow and lend from each other to manage their daily financing.

The BOJ meeting also concluded that “Japan’s economy continues to recover steadily,” carrying over the tone from its April report.

The central bank said in its May report on recent economic and financial developments that the economy is expected to “expand moderately,” modifying the wording of its April report that the economy is expected to “continue to recover steadily.”

The BOJ said the reason for the revision was that “the conditions of persistent excess supply have been dispersed, and the output gap now seems to be close to zero.”

The decision, made during the central bank’s two-day Policy Board meeting ended Friday, is the third consecutive time the BOJ has refrained from hiking interest rates since it lifted the five-year-old “quantitative easing policy” on March 9. The unorthodox policy was designed to fight deflation by pumping excess liquidity into the banking system, thereby keeping interest rates at virtually zero.

Since then, speculation has been rife that the BOJ will raise rates soon, especially after draining the huge pool of liquidity — the outstanding balance of current account deposits held by banks at the BOJ — to the legally required level of some 6 trillion yen from over 30 trillion yen by early summer.

“The balance of current account deposits has been steadily reduced and the process to absorb the excess balance will be completed in several weeks at the current pace,” BOJ Gov. Toshihiko Fukui told a news conference later in the day, saying he expected the balance to “settle at a level somewhere below 10 trillion yen.”

There’s no way to know, however, how much the balance can be reduced after that point while the BOJ maintains its basic policy of keeping interest rates near zero, Fukui said, dampening the growing expectations for an interest rate hike.

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