The Bank of Japan decided Friday to maintain its 0.25 percent short-term interest rate as the central bank’s assessment of economic and financial condition in the past month remained unchanged.

The central bank’s nine-member Policy Board made the unanimous decision after a two-day meeting that ended Friday noon.

In its monthly report of recent economic and financial developments, the BOJ said Japan’s economy is expected to continue expanding moderately — the same expression it used in July.

It is the first Policy Board meeting since the BOJ decided to raise the interest rate last month.

In July, the board unanimously voted for a 0.25 percent hike of short-term lending rate, or overnight call rate, ending more than five years of its “zero-interest-rate” policy.

The interest rate hike led major banks, including the mega Bank of Tokyo-Mitsubishi UFJ, to raise short-term prime lending rates — the base rate for blue-chip corporate borrowers — by 0.250 percentage point to 1.625 percent.

In March, the BOJ scrapped its so-called quantitative easing policy, which allowed the central bank to flood the banking system with liquidity to combat deflation.

The central bank has been giving mixed messages over the past month on whether it will hike the interest rate again by the end of this year.

During a news conference in July, Gov. Toshihiko Fukui said the BOJ would “slowly” adjust interest rate levels after considering economic and price conditions, which caused market watchers to suspect there would be no hike this calendar year.

However, Atsushi Mizuno, one of the Policy Board members, said in a speech on Aug. 2 that it is a “wrong interpretation” to consider that there would not be a rate hike by the yearend.

Speaking at a news conference Friday, Fukui said the BOJ will keep an open mind on the timing of the next interest rate hike, making a decision based on economic conditions.

“I cannot deny the possibility of another interest rate hike by the end of the year, nor do I intend to suggest there will be one,” Fukui said.

He said the central bank will “slowly adjust” the money supply as economic conditions warrant.

The BOJ chief also said he intends to serve out his term, which ends in March 2008, despite calls for him to step down over his investment in the Murakami fund. The head of the fund, Yoshiaki Murakami, faces trial for insider trading.

“I naturally have it in mind to fulfill my duty during my tenure. I will humbly accept voices of criticism, deeply reflect on my acts and try to fulfill my duty.”

Fukui invested 10 million yen in the Murakami fund when it was set up in 1999. He was criticized for not cashing out the investment when he became BOJ governor in March 2003.

Fukui pulled his money from the fund at the end of June after making 14.73 million yen in profits.

Asked if he has already received the proceeds, Fukui said he has yet to be notified and does not know whether he has received the money.

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