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The Bank of Japan said Thursday it will hold its key interest rate steady at 0.1 percent and pledged anew to keep monetary policy “extremely” easy amid rising pressure from the government to do more to end deflation.

At a two-day policy meeting, the BOJ continued to describe the economy as “picking up” and did not announce any new policy initiatives.

As for the downtrend in prices, the BOJ said it will be a “critical challenge” to overcome deflation and return to sustainable growth.

“To this end, the bank will continue to consistently make contributions as the central bank . . . (and) aim to maintain the extremely accommodative financial environment,” the BOJ said, repeating the same rhetoric against deflation.

BOJ Gov. Masaaki Shirakawa said the bank sees its current framework for price stability as appropriate, noting there has been increasing awareness of the adverse effects of an inflation target amid the global financial crisis, such as focusing too much on price movements and overlooking other problems.

“Of course, we do not say our framework is the best in all weather . . . but currently, we believe the BOJ’s framework is the most appropriate,” he said.

Likening deflation to low body temperature, Shirakawa also said the economy needs “internal reform” and that improving productivity would be the key to defeating deflation.

To that end, he said, “It is important for the authorities to review various regulations and frameworks to help companies’ business efforts, considering the fierce global competition they are facing.”

The policy meeting came after Finance Minister Naoto Kan put fresh pressure on the central bank Tuesday to take more action to support the economy, saying at a House of Representatives Budget Committee meeting that he wants to see price growth of about 1 percent and that the government and the BOJ should work closely to that end.

The BOJ has forecast that deflation will last until fiscal 2011, although it expects price falls to abate as a recovery develops.

Maiko Noguchi, an economist at Daiwa Institute of Research, said the Democratic Party of Japan-led government apparently wants the BOJ to do more to support the economy as the ballooning public debt limits its fiscal options. The BOJ, however, is also running out of tools, she said.

“The policy rate is already at 0.1 percent . . . and when considering unorthodox operations, few choices are left” in terms of effectiveness, she said.

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