Japan's central bank decided on Thursday to keep the monetary policy, while upgraded its assessment of the world's third-largest economy.
At the end of a two-day policy meeting, Bank of Japan's (BOJ) Governor Masaaki Shirakawa and his eight board colleagues voted unanimously to maintain its asset purchase program at the current JPY 101 trillion (USD 1.1 trillion) by the end of this year, apparently in order to assess the effect of a 2 percent inflation target the additional measures. The policy board also decided to leave the unsecured overnight lending rate unchanged at a range of zero percent to 0.1 percent in a widely expected move.
"The BOJ recognizes that the inflation rate consistent with price stability on a sustainable basis will rise as efforts by a wide range of entities toward strengthening competitiveness and growth potential of Japan's economy make progress," the central bank said in a statement after the meeting. The BOJ will pursue aggressive monetary easing, aiming to achieve the 2-percent inflation target, through a virtually zero interest rate policy and purchases of financial assets, as long as it judges it appropriate to continue with each policy measure respectively, the statement said.
The BOJ upgraded its assessment of the Japanese economy, saying, "it has stopped weakening." Exports appear to stop decreasing, mainly against the background of the developments in overseas economies, and industrial production has stopped decreasing, it said. With regard to the outlook, the BOJ said Japan's economy is expected to level off more or less for the time being, and thereafter, it will return to a moderate recovery path mainly as domestic demand remains resilient partly due to the effects of various economic measures and overseas economies gradually emerge from the deceleration phase.
It also pointed out risks to Japan's economy, warning there remains "a high degree of uncertainty," including the prospects for the European debt problem, the momentum toward recovery for the US economy, and the effects of the recent bilateral relationship between Japan and China.
The policy meeting was the last chaired by Gov. Shirakawa, who will step down from the post on March 19 along with his two deputies, before his five-year term expires in April. Haruhiko Kuroda, the government's nominee for the next central bank chief, vowed on Monday to do his best to achieve a 2-percent inflation target at the earliest to end deflation. Kuroda, currently working as Asian Development Bank President, is regarded as a supporter of Prime Minister Shinzo Abe's aggressive monetary easing policies.
The appointments of Kuroda and two new deputy governors must win approval by both chambers of parliament, which the government and the ruling coalition are seeking to obtain by March 15.