Japan's central bank maintains key interest rate between zero and 0.1%

19:36, December 21, 2010      

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The Bank of Japan (BOJ) on Tuesday kept its key interest rate unchanged between zero and 0.1 percent in a widely expected decision as the yen has shown recent signs of weakening against the U.S. dollar and given Japan's fragile economic recovery a boost.

Following the BOJ's two-day policy meeting that ended the same day, the central bank's board voted unanimously to keep its key interest rate at virtually zero as part of its monetary easing policy which commenced in October and is aimed at stimulating the nation's sluggish economy.

The BOJ also said that it will continue to purchase various financial assets and provide longer-term funds "so that the effects of comprehensive monetary easing spread."

The central bank launched a new 5 trillion yen asset buying program in October, to boost private investment. The bank has been purchasing government and corporate bonds as well as riskier exchange-traded investment funds and real estate investment trusts, to boost liquidity in the economy.

BOJ Governor Masaaki Shirakawa said Monday that increasing the size of the emergency asset buying program would be "an important option for the central bank if it is to make additional efforts to help fight deflation in Japan."

The central bank also maintained its assessment of the nation's economy, saying it still shows signs of a moderate recovery from deep recession but that the recovery was "pausing."

"The bank will continue to carefully examine the outlook for economic activity and prices, and take policy action in an appropriate manner," the central bank said in a statement following the conclusion of the policy board's meeting.

With regard to growth in Japan's exports slowing and industrial production falling in recent months, as demand from emerging markets wanes and a government subsidy scheme to encourage the purchase of environmentally-friendly vehicles expired in September, the BOJ said that this has impacted business confidence, the pace of recovery is likely to quicken from slow to moderate.

"Production has recently declined slightly and business sentiment has also been somewhat weak, particularly in the manufacturing sector," it said.

"Japan's economy is likely to grow at a slower pace for some time but is expected to return to a moderate recovery path," the central bank said, reiterating its view from the previous policy meeting.

The BOJ's nine-member policy board also voted unanimously Monday to maintain its effectively interest-free uncollateralized overnight call rate.

Source: Xinhua
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