Wed, Apr 11, 2012 - Page 10 News List

Bank of Japan leaves key rate unchanged

DEFLATION:The Japanese central bank maintained its warning that the country’s longstanding deflation issue, as well as Europe’s debt problems, would continue to lurk

AFP, TOKYO

Cherry blossoms are in full bloom in front of the Bank of Japan headquarters in Tokyo yesterday.

Photo: Reuters

The Bank of Japan (BOJ) yesterday left its key interest rate unchanged and maintained its view that the world’s third-largest economy was picking up, but dashed hopes for fresh easing measures.

The central bank, which made the announcement after a two-day policy board meeting, said the vote to keep rates unchanged at between zero and 0.1 percent was unanimous.

Tokyo shares ended flat yesterday, giving up an earlier rally after the bank dashed hopes it would usher in further easing measures to stimulate the world’s third-largest economy.

The Nikkei 225 index at the Tokyo Stock Exchange edged down 0.09 percent, or 8.24 points, to 9,538.02. The broader TOPIX index of all first-section shares lost 0.03 percent, or 0.26 points, at 813.43.

The news also boosted the yen. The greenback was changing hands at ¥81.30 in Tokyo afternoon trade, down from ¥81.49 in New York late on Monday and well off the ¥81.80 level yesterday before the central bank’s announcement.

The euro was at ¥106.60, down from ¥106.80 in New York and well off ¥107.38 earlier yesterday.

The BOJ warned that Europe’s sovereign debt problems and global commodity prices remained a concern and added that the key US economy was “improving moderately.”

“Japan’s economic activity has shown some signs of picking up, although it has remained more or less flat,” the BOJ said in a statement.

The battle against the stubborn deflation that has haunted the nation’s economy for years would continue, the bank warned.

Falling prices cut into corporate profits, leading firms to slash jobs and put off capital investment that generates growth, while also encouraging consumers to delay purchases.

“The bank recognizes that Japan’s economy faces the critical challenge of overcoming deflation and returning to a sustainable growth path with price stability,” it said.

The statement added that the BOJ would “pursue powerful monetary easing, and will support private financial institutions in their efforts to strengthen the foundations for Japan’s economic growth.”

Also yesterday, Japanese Minister of Finance Jun Azumi said he hoped the central bank would “act appropriately” by reaching into its policy bag to help fuel economic growth.

“I believe this is an important month for us to build a solid base for the economy this year so it can make a further leap forward,” he told a regular news briefing.

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