The Bank of Japan held off fresh easing measures yesterday and repeated its view that the economy was “picking up moderately,” but warned Europe’s ongoing debt crisis continued to cast a shadow.
After a two-day policy meeting, the central bank said it left unchanged its policy tool, a ￥70 trillion (US$891 billion) asset purchase program while it would also hold interest rates unchanged at between zero and 0.1 percent.
“Japan’s economy has started picking up moderately as domestic demand remains firm, mainly supported by reconstruction demand” following the March 11 earthquake and tsunami disaster, it added.
The nation’s economy was hammered by last year’s terror, which wreaked havoc on industrial production, while flooding in Thailand and the yen’s surge to record highs against the dollar later in the year also hurt growth.
The bank yesterday said “overseas economies have shown moderate improvement,” but added that “in global financial markets some nervousness continues to be seen, mainly due to concern about the European debt problem.”
Europe is a major market for Japanese products and Tokyo warned that the eurozone’s fiscal crisis was the biggest threat to recovery.
The bank’s decision yesterday was largely in line with market expectations, and came after the US Federal Reserve and European Central Bank also held off fresh measures following recent policy meetings.
“Japan’s economy started improving ahead of others,” Yuji Kameoka, chief currency strategist at Daiwa Securities, told Dow Jones Newswires, adding that the Bank of Japan would likely take a “wait-and-see stance” on fresh measures.
“Emerging economies like China aren’t bad. There are also signs of improvement in the US economic indicators recently. The exception is Europe.”
The yen got a boost following the bank’s decision, with the euro buying ￥96.99 and the US dollar at ￥78.36, compared with ￥97.22 and ￥78.52 earlier.
Last month, the bank said it expected Japan’s economy to expand 2.2 percent in the fiscal year through March 2013, slightly lower than its April outlook of 2.3 percent but still above a January forecast of 2 percent.
It kept a 1.7 percent growth forecast for the next fiscal year unchanged.