Japan’s central bank voted to keep interest rates near zero, holding off on further measures to tackle a strong yen that is undermining the country’s fragile economic recovery.
In a unanimous decision, the Bank of Japan’s nine-member policy board decided yesterday to maintain its key interest rate at 0.1 percent, as widely expected. The central bank has not changed the overnight call rate since December 2008.
The central bank maintained its assessment of the economy, saying it shows “further signs of a moderate recovery” but acknowledged growing headwinds.
PHOTO: REUTERS
“Against the backdrop of increased uncertainty about the future, especially for the US economy, and associated instability in the foreign exchange and stock markets, attention should be paid to downside risks to Japan’s economy,” it said in a statement.
The central bank’s latest decision to do nothing follows an emergency meeting last week, when it expanded a low-interest credit program to help contain the impact of the strong yen.
Last week’s move, however, generally underwhelmed markets and analysts, who criticized the loan expansion as too modest.
In its defense, the Bank of Japan said it has been “striving to pursue powerful monetary easing” and pledged to maintain an extremely easy financial environment.
“The bank will carefully examine the outlook for economic activity and prices, and, if judged necessary, take policy actions in a timely and appropriate manner,” it said, reiterating Bank of Japan governor Masaaki Shirakawa’s comments last week.
Meanwhile, Australia’s central bank left its key cash rate unchanged at 4.5 percent for a fourth month yesterday, while sounding more upbeat on domestic demand and investment and less concerned about the global outlook.
The Reserve Bank of Australia reiterated that policy was “appropriate for the time being”, in a brief statement after its monthly policy meeting. The central bank led the developed world in hiking 150 basis points between October and May.
It noted that the global background was “somewhat uncertain” but underlined that booming export earnings were lifting household consumption and driving strong business investment.
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