BoJ Maintains Key Interest Rate As Expected; Upgrades Economic Assessment

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The Bank of Japan decided to leave its key interest rate unchanged as expected and upgraded its economic assessment on Wednesday even as it made no comments on scrapping its corporate debt purchase programs.

The Policy Board of the BoJ unanimously decided to maintain the uncollateralized overnight call rate at 0.1%. The last change in the rate was a 0.1% cut in interest rates at the December 2008 meeting.

In a statement, the central bank said "Japan's economy has started to pick up." Last month, BoJ said Japanese economic conditions are showing signs of recovery.

Public investment increased and exports and production rose amid progress in inventory adjustments and a recovery in overseas economies. As a result, business sentiment is showing improvement. The decline in business fixed investment also moderated, while private consumption remained generally weak amid the severe employment and income situation.

Further, the BoJ noted increasing signs of improvement in the financial environment. The unconventional measures of the central bank is set to expire by the end of the year.

Last week, Finance Minister Hirohisa Fujii said the central bank is expected to carefully monitor the economy before making any decision on ending emergency funding measures, given the fragility of the economy. Fujii noted that current economic conditions in Japan warrants continuation of stimulus measures, though there are signs of recovery.

Amid signs of a better-than-projected recovery in emerging economies, risks to the economy remain on the downside, stemming from future developments in the global financial and economic situation, and from changes in firms' medium-to long term growth expectations, the BoJ added in its post-meeting policy statement.

With regard to prices, the central bank said there is a possibility that inflation would fall more than expected, provided the downside risks to the economy materialize or medium to long-term inflation expectations decline.

The central bank reiterated that it will exert utmost efforts to facilitate the return of Japan's economy to a sustainable growth path with price stability.

A report released earlier in the day showed that Japanese corporate goods prices dropped for the ninth straight month in September. However, the annual decline in domestic corporate goods prices slowed to 7.9% in September from 8.5% in August. On a monthly basis, producer prices rose 0.1%.

The Bank of Japan decided to leave its key interest rate unchanged as expected and upgraded its economic assessment on Wednesday even as it made no comments on scrapping its corporate debt purchase programs. (Market News Provided by RTTNews)