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The Bank of Japan's board members said that there was a decreasing need to emphasize financial conditions as a downside risk, minutes from the September 16 and 17 monetary policy meeting revealed on Monday.
The board added that the positive effects of the crisis measures it had undertaken were beginning to fade, while at the same time drawing attention to the effect that the rising yen was having on the Japanese economy.
"Financial conditions, with some lingering severity, were increasingly showing signs of improvement," the minutes said. "The overnight call rate had remained at an extremely low level, and firms' funding costs had remained more or less unchanged at low levels. However, the stimulative effects from low interest rates had been limited given the low levels of economic activity and corporate profits."
At the meeting, the board unanimously decided to maintain the uncollateralized overnight call rate at 0.1 percent, as expected. Further, the policy board raised its economic assessment, saying tat the economy is showing some signs of improvement. In the previous month, the bank had noted that conditions had stopped worsening.
"Public investment is increasing, and exports and production are also increasing against a backdrop of progress in inventory adjustments both at home and abroad as well as a recovery in overseas economies, especially emerging economies," the minutes said. "On the other hand, business fixed investment is declining mainly reflecting weak corporate profits. Private consumption, while there are some signs of a pick-up mainly attributable to the effects of various policy measures, remains generally weak amid the worsening employment and income situation." The bank cut rates in December by 20 basis points to the current level - marking the first easing October 31, when the bank lowered rates by 20 basis points from 0.50 percent. That rate cut was the bank's first in seven years, and it snapped a strong of 22 consecutive meetings of keeping the rates on hold. The BoJ had kept rates unchanged since a 0.25 percent increase in February 2007.
In July, the central bank had extended its unconventional measures by three months to December as funding conditions remained tight.
"The Bank, paying attention for the time being to the downside risks to economic activity and prices, will continue to exert its utmost efforts as the central bank to facilitate the return of Japan's economy to a sustainable growth path with price stability," the minutes said.
Also on Monday, an index measuring tertiary industrial activity in Japan was up 0.3 percent in August compared to the previous month, the Ministry of Economy, Trade and Industry said on Monday, posting an index score of 97.1.
That beat analyst expectations for a 0.1 percent monthly increase following the revised 0.7 percent increase in July - which was originally reported higher by 0.6 percent.
The index incorporates data from firms involved with wholesale and retail trade, financial services, health care, real estate, leisure, and utilities.
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