BOJ defies pressure, keeps key interest rate unchanged
October 6, 2012, 12:10 am TWN
TOKYO -- Japan's central bank ended its latest policy meeting Friday with no change in the country's key interest rate, resisting government pressure for further easing.
The Bank of Japan (BOJ) said in a statement Friday that it expected the world's third-largest economy to “level off” for now, with inflation at a near standstill.
In a rare move, the government's national policy minister, Seiji Maehara, told reporters he attended the central bank's meeting to appeal for more dramatic action to spur growth.
He and other government officials have recently voiced frustration over the failure of policies to end Japan's protracted bout of deflation, or falling prices, which are a drag on economic growth.
“I'm heading to the meeting keeping in mind the government's stance of urging further easing of monetary policy to help us escape from deflation,” Maehara said Thursday. Local media reports said he was the first government minister to attend a central bank policy meeting since 2003.
The BOJ said it would keep policy unchanged for now but continue asset purchases and other “powerful monetary easing,” such as its decision, announced last month, to increase and extend its purchases of Japanese government bonds and treasury bills under its stimulus program.
It also urged that greater attention be paid to the impact of financial and foreign exchange markets on the economy — reflecting Tokyo's unhappiness over the recent strengthening of the Japanese yen against other currencies. The yen's gains have partly stemmed from steps taken by the U.S. and other major economies to stimulate growth through deeper monetary easing of their own.
The strong yen, which erodes overseas earnings while making Japanese exports more expensive in global markets, has pummeled Japanese manufacturers already suffering from weak global and domestic demand.
The policy meeting comes just days before Tokyo will host the annual meeting of the International Monetary Fund and World Bank, and a gathering of finance ministers of the major “Group of Seven” industrial economies.
Their talks will likely focus on ways to salvage the global recovery and cope with the lingering European debt crisis.
“Regarding risks, there remains a high degree of uncertainty over the global economy,” the central bank said.
Despite recent discouraging economic data, the central bank has forecast the economy will rebound thanks to resilient domestic demand, with growth for the current fiscal year, which ends on March 31, expected to exceed 2 percent.