By TATSUO ITO And MEGUMI FUJIKAWA
TOKYO—The Bank of Japan left its monetary policy unchanged on Thursday, as the economy remains on a moderate recovery track and as recent political pressure for it to take action has waned.
As expected, the central bank’s policy board voted unanimously at the end of a two-day meeting to maintain the target of the BOJ’s asset purchase program—its main tool for monetary easing amid near zero interest rates—at 70 trillion yen ($893.19 billion).
BOJ Gov. Masaaki Shirakawa did not provide any hints on when the bank might act at a later news conference, only reiterating that it is committed to continuous easing measures in order to reach the ¥70 trillion target for its asset purchase program by next June.
The meeting was the first to include new members Takahide Kiuchi and Takehiro Sato—both former private-sector economists who have previously advocated further easing—after their appointments late last month. Despite their perceived dovish views, the two didn’t propose any additional easing steps at the meeting.
Mr. Shirakawa said that the addition of the new members to bring the board back to its full contingent of nine led to “active and fruitful debate” and described them as presenting “well-balanced views.”
The central bank’s decision came after the U.S. Federal Reserve, the European Central Bank and the Reserve Bank of Australia held off from additional easing measures at their latest policy-setting meetings.
Some investors expect the BOJ to take new easing measures over the next few months, with a removal of its minimum bidding yield for longer-term government debt seen as the most likely policy candidate. That would allow prices to rise, likely stoking selling interest among financial firms that hold the debt and helping the central bank to meet its asset-purchase target.
But Mr. Shirakawa brushed off that idea on Thursday, saying the central bank is having no problem meeting its target. The bank had purchased ¥55 trillion in Japanese government bonds, corporate bonds and other assets as of the end of July.
Political pressure on the BOJ also appears to be less intense as lawmakers are busy wrangling over whether to approve a key tax package.
“Politicians have been busy with the political situation and they have no room to pay close attention to economic policies, including those from the BOJ,” said Barclays
Securities Japan Chief Economist Kyohei Morita.
The central bank maintained its assessment of the domestic economy, saying it has “started picking up moderately as domestic demand remains firm mainly supported by reconstruction demand.”
However, it softened its view of exports and output, the key engines Japan’s economy needs to achieve a full economic recovery. “The pick-up in exports has moderated and recent reading of production has been relatively weak.”
The central bank said last month that exports showed signs of a pick-up, while production had started gaining moderately with some fluctuations.
Looking ahead, the BOJ didn’t lower its guard against risk factors such as the European financial crisis or the outlook for the U.S. and emerging economies. “There remains a high degree of uncertainty about the global economy,” it said.
Coupled with concerns that domestic demand may lose momentum later this year as reconstruction demand tails off, analysts expect the central bank may take additional easing steps in September if the Fed loosens monetary policy further. Or, it might act in October when the policy board is slated to release its semiannual forecasts on the economy and prices.
The board also voted unanimously to keep the BOJ’s policy rate, the unsecured overnight call loan rate, in a 0.0%-0.1% range.
Write to Tatsuo Ito at tatsuo.ito@dowjones.com and Megumi Fujikawa at megumi.fujikawa@dowjones.com
Article source: http://online.wsj.com/article/SB10000872396390443537404577578114050968038.html?mod=rss_economy
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