BOJ keeps monetary policy steady
Source: Agencies |
May 24, 2012, Thursday
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Print Edition
Print Edition
THE Bank of Japan kept monetary policy steady yesterday but warned of lingering risks to the country's recovery prospects, a sign it was saving ammunition in case Europe's deepening debt crisis warrants further supportive action to shield the economy.
The central bank said it would conduct policy appropriately to beat deflation, but did not repeat the vow of powerful easing it has used in post-meeting statements since August 2010.
Some market players interpreted this as a sign the BOJ may scale back its ultra-loose policy, a view its governor quickly dismissed.
"There is absolutely no change to our stance of pursuing powerful monetary easing," Governor Masaaki Shirakawa told a news conference.
He also warned that a prolonged slowdown in Chinese growth and Europe's simmering debt crisis could hurt Japan's economy, a sign the BOJ stands ready to act again soon should markets become destabilized and trigger a renewed spike in the yen, which along with the US dollar is seen as a safe-haven of sorts during global financial turmoil.
"The BOJ stood pat as expected but is likely to ease next in July, based on recent patterns," said Yasuhide Yajima, chief economist at NLI Research Institute in Tokyo.
"Japan is likely finding it more difficult than before to intervene in the currency market given international pressure, so if the yen spikes to around 77 to the dollar, the BOJ may act first through monetary policy to weaken the yen."
As widely expected, it kept the size of its asset buying program unchanged at 40 trillion yen (US$504 billion) and maintained its policy rate between zero and 0.1 percent.
The dollar slipped 0.7 percent against the yen to 79.39 yen after the BOJ decision, with the firmer yen hitting shares of Japanese exporters and helping to push the Nikkei index to a four-month closing low.
Fears of a Greek exit from the eurozone and funding strains in Spain have kept Japanese central bankers on edge as they fret about the damage that relentless yen gains and slumping Tokyo share prices could inflict on the export-reliant economy.
In a sign that support from global growth remains wobbly, Japan's exports rose just 7.9 percent in April from a year earlier, slower than a median forecast of 12.7 percent due to falling shipments to China.
While the BOJ is ready to loosen policy again on any signs that Japan's recovery is under threat, it has good reason to keep policy on hold now and save its limited options for later.
The central bank said it would conduct policy appropriately to beat deflation, but did not repeat the vow of powerful easing it has used in post-meeting statements since August 2010.
Some market players interpreted this as a sign the BOJ may scale back its ultra-loose policy, a view its governor quickly dismissed.
"There is absolutely no change to our stance of pursuing powerful monetary easing," Governor Masaaki Shirakawa told a news conference.
He also warned that a prolonged slowdown in Chinese growth and Europe's simmering debt crisis could hurt Japan's economy, a sign the BOJ stands ready to act again soon should markets become destabilized and trigger a renewed spike in the yen, which along with the US dollar is seen as a safe-haven of sorts during global financial turmoil.
"The BOJ stood pat as expected but is likely to ease next in July, based on recent patterns," said Yasuhide Yajima, chief economist at NLI Research Institute in Tokyo.
"Japan is likely finding it more difficult than before to intervene in the currency market given international pressure, so if the yen spikes to around 77 to the dollar, the BOJ may act first through monetary policy to weaken the yen."
As widely expected, it kept the size of its asset buying program unchanged at 40 trillion yen (US$504 billion) and maintained its policy rate between zero and 0.1 percent.
The dollar slipped 0.7 percent against the yen to 79.39 yen after the BOJ decision, with the firmer yen hitting shares of Japanese exporters and helping to push the Nikkei index to a four-month closing low.
Fears of a Greek exit from the eurozone and funding strains in Spain have kept Japanese central bankers on edge as they fret about the damage that relentless yen gains and slumping Tokyo share prices could inflict on the export-reliant economy.
In a sign that support from global growth remains wobbly, Japan's exports rose just 7.9 percent in April from a year earlier, slower than a median forecast of 12.7 percent due to falling shipments to China.
While the BOJ is ready to loosen policy again on any signs that Japan's recovery is under threat, it has good reason to keep policy on hold now and save its limited options for later.
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