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BOJ stays cautious on policy
By Leika Kihara |
December 22, 2010, Wednesday
|
Print Edition
Print Edition
THE Bank of Japan kept monetary policy on hold yesterday but warned of weakening factory output and business sentiment, assuring markets that it was focusing on downside risks to growth that may trigger further easing ahead.
The decision to stand pat on policy was widely expected as the central bank likely felt no imminent need to top up its new asset buying scheme, with Tokyo stock prices on the rise and the yen well off a 15-year high hit against the dollar last month.
But with the outlook murky, BOJ policymakers are expected to have scrutinized various risks to the economy that may hurt business morale, which is seen worsening in the coming three months.
The BOJ kept its economic assessment unchanged but revised down its view on output, saying it had declined slightly. The bank also warned that business sentiment has been "somewhat weak," signaling that it saw its latest tankan survey as offering negative signals for the economy.
Markets are on the lookout for what Governor Masaaki Shirakawa has to say about recent rises in Japanese bond yields, which add to the hardships facing the frail economy.
"No change doesn't mean no message. The BOJ is saying they remain cautious despite the market being more optimistic," said Takuji Okubo, chief economist at Societe Generale Securities.
"I think the BOJ is trying to calm the JGB market by saying recovery is still uncertain."
As widely expected, the BOJ kept interest rates at a range of 0 to 0.1 percent, joining other major central banks in supplying abundant funds to markets to support their countries' economies. Recent rises in Japanese long-term interest rates have created a headache for the BOJ, which aims to push down one- to two-year yields with its new asset buying scheme.
The decision to stand pat on policy was widely expected as the central bank likely felt no imminent need to top up its new asset buying scheme, with Tokyo stock prices on the rise and the yen well off a 15-year high hit against the dollar last month.
But with the outlook murky, BOJ policymakers are expected to have scrutinized various risks to the economy that may hurt business morale, which is seen worsening in the coming three months.
The BOJ kept its economic assessment unchanged but revised down its view on output, saying it had declined slightly. The bank also warned that business sentiment has been "somewhat weak," signaling that it saw its latest tankan survey as offering negative signals for the economy.
Markets are on the lookout for what Governor Masaaki Shirakawa has to say about recent rises in Japanese bond yields, which add to the hardships facing the frail economy.
"No change doesn't mean no message. The BOJ is saying they remain cautious despite the market being more optimistic," said Takuji Okubo, chief economist at Societe Generale Securities.
"I think the BOJ is trying to calm the JGB market by saying recovery is still uncertain."
As widely expected, the BOJ kept interest rates at a range of 0 to 0.1 percent, joining other major central banks in supplying abundant funds to markets to support their countries' economies. Recent rises in Japanese long-term interest rates have created a headache for the BOJ, which aims to push down one- to two-year yields with its new asset buying scheme.
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