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Bank of Japan keeps interest rate steady
AFP - 1 hour 56 minutes ago
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TOKYO (AFP) - – Japan's central bank on Tuesday kept its key rate unchanged at 0.1 percent, as expected, aiming to continue nurturing a moderate recovery while also combating deflation.
"Japan's economy shows further signs of a moderate recovery, induced by improvement in overseas economic conditions," the Bank of Japan statement said.
The decision to leave the key rate unchanged comes amid worries about the impact of the yen's recent strength on Japan's fragile export-driven recovery, which has driven speculation as to how the bank may respond.
Earlier in the day, Finance Minister Yoshihiko Noda told reporters he wanted the bank to cooperate more with the government to tackle the rising yen, in a sign of fresh pressure on the body from officials.
"With regard to problems such as the strong yen or deflation, we want to cooperate with the BoJ more closely than ever before," he told reporters, although he refrained from commenting on a possible intervention.
Japan has not intervened in currency markets since 2004. For every one-yen rise in the currency's value against the dollar, companies can lose tens of billions of yen earned overseas when repatriated.
"The yen has appreciated largely because of factors overseas," said Maiko Noguchi, economist at Daiwa Institute of Research.
"Considering there is an FOMC meeting today, (the central bank) seems to have decided not to say much and to take a wait-and-see stance for a while," Noguchi said of the upcoming US policy-setting Federal Open Market Committee meeting.
The yen was little changed after the monetary policy decision, trading at 85.82 to the dollar in Asian trade.
Markets had their eyes turned to Bank of Japan Governor Masaaki Shirakawa's press conference later Tuesday for his assessment of the yen's impact on the Japanese economy.
The central bank has maintained its current overnight call rate, at which it charges other banks overnight, since December 2008, the height of the global financial meltdown.
"The Bank recognises that Japan's economy faces the critical challenge of overcoming deflation and returning to a sustainable growth path with price stability," it added. "The Bank will aim to maintain the extremely accommodative financial environment."
The policy decision came hours before the US Federal Reserve's monetary policy meeting amid speculation it may step up "quantitative easing" -- pumping money into the economy through the purchase of assets -- to boost the economy.
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