Bank of Japan keeps monetary policy unchangedgreenspun.com : LUSENET : Unk's Wild Wild West : One Thread
UPDATE 1-BOJ board keeps monetary policy unchanged
Friday June 15, 12:08 AM EDT
(Updates throughout with economists' comments)
TOKYO, June 15 (Reuters) - The Bank of Japan (BOJ) kept its already super-loose policy unchanged on Friday, resisting political pressure for even more monetary firepower to stop the economy from deteriorating further.
But economists said it was likely a matter of time before the central bank's governor, Masaru Hayami, would be forced into further action to ease the pain of reforms being planned by Prime Minister Junichiro Koizumi.
The decision, announced after a two-day meeting by the central bank's nine-member Policy Board, was unanimous.
"It's significant that the decision was a unanimous decision. Even the doves on the board didn't vote for an easing. That means Hayami is in control and there's less chance of an early move," said James Malcolm, an economist with J.P. Morgan.
"But we still fully expect some sort of easing later in the year, perhaps August or September, as the economy deteriorates."
Data this week showed output shrank 0.2 percent in the first quarter of the year and Finance Minister Masajuro Shiokawa projected an even weaker second quarter -- an outcome that would constitute a a relapse into recession.
Garry Evans, a strategist with HSBC, said he was disappointed by the board's decision.
"Someone needs to persuade the BOJ that it's worth taking the risk of doing something a bit more adventurous in terms of monetary policy," he said.
The BOJ said it would continue to keep its target volume for current account deposits -- the sum of bank reserves and deposits of non-bank institutions parked at the BOJ -- at five trillion yen ($41.2 billion),
The BOJ adopted that target, which effectively cut short-term interest rates to zero, at its March 19 meeting and pledged to stick to it until core consumer prices stop falling.
Bank reserves are the basic building block for money and credit expansion in the economy.
But with banks shy to lend and customers eager to pare their debts, demand for funds from the central bank is so weak that the BOJ has been having trouble hitting its five trillion yen target.
As a result, economists had not expected the BOJ to raise the target -- at least yet.
"Further quantitative easing doesn't really make much difference any more, so refraining from taking more action was very understandable," said Mitsuru Saito, chief economist at Sanwa Securities.
"We all know that monetary policy will not have much effect on reviving the economy."
-- (M@rket.trends), June 15, 2001