Wednesday, August 8, 2012

Bank of Japan keeps rate steady, sees moderate recovery

    The Bank of Japan (BOJ) held its policy rate unchanged, as widely forecast, repeating last month's statement that its domestic economy was expected to recover moderately on the back of firm domestic demand and overseas economies that are emerging from a phase of deceleration.
    However, the BOJ, which held its overnight call rate steady at zero to 0.1 percent, acknowledged that there was a high degree of uncertainty about the global economy and Japan faces the challenge of overcoming deflation and returning to sustainable growth with price stability.
    The BOJ still expects the inflation rate to remain around zero percent for the time being and it would continue its policy of monetary easing by steadily increasing the amount outstanding in its Asset Purchase Program.
    "Regarding risks to the price outlook, careful attention should be paid to future developments in international commodity prices and in medium- to long-term inflation expectations," the BOJ said.

    The BOJ has a target of 70 trillion yen for its asset purchase program but economists worry that it may not be able to meet its target. 
    Japan continues to combat deflation, with consumer prices down 0.20 percent in June from the same month last year. But the economy is continuing to expand faster than other advanced economies and in the first quarter the GDP rose 1.2 percent from the previous quarter for an annual rate of 2.7 percent.


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