Forex News – Bank of Japan maintains interest rates as growth outlook improves, Yen gains

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The Bank of Japan announced its overnight call rate today, which is the interest rate at which the central bank rediscounts bills and extends loans to financial institutions. The rate remained unchanged between zero to 0.1 percent by a unanimous vote as forecasted and held off on loosening policy further.

A rebound of factory output last month gave evidence that Japan is on the road to recovery following the devastating March earthquake that had crippled factories and supply outlets.

The central bank said in a statement issued after the rate decision that “Japan’s economy is picking up as supply constraints from the earthquake ease.”

Factory output marked the biggest increase in almost 60 years in May while business and consumer sentiment showed signs of recovery from the quake’s damage, which underscored the Bank’s view that the economy will resume a moderate recovery as of September.

However, BoJ warned that emerging nations faced a tough balancing act between keeping inflation in check while sustaining economic growth.

It also reiterated that U.S. debt as well as the Euro zone’s debt ridden economies were among risks to Japan’s economic outlook, in light of a spate of weak U.S. economic data that increased concerns that exports from the world’s major economy may suffer as global demand dwindles just when Japan is overcoming supply constraints.

The Japanese Yen gained across the board following the rate announcement. USDJPY fell from the European session open of 80.11 and is currently trading at 79.16 at 08:00GMT. EURJPY dropped to 109.57 from the open of 111.85.