The Bank of Japan announced following its policy meeting early on Wednesday that it has kept monetary policy on hold as was widely expected. The interest rate was left a record lows between 0 and 0.1 percent, and no policy easing measures were taken. The central bank kept the size of its asset buying programme unchanged at 40 trillion yen ($504 billion).
However, the BOJ did cite ongoing risks to the global economy and warned of market jitters over Europe which is a risk to Japan’s recovery prospects. The country’s exports rose just 7.9 percent in April from a year earlier, slower than a forecast of 12.7 percent. The slowdown was attributed to falling shipments to China, which is also showing signs of slowing growth.
“Global financial markets have been jittery recently due to Europe’s debt problems, so we must monitor developments carefully for now,” the BOJ said in a statement issued after the meeting.
Despite the readiness of the BOJ to loosen policy on any signs that Japan’s recovery is under threat, it had good reason to keep policy unchanged this time. Recent data show that Japan’s economy rebounded in the first quarter from last year’s stagnation and is seen headed for a recovery due to spending for rebuilding from last year’s earthquake, making it difficult to justify easing now.
The Japanese yen strengthened against most of its major counterparts after the policy announcement, regaining losses made following a Fitch downgrade to Japan’s credit rating by one notch on Monday.