Japanese central bank says nation's economy recovering

  • Business
  • Wednesday, 15 Jun 2005

TOKYO (AP) - Japan's central bank said Wednesday the nation's recovery was continuing, leaving its monthly economic assessment unchanged, and said it was holding its monetary policy steady in its efforts to pump the financial system with excess cash to keep the delicate recover afloat. 

In its monthly economic report, the central bank slightly downgraded its assessment of exports, saying that momentum of growth in exports remains weak.  

In May, the bank had said that exports were recovering. 

Despite that, the central bank still sees a growing trend in exports and said exports may pick up again if China increases its imports. 

The central bank acknowledged some bright spots in the economy, such as improved corporate profits that it said may be filtering through to the household sector through higher incomes. 

Capital spending has also been increasing, it said. But the Bank of Japan noted risk factors such as crude oil prices, which have been surging in recent months. 

Meanwhile, at the end of a two-day policy board meeting, the Bank of Japan left its target range for liquidity, or commercial banks' account balances kept at the central bank, in a range of 30 trillion yen (US$274 billion; euro226 billion) to 35 trillion yen (US$320 billion; euro264 billion).  

It also left unchanged its monthly purchase of government bonds at 1.2 trillion yen (US$11 billion; euro9 billion). 

In principle, more cash gets freed up to be used by the commercial banks if the target for the account balance is kept higher. 

A month ago, the central bank decided to allow the account balance to fall below the target range - a move that can be seen as a gradual step toward changing policy. 

The account balance at the central bank was 34.34 trillion yen (US$314 billion; euro259 billion) Wednesday, after falling below 30 trillion yen (US$274 billion; euro226 billion) earlier this month. 

The bank reiterated its view that it stood ready to step in, if there are any signs of market instability. 

The decision was in line with market expectations. 

The Bank of Japan has kept interest rates virtually at zero to encourage a rebound that has been taking place in recent years following more than a decade of stagnation. - AP

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