By Lisa Twaronite, MarketWatch
TOKYO (MarketWatch) — The Bank of Japan decided Tuesday by unanimous vote to keep its key overnight call rate range at zero to 0.1%, as widely expected, and also upgraded its overall assessment of the economy on improving trends in exports and industrial output.
“Japan’s economy is gradually emerging from the current deceleration phase,” the central bank said in a statement released at the end of its regular two-day policy meeting.
“As the growth rate of the global economy has started increasing again, led by emerging and commodity-exporting economies, Japan’s exports and production are showing signs of resuming an uptrend,” the central bank said.
The statement said: “Japan’s economy is expected to emerge from the current deceleration phase and return to a moderate recovery path.”
The bank cited upside risks as “faster growth in emerging and commodity-exporting economies due to robust demand and capital inflows from overseas.”
Downside risks were associated with “continued uncertainties about the outlook for the U.S. and European economies and developments in global financial markets.”
On Monday, the country’s Cabinet Office reported that gross domestic product fell 1.1% in the October-December quarter on an annualized basis, beating forecasts but also marking the first economic contraction since July-September 2009. Read more on Japan GDP.
But recent data showed exports and production have begun to improve, driven by demand from China.
As for prices, the Bank of Japan said the year-on-year rate of decline in the consumer price index was “expected to continue slowing,” but there was a “possibility that inflation will rise more than expected,” if commodity prices increase further.
There was also a risk that the rate of inflation “will deviate downward,” due to factors such as a “decline in medium- to long-term inflation expectations,” it said.
BOJ Gov. Masaaki Shirakawa was slated to hold a press conference later Tuesday.
