JAPAN-Nikkei-Time to go back up? Message Board

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Strategies & Market Trends : JAPAN-Nikkei-Time to go back up?

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From: Julius Wong	9/8/2006 7:14:15 AM
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Bank of Japan Leaves Monetary Policy Steady By HIROSHI INOUE September 8, 2006 1:19 a.m. TOKYO -- Bank of Japan board members Friday voted unanimously to leave monetary policy steady, judging that current economic and financial conditions didn't warrant any imminent policy action. At the two-day meeting, the BOJ kept its guidelines for money-market operations intact, saying it will "encourage the uncollateralized overnight call rate to remain at around 0.25%." The central bank also left unchanged its monthly purchases of government bonds at ¥1.2 trillion ($10.3 billion). The decision was in line with market expectations. Investors will now closely monitor a news conference by BOJ Governor Toshihiko Fukui later Friday for clues on the timing of any future rate increases, especially after unexpectedly weak consumer price index data released in late August lowered expectations for an imminent rate increase. The BOJ board members at the meeting likely judged that Japanese consumer prices will continue rising gradually despite the weaker-than-expected CPI data. Japan's core CPI posted an unexpectedly small rise of 0.2% in July from a year earlier as new index components, including flat-screen televisions, pushed it down and forced past readings to be downgraded. The weaker data gave many market participants the impression that the BOJ probably doesn't need to worry about inflationary pressures for now, and thus lowered expectations for another rate increase this year. The central bank on July 14 ended its zero-interest-rate policy and raised the unsecured overnight call loan rate to 0.25%. The rate rise was the first since August 2000. The BOJ board also likely discussed the outlook for the U.S. -- where the economy is showing signs of slowing down but inflationary pressure remains strong -- and how such developments could affect the BOJ's view that the Japanese economy will maintain sustainable growth. The next policy decision meeting is scheduled to be held Oct. 12-13 on the heels of the release of the BOJ's September tankan corporate sentiment survey Oct. 2. If the tankan result shows strong corporate activity, such as capital spending, it may pave the way for the central bank to consider raising rates again, some BOJ watchers say. online.wsj.com

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