The Bank of Japan has ruled out easing policy for now and will continue with virtual zero interest rates, it announced after a monetary policy meeting Aug. 8-9.
The bank’s policy board voted unanimously to keep the size of its asset purchase program unchanged at 70 trillion yen ($897 billion). Annual interest rates will remain between 0 and 0.1 percent.
The BOJ is seen as shrugging off concerns about the strong yen, instead saving resources for possibly worse conditions later this year.
“The European economy remains unstable, and the U.S. and Chinese economies face a fair amount of uncertainty too,” BOJ Governor Masaaki Shirakawa said at a news conference.
Germany, the engine of European growth, is in trouble. Recent data showed a decline in manufacturing and exports.
Europe’s struggles are hurting its main supplier: China’s economic growth fell to 7.6 percent in the quarter to June, below 8 percent for the first time in three years.
U.S. unemployment remains between 8 percent and 9 percent, enough to threaten economic recovery.
Meanwhile, Japan’s economy is enjoying a boost from reconstruction spending after last year’s quake, tsunami and nuclear accident. But Japanese exporters are suffering from lackluster demand in foreign markets.
If the global economy deteriorates further, the BOJ may miss its target of beginning recovery by September.
The markets have been speculating that the U.S. Federal Reserve, the European Central Bank and the People's Bank of China could ease monetary policy in the autumn to shore up their economies.
Analysts expect the BOJ to consider a similar step at its board meeting in September.
They watched this week’s meeting closely. It was the first with new members Takahide Kiuchi and Takehiro Sato, both private-sector economists.
They joined the board in July and were later quoted advocating monetary easing.
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