Japan’s central bank kept it key interest rate unchanged at virtually zero Tuesday, hoping to protect a still-fragile economy from veering off track.
In a widely expected decision, the Bank of Japan’s nine-member policy board voted unanimously at a two-day meeting to keep the overnight call rate target at 0 to 0.1 percent.
The central bank maintained its assessment of the world’s No. 3 economy.
“Japan’s economy still shows signs of a moderate recovery, but the recovery seems to be pausing,” it said in its statement.
Japan’s economy has been pressured by slowing overseas demand, a persistently strong yen and deflation. The employment and income situation remains “severe” and private consumption has fallen recently, the central bank said.
The central bank predicts, however, that the economy will gradually find its footing again and return to a “moderate recovery path” in tandem with a growing global economy.
It upgraded its economic outlook for the fiscal year ending March 31, mainly because of a revision of past gross domestic product figures. It now expects real GDP to expand 3.3 percent, up from 2.1 percent forecast in October.
For the fiscal year ending March 2012, the central bank expects GDP to grow 1.6 percent, slightly lower than the 1.8 percent it forecast three months ago.
It predicts deflation will reverse course next fiscal year due to rising commodities prices. The core consumer price index will rise 0.3 percent in the year through March 2012, the central bank forecasts.
The Bank of Japan pledged to pursue “powerful monetary easing” to assist the country’s efforts to beat deflation and return to sustainable growth.
“The Bank will continue to carefully examine the outlook for economic activity and prices, and take policy actions in an appropriate manner,” the central bank said.