The Bank of Japan (BOJ) on Wednesday left its key rate unchanged and refrained from announcing any new monetary easing measures as it buys time to ascertain the emerging situation in the debt-plagued eurozone.
The BOJ kept its key Overnight Rate at 0-0.1%, as expected. The Japanese central bank also left its asset-buying fund at 40 trillion yen (US$501bn) and a credit-lending program at 30 trillion yen, it said today.
Economists predict that political pressure will compel the BOJ to announce fresh monetary easing next quarter.
The BOJ noted that the year-on-year change in consumer prices was likely to remain around 0% for the time being.
The BOJ also said that Japan's economy was shifting to a phase of faster growth, as public investment increased and private consumption improved.
It said that a high degree of uncertainty loomed over the global economy amid the European debt problems and that careful attention should be paid to changes in commodity prices and medium-term to long-term inflation expectations.
"Global financial markets have been jittery recently due to Europe's debt problems, so we must monitor developments carefully for now," the BOJ said in a statement issued after the policy meeting.
Japan's economy rebounded in the first quarter from last year's stagnation and is seen headed for a recovery due to spending for rebuilding from last year's earthquake.
Many analysts expect the BOJ to consider easing in July when it issues revised quarterly economic and price forecasts. The BOJ eased monetary policy via an increase in asset purchases in February and April.
Japan's trade gap swells more than forecast in April