Members of the Bank of Japan's monetary policy board said that Japan's economic activity has started to pick up again after fading in recent months, minutes from the board's meeting on August 8 and 9 revealed on Monday.
The board members fully expect that Japan's economy will return to a moderate recovery path on firm domestic demand and improving demand from overseas economies, the minutes showed.
"Japan's economic activity has started picking up moderately as domestic demand remains firm mainly supported by reconstruction-related demand," the minutes said. "Public investment has continued to increase. Business fixed investment has been on a moderate increasing trend with improvement in corporate profits. Against the background of improvement in consumer sentiment, private consumption has continued to increase moderately."
At the meeting, the central bank held its benchmark uncollateralized overnight call rate at 0-0.1 percent and also kept the total size of the stimulus program at JPY 70 trillion with the asset purchases of JPY 45 trillion and the credit facility of JPY 25 trillion.
The central bank retained its assessment that the economy has started to pick up moderately and is likely to return to a moderate recovery path as demand recovers.
The members also agreed that deflation remains a critical threat and downside risk to the Japanese economy, as the annual rate of CPI excluding fresh food is expected to remain around 0 percent.
"Japan's economy faces the critical challenge of overcoming deflation and returning to a sustainable growth path with price stability," the minutes said. "This challenge will be met through efforts by a wide range of economic agents to strengthen the economy's growth potential and support from the financial side. Based on this recognition, the bank has been providing support to strengthen the foundations for economic growth and pursuing powerful monetary easing."
The bank noted that exports have slowed in recent months due to the slowing of other economies, but especially those in Europe.
The global economy as a whole remains fraught with ambiguity.
"There remains a high degree of uncertainty about the global economy, including the prospects for the European debt problem, the momentum toward recovery for the U.S. economy, and the likelihood of emerging and commodity-exporting economies simultaneously achieving price stability and economic growth," the minutes said.
The board noted that financial conditions in Japan remained accommodative. The bank said it will continue to ensure the stability in the financial system, while paying attention to developments in European markets.
The BoJ said it has been pursuing powerful monetary easing and providing support to strengthen the foundations of economic growth. The bank vowed to conduct monetary policy "in an appropriate manner" and continue monetary easing by steadily increasing the asset purchase program.
by RTT Staff Writer
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