Several of the board members of the Bank of Japan felt that the risks to the Japanese economy are starting to find balance, minutes from the bank's February 17-18 policy meeting showed on Tuesday.
The minutes also showed that the board believes that the effects of monetary policy are strengthening, but the bank must continue to act swiftly and decisively to support the economy. Further, improvements in productivity are needed for a full economic recovery, the minutes said, while unemployment remains "severe."
"Exports had been increasing, due to the improvement in overseas economic conditions," the minutes said. "The uptrend in exports was expected to continue, reflecting continued improvement in overseas economic conditions, although the pace of increase was likely to moderate gradually."
At the meeting, the board unanimously decided to retain the overnight call rate at 0.10 percent, in line with market expectations. The last change in the rate was a 0.10 percent cut in interest rates at the December 2008 meeting.
The bank again repeated its vow to fight deflation and widely retained its economic assessment, saying growth is picking up mainly due to various policy measures taken at home and abroad, although there is not yet sufficient momentum to support a self-sustaining recovery in domestic private demand.
"The CPI (excluding fresh food) had been declining on a year-on-year basis due to the substantial slack in the economy as a whole, but the pace of decline had been moderating mainly reflecting developments in the prices of petroleum products," the minutes said. "The year-on-year pace of decline in the CPI was likely to remain more or less unchanged for the time being, and then moderate as the aggregate supply and demand balance improved gradually."
The Bank of Japan's baseline scenario projects the pace of improvement in the economy to remain moderate until around the middle of fiscal 2010. Thereafter, the bank expects export-driven growth in the corporate sector to spill over to the household sector, and predicts the economic growth rate to gradually rise.
"Members agreed that, in order for Japan's economy to overcome deflation and return to a sustainable growth path with price stability, the Bank should continue to consistently make contributions as central bank," the minutes said. "They concurred that, in its conduct of monetary policy, the Bank was determined to maintain the extremely accommodative financial environment by providing ample funds to meet market demand and maintaining the extremely low interest rates."
The Japanese yen edged lower across the board following the release of the minutes. The yen slumped to a four-day low of 136.58 against the pound and 83.04 against the Australian dollar from Monday's North American session closing values of 136.15 and 82.80, respectively.
The yen also traded lower at 85.49 against the Swiss franc, 122.64 against the euro, 90.39 against the US dollar, 88.92 versus the Canadian dollar and 63.99 against the NZ dollar.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.