BOJ refrains from easing, overrules lone stimulus proposal

Tue Mar 13, 2012 4:56am EDT
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By Leika Kihara

TOKYO (Reuters) - The Bank of Japan kept monetary policy on hold on Tuesday, overruling a lone proposal for more stimulus and disappointing some in markets who thought the central bank could follow up last month's easing with another move to amplify its impact.

The central bank instead expanded a loan scheme targeting growth industries by 2 trillion yen ($24 billion) to 5.5 trillion yen.

Under the plan, it created several new loan arrangements including one that will tap its dollar reserves for investments and loans denominated in foreign currencies.

As expected, the BOJ kept its policy rate unchanged at a range of zero to 0.1 percent and refrained from increasing its asset purchasing scheme after boosting it by 10 trillion yen last month.

But the yen ticked up after the decision, while government bond futures and Tokyo share prices trimmed gains in a sign that some market players had counted on another surprise.

"Even though some overseas market players seem to have expected further easing, the central bank held its fire because of the rather favorable economic outlook," said Junko Nishioka, chief Japan economist at RBS.

"That said, the BOJ is basically maintaining its stance of monetary easing after setting an inflation goal of 1 percent. To clarify its determination to beat deflation, the BOJ could ease policy further as early as late April," she said.

Ryuzo Miyao, regarded as one of pessimists on the bank's board, proposed to increase the asset buying and loan scheme again by 5 trillion yen to 70 trillion yen, but was outvoted 8 to 1.   Continued...

A man walks in front of the Bank of Japan headquarters building in Tokyo March 13, 2012. The Bank of Japan kept monetary policy steady after last month's surprise easing but extended a loan scheme for growth sectors to keep up its long-term efforts to boost the country's potential growth and beat deflation. REUTERS/Yuriko Nakao