BOJ bucks global easing trend, sticks to recovery view

Thu Jul 12, 2012 2:01am EDT
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By Leika Kihara

TOKYO (Reuters) - The Bank of Japan held off on further policy easing on Thursday despite slowing global growth that has driven other major central banks into expanding stimulus, convinced that robust domestic demand will keep Japan's economic recovery on track.

The yen briefly fell and government bond futures rose after the central bank reshuffled the composition of its 70 trillion yen ($879 billion) stimulus program to buy more short-term securities and reduce the amount offered in fixed-rate market operations.

But the initial market reaction soon faded and the yen bounced back as the move was mainly a technical adjustment by the central bank, which is desperately trying to force-feed money to markets already awash with excess cash.

Bond futures, however, held on to initial gains, supported by the central bank decision to abolish a 0.1 percent minimum rate for its purchases of short-term securities.

"The BOJ slightly tweaked the content of the asset buying scheme but this does not mean it implemented any new easing steps, and it did not increase its long-term bond buying," said Yoshimasa Maruyama, chief economist at Itochu Economic Research Institute in Tokyo.

"October is the next possible chance for a BOJ easing because the central bank may lower its growth forecasts along with a downgrading of its view on overseas economies."

As widely expected, the central bank kept its policy rate at a range of zero to 0.1 percent, and held off on a further increase in its asset buying and lending program.

GLOBAL EASING   Continued...

A man walks past the Bank of Japan headquarters in Tokyo June 15, 2012. REUTERS/Yuriko Nakao