The Bank of Japan kept policy unchanged today, taking heart from the fastest economic growth in 13 years, but showed it is still prepared to act by saying it may tweak rules to improve government bond market liquidity.
The BOJ Policy Board decided by a unanimous vote to keep its target volume for current account deposits parked at the central bank by commercial banks at 30-35 trillion yen, as expected by financial markets.
That came as little surprise after data last week showed 1.7 per cent economic growth in October-December over the previous quarter, helped by robust exports and capital spending.
The BOJ has repeatedly raised the target over the past year in an effort to encourage business activity and stamp out deflation, which is seen crimping corporate profits and discouraging consumption.
Current account deposits are bank reserves and reserves of other financial institutions such as brokerages, and the target is a benchmark for the banking system's liquidity.
The target was last raised in January from 27-32 trillion yen. That move surprised financial markets as the economy had been showing signs of a firm, export-led recovery.
But in a sign it has not abandoned its aggressive policy stance, the central bank said it may adopt changes to help boost liquidity in the Japanese government bond (JGB) market.
