Bank of Japan Leaves Rates Unchanged

Currency traders are at the dealing room as the U.S. dollar against Japanese yen bought at 119.24 yen on the Tokyo Foreign Exchange Tuesday, Oct. 10, 2006. The U.S. dollar rose against the yen above 119.30 yen, highest since Feb. 3. Japanese stocks were higher Tuesday morning despite early losses following North Korea's announcement it tested a nuclear weapon. The benchmark Nikkei 225 index rose 55.59 points to 16,491.65 at the end of morning session. (AP Photo/Koji Sasahara) (AP Photo/Koji Sasahara) (Koji Sasahara - AP)

TOKYO -- The Bank of Japan's policy board voted unanimously to leave interest rates unchanged, as widely expected, at the end of a two-day meeting Friday.

In July, the central bank had raised a key interest rate for the first time in six years, lifting it to 0.25 percent from virtually zero, reflecting its confidence in the nation's recovery.

With prices rising again after years of deflation, or falling prices, analysts have been speculating about when the Bank of Japan will next raise rates. The nation's core consumer price index rose 0.3 percent in August after rising 0.2 percent in July.

The BOJ's decision had been widely expected, as there have been no significant developments in the economy and markets since it ended the zero-interest-rate policy on July 14.

Market players were also aware that the BOJ is monitoring the effect on the Japanese economy from the U.S. economy, which appears to be slowing.

BOJ Governor Toshihiko Fukui said that the central bank will not rule out the possibility of raising interest rates by the end of the year, but it doesn't have any specific aim for the timing of future rate increases.

Fukui also reiterated that the BOJ can keep a very accommodative policy for the time being. The central bank will adjust interest rate levels slowly while watching movements in the economy and prices, he said.

"We are open" on future policy options, Fukui told reporters at a news conference after the BOJ board meeting.

Earlier Friday, Finance Minister Koji Omi said he hoped the Bank of Japan would keep supporting the current economic recovery with its monetary policy.

Omi also struck an optimistic note about the nation's economic recovery, which is about to match the longest postwar period of economic expansion, a 4 1/2-year period from 1965 to 1970. The current recovery is considered to have started in February 2002, based on government data, including gross domestic product.

"The economy is recovering steadily at the moment. I can't say for sure whether it will remain so, but I'm not much concerned about the future," Omi told reporters at a regular press conference.