Tokyo - Japan's central bank on Wednesday decided to keep its benchmark interest rate at 0.1 per cent, saying, "Japan's economy has started to pick up," but did not make an anticipated decision on whether to end its programmes on purchasing corporate debt. Bank of Japan Governor Masaaki Shirakawa had said this month that credit markets had stabilized in the wake of the global financial crisis, reducing the need for its emergency credit funding.
His statement was made as other central banks around the world are ending or reducing programmes designed to help free up credit markets frozen because of the financial crisis. Japan's government has argued that small firms are still finding it hard to borrow money.
The Bank of Japan lowered its benchmark rate to 0.1 per cent in December and was expected to keep it steady through this year as Japanese companies deal with a strengthening yen, which make their products sold abroad more expensive and reduces their overseas earnings.
Corporate investment was also expected to remain sluggish as the world's second-largest economy emerges from its worst postwar recession.
However, the central bank saw improvement at the end of a two-day meeting. "Business sentiment, especially at large manufacturing firms, is showing some improvement. The decline in business fixed investment, which mainly reflects weak corporate profits, has been moderating," it said.
On a down note, the bank said consumer spending, which accounts for more than half of Japan's economic activity, "remains generally weak amid the severe employment and income situation" despite showing signs of a pick-up thanks to government stimulus measures.
"There are prospects for Japan's economy to return to a sustainable growth path with price stability in the longer run," it said. "However, the outlook is attended by a significant level of uncertainty stemming mainly from developments in overseas economies and global financial markets."
