Japan’s central bank keeps key interest rate unchanged, upgrades economic assessment

Japan’s central bank keeps interest rate unchanged

TOKYO — Japan’s central bank kept its key interest rate unchanged at 0.1 percent Friday and upgraded its assessment of the world’s second largest economy because of an improvement in exports.

The unanimous decision on the interest rate, which was widely expected, came at the end of the Bank of Japan’s two-day policy board meeting.

“Japan’s economy is picking up mainly due to various policy measures taken at home and abroad,” the central bank said. Exports, a key driver of Japan’s economy, and production are rising thanks to a recovery in emerging economies, it said.

The Bank of Japan upgraded its economic assessment for the third straight month, saying private consumption is also recovering due to government policy measures.

The central bank also said a year-on-year decline in prices remained stable.

But Deputy Prime Minister Naoto Kan said Friday that Japan is in deflation, while Finance Minister Hirohisa Fujii voiced grave concern over falling prices.

Deflation, which plagued Japan during its so-called “lost decade” of the 1990s, threatens to hamper growth by depressing company profits and causing consumers to postpone purchases. That can lead to production cuts, lower wages and increasing debt burdens.

The more upbeat central bank statement on the economy came on the heels of figures Monday showing that Japan’s economy grew at an annualized pace of 4.8 percent in the July-September period.

Gross domestic product, or the total value of the nation’s goods and services, has climbed for two straight quarters and recorded its fastest acceleration since a 5.7 percent jump in the first quarter of 2007. In the April-June quarter, GDP rose at a revised annual pace of 2.7 percent.

The Bank of Japan projected the pace of Japan’s recovery is likely to remain moderate until around the middle of the fiscal 2010.