TOKYO (Reuters) - the Bank of Japan preserved political monetary regular Friday in a sign that an economic slowdown in the first quarter has not changed view of the Central Bank that growth will resume on the fall when the devastating earthquake wounds begin to heal.
In a surprise gesture, Deputy Governor Kiyohiko Nishimura has abandoned its proposal to relax policy more far with an expansion of the scheme to purchase assets of the Central Bank. He has made such a proposal last month, but was rejected by a margin of 8-1.
That led some analysts to scale back expectations of a monetary easing in the short term.
"I believe that the Bank of the Japan will be waiting for some time." Perhaps Nishimura came to the conclusion that there is no support. For the sake of unity within the Bank, which could be a good thing, ", said Adrian Foster, responsible for research on the financial markets for the Rabobank International Asia-Pacific in Hong Kong."
"I see many steps background that could take the Bank of Japan, providing 4 to 5 points lower base yield curve, which is marginal because with purchases you speak".
As widely expected, the Bank of Japan kept interest rates unchanged at a range of zero to 0.1% by a unanimous vote and maintained the limit of 10 billion yen (122 billion dollars) for its asset buying scheme, which now serves as its main policy tool.
Stock and currency government debt markets were broadly stable after the announcement and Kazuhiro Takahashi, manager at Daiwa Securities, said that recent stability of the yen may convinced Nishimura to change tactics.
The Central Bank maintained its assessment of the economy, saying: he is facing a crisis paralyzed nuclear power and the strong downward pressure because of the impact of the earthquake of magnitude 9.0 on 11 March, a deadly tsunami.
He also repeated that he will focus on the risks for growth, signalling that it stands ready to ease monetary policy further if damage to the economy is more important than expected.
World's third largest economy decreased much more that provided for in the first quarter and tripped into its second recession in three years after the disaster struck business and consumer and manufacturers supply networks spending tore.
However, the Bank of Japan sees the current downturn as a patch temporary rough, a view shared by the Minister of economy Kaoru Yosano and focuses more on the question of whether the economy will resume growth end this year as it projects.
This means that the Bank of the Japan will wait for more clues on the timing of the recovery and use of its limited options only if market shock sudden or prolonged interruptions of injured feelings and expenditures of output.
BIAS ULTRA-LOOSE
The Bank of the Japan has repeatedly stated that although monetary policy can alleviate a sharp deterioration in sentiment, there is little he can do to solve the problems now plaguing the economy as fears of energy shortages and disruptions in the supply chain.
Yet, the Bank of the Japan should maintain its bias policy ultra-loose at least a year, while other central banks, as the Federal Reserve and European Central Bank, are beginning to roll back the huge stimulus enabled after the collapse of Lehman Brothers, towards the end of 2008.
In view of the risk of recovery, as a threat of shortages of power in the summer, Governor of the Bank of the Japan Masaaki Shirakawa, due to inform the media after 0700 GMT, is expected to stress of loan from the Bank to ease policy more if the Japan fights to return to growth when it develops on the decision later in the day.
Any relaxation would come thanks to fill the basin of the Bank of the Japan of funds set aside for the purchase of a range of financial assets, including the obligations of the Government and corporate debt, which the Central Bank doubled days after the earthquake.
He Bank held monetary policy on hold since then and was purchased for the moment almost 4 billion yen of assets value.
"The Bank of the Japan probably need to go through more data for April and may to decide whether it should revise its point of view on the economy," said Takeshi Minami, Chief Economist at Norinchukin Tokyo Research Institute.
"There is a chance of the Bank of the Japan will expand its asset purchase plan around August, when the Government is reportedly to compile the next significant additional budget for disaster."
(Other reports by Rie Ishiguro, Kaori Kaneko, Stanley White and Antoni Slodkowski;) (Editing by Tomasz Janowski)
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