The Bank of Japan decided Friday to leave monetary policy unchanged after a policy U-turn in March when it effectively returned to its zero interest rate policy to help prop up the sagging economy.
The Japanese central bank said following its monetary policy board meeting it had unanimously decided to maintain its policy settings in a move widely expected by the markets.
"The Bank of Japan will conduct money market operations, aiming the outstanding balance of the current accounts at the bank at around five trillion yen (40.3 billion dollars)," the Bank of Japan said in a statement.
"Should there be a risk of financial market instability, e.g. a rapid surge in liquidity demand, the bank will provide ampler liquidity irrespective of the guideline above," it said.
The widely expected decision had no effect on financial markets.
Bank of Tokyo-Mitsubishi dealer Kiyoshi Kuzuhara said: "The announcement hardly had an impact on the foreign exchange market.
"Since investors expected no change from the BoJ, there was no surprise in the outcome," he said.
The dollar was 124.01-05 yen at 12:00 pm before the decision was announced and was trading at 124.17 around 3.40 pm (0640 GMT).
The decision also failed to create any ripples in the share market.
"The stock market hardly reacted to the announcement. The market expected the BoJ to keep its zero interest rates for a while," said Hiroichi Nishi, senior market analyst at Nikko Securities.
The Tokyo Stock Exchange's Nikkei-225 index closed up 33.28 points, or 0.2 percent, at 13,385.72. The index came off its morning highs as investors opted to take profits because of the Easter holiday in other major global markets.
In what analysts described as "an historic about-face," the central bank on March 19 said it would effectively return to the zero interest rate policy it had controversially abandoned seven months earlier last August.
The central bank said then it was shifting its focus for money market operations from the overnight call rate -- which governs inter-bank borrowing among commercial banks -- to its current account for bank deposits.
The central bank lifted the level of reserves banks were required to deposit in the account to five trillion yen from four trillion. As a result of the increased liquidity, it expected the call rate "to stay close to zero percent under normal circumstances."
The central bank also said it would retain the new policy until core consumer prices stopped falling.
The BoJ warned its new monetary policy would only be fully effective if accompanied by a government clean-up of banks' vast bad loans, and structural reforms to the economy.
Last week the government announced a emergency economic package which included a requirement that banks write off existing bad debts within two years and new bad loans within three years -- TOKYO (AFP)
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