And the Bank of Japan also kept its key rate unchanged after a meeting in Tokyo yesterday.
But it didn’t reveal any new measures to help the stalling Japanese economy, on top of the expansion last week of the credit program for business.
In a unanimous decision, the Bank of Japan’s nine-member policy board decided to maintain its key interest rate at 0.1%.
That was widely expected and means the rate has not changed since December 2008.
Compared with Australia Japan’s economy is all but in negative territory. Our economy grew 1.2% in the June quarter, Japan’s just 0.1%.
The record low interest rate reflects that difference and the continuing ravages of deflation, high unemployment and severe pressure on consumer spending and other income as a result.
The Bank of Japan’s decision comes ahead of the release later this week of the latest estimate for second quarter economic growth which was 0.4% annual (0.1% quarter on quarter) in the first forecast last month.
Some economists say there’s a chance the economy dipped into the red in the June quarter.
Despite that, the central bank maintained its assessment of the economy, saying it shows "further signs of a moderate recovery" but acknowledged growing uncertainty.
"Against the backdrop of increased uncertainty about the future, especially for the US economy, and associated instability in the foreign exchange and stock markets, attention should be paid to downside risks to Japan’s economy," it said in the statement.
With Japan’s exports slowing, industrial production weak, growth stalling and deflation still gripping the economy, the central bank has been under increasing political pressure to act.
The rising value of the yen (which has eased slightly in recent days) is pressuring exports on top of stalling demand from the US and the slowing Chinese economy.
The Bank of Japan said it has been "striving to pursue powerful monetary easing" and pledged to maintain an extremely easy financial environment.
"The bank will carefully examine the outlook for economic activity and prices, and, if judged necessary, take policy actions in a timely and appropriate manner."
In other words, it won’t do anything more.
The ruling Democratic Party of Japan faces a leadership contest next week which further complicates the management of the economy.
In its statement the Bank of Japan said:
"Japan’s economy shows further signs of a moderate recovery. Exports and production have been increasing, albeit at a slower pace. Business fixed investment is showing signs of picking up. The employment and income situation has remained severe, but the degree of severity has eased somewhat. In these circumstances, private consumption has been generally picking up and has recently been boosted by the extremely hot weather and a last-minute increase in demand for durable consumer goods ahead of the expiration of the policy measure.
"Public investment is declining. Meanwhile, financial conditions have continued to show signs of easing. The CPI (excluding fresh food) is declining on a year-on-year basis due to the substantial slack in the economy as a whole, but the slowing trend in the pace of decline has continued.
"The Bank’s baseline scenario projects that the economy is likely to be on a recovery trend. With regard to prices, based on the assumption that medium- to long-term inflation expectations remain stable, the year-on-year rate of decline in the CPI (excluding fresh food) is expected to slow as the aggregate supply and demand balance improves gradually.
"With regard to economic activity, there are some upside risks such as faster growth in emerging and commodity-exporting economies. On the other hand, against the backdrop of increased uncertainty about the future, especially for the U.S. economy, and associated instability in the foreign exchange and stock markets, attention should be paid to downside risks to Japan’s economy.
"With regard to prices, there is a possibility that inflation will rise more than expected due to a rise in commodity prices brought about by higher growth rates in emerging and commodity-exporting economies, while there is also a risk that the rate of inflation might decline due, for example, to a decline in medium- to long-term inflation expectations.
"The Bank recognizes that Japan’s economy faces the critical challenge of overcoming deflation and returning to a sustainable growth path with price stability. To this end, the Bank has been striving to pursue powerful monetary easing, ensure financial market stability, and support strengthening the foundations for economic growth, and it will continue to consistently make such contributions as central bank.
"In the conduct of monetary policy, the Bank will maintain the extremely accommodative financial environment. The Bank will carefully examine the outlook for economic activity and prices, and, if judged necessary, take policy actions in a timely and appropriate manner."
And for all that, the country’s Finance ministry slipped out a small report on the size of Japan’s international reserves.
They are huge, the second largest after China’s reserves.
The Minister said the foreign exchange reserves were at the second highest level on record at the end of last month.
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