February 15, 2003	Saturday	Zul Hijjah 13, 1423

TOKYO, Feb 14: The Bank of Japan (BoJ) on Friday ignored growing political pressure to adopt fresh measures to fight sliding prices, opting instead to leave monetary policy unchanged after a two-day board meeting.

The move was widely expected and had minimal impact on currency markets, especially after the release of much better than expected gross domestic product (GDP) data for the three months to December.

Attention is now focused on who Prime Minister Junichiro Koizumi will nominate to replace BoJ governor Masaru Hayami, who is due to retire next month, and economists said the central bank is unlikely to introduce any radical new measures ahead of the changeover.

Board members voted unanimously to maintain reserves in the central bank current account, funds which are made available to banks for lending, at around $124 to 165 billion.

But the BoJ said in a statement it would provide more liquidity irrespective of the above target when necessary to secure financial market stability towards the end of a fiscal year.

Cabinet ministers on Wednesday had turned up the heat on the BoJ to ease monetary policy further to help fight prolonged deflation, which has eroded corporate profits and increased the burden of debt in real terms.

Koizumi has said he wants the next governor to be a deflation fighter, and speculation is mounting the new chief could introduce an inflation target a measure Hayami has vociferously opposed.

The situation is very difficult for them (the BoJ board members), said Credit Suisse First Boston chief economist Yasushi Okada.

They know the basic condition of the economy is very unstable, he said.

But they don’t have any reason to change monetary policy especially before the new BoJ governor is nominated, they are waiting to hear the name of the new BoJ governor, Okada noted.

Koizumi is widely expected to announce Hayami’s successor after a Group of Seven (G7) meeting in Paris next week.

Economists had suggested the BoJ might increase liquidity in the financial system by purchasing more Japanese government bonds (JGBs) if GDP data for October-December had been worse than the market consensus of a 0.4 per cent contraction.

But the Cabinet Office said earlier the world’s second largest economy grew 0.5 per cent from the previous quarter.

If the economic situation becomes more severe, or other things happen outside Japan, then (the BoJ) must increase the target buying of JGBs, said Okada.

The dollar eased slightly against the yen following the BoJ decision. It was trading at 120.41 yen at 2:40 pm (0540 GMT), down from 120.54 yen just before the announcement. —AFP