06 February 2004	Friday	14 Zilhaj 1424

TOKYO, Feb 5: Japan's central bank left its stimulative monetary policy unchanged on Thursday, vowing to pump ample cash into the economy to support a recovery it still sees as only moderate.

In its latest monthly report, the Bank of Japan (BoJ) maintained its view that the world's second largest economy is "recovering gradually" and is "anticipated to continue recovering, albeit at a moderate pace."

Economists had largely expected the central bank to take no action after its surprise credit easing at its last meeting on January 20 aimed at fighting deflation and ensuring recovery by putting even more cash into the nation's financial system.

"The Bank of Japan will conduct money market operations, aiming at the outstanding balance of current accounts held at the bank of around 30 to 35 trillion yen ($284bn to $332bn)," it said in a statement.

"Should there be a risk of financial market instability, such as a surge in liquidity demand, the bank will provide more liquidity irrespective of the above target."

On January 20, the BoJ raised the ceiling on the current accounts to around 30-35 trillion yen from 27-32 trillion yen.

BoJ Governor Toshihiko Fukui said the bank will continue to try to bring about mild inflation.

"Our stance to maintain the super-loose monetary policy until the core (consumer price index) recovers to stay at zero or above for a sustained period has not changed," he told a news conference on Thursday.

The central bank has been tackling deflation by offering commercial banks massive amounts of funds as there is little room for cutting Japan's already super-low interest rates, which are about zero per cent for overnight lending.

The January 20 credit easing reflected a clear shift in policy at the central bank, which has now declared that it will continue supporting the economy with easier credit even when it has shown signs of recovery.

Analysts said there has been a sea change in the bank's policy since Fukui took over as governor in March 2003.

The career central banker has established closer contact with Prime Minister Junichiro Koizumi, who is staking his political future on government reforms and deflation-busting.

In the February monthly report, the bank's assessment of Japan's overall economic health was unchanged from January while it stressed the recovery was being led by increasing exports.-AFP