TOKYO (MNI) – Many Bank of Japan board members said that the BOJ
needs to pay great attention to the risk factors that could worsen the
Japanese economy, minutes of the May 20-21 policy-setting meeting show.

“Many members said that the possibility was small at present that
the recovery in advanced economies would come to an end. These members
continued that close attention should be paid to the risk that
balance-sheet adjustments and events stemming from European countries’
fiscal conditions might adversely affect advanced economies through such
channels as financial markets and international trade,” the minutes

It also said, “A few members said that the key to the world economy
establishing a virtuous circle would start off with the rapid growth in
emerging economies and maintain a solid recovery in the U.S. and
Japanese economies, while containing the adverse effects from the
heightened uncertainty in European economies.”

The minutes also showed that many members emphasized the need for
the BOJ to pay attention to the risk that possible intensification of
the financial market strains — which could arise in the process of
fiscal consolidation and economic reforms in countries such as Greece —
might depress economic activity in the whole euro area through various

The BOJ said on May 21 that its policy board voted unanimously to
leave the target for the overnight lending rate among commercial banks
unchanged at 0.1%, the lowest possible rate without hurting market

The BOJ has maintained the target since December 2008, when it
lowered it from 0.3% at the height of the global financial crisis.

Meanwhile, the BOJ also unveiled the outline of its new lending
facilities that were decided at the April 30 policy meeting and is aimed
at increasing commercial banks’ incentives to extend loans to innovative
firms in growth sectors.

The central bank will extend one-year loans to private banks at the
overnight call rate, which is currently at 0.1%, and they can be rolled
over, it said in the Statement on Monetary Policy released after a
two-day policy-setting meeting.
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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