Bank of Japan cuts economy view, holds rate steady

LOS ANGELES (MarketWatch)
The Bank of Japan said Wednesday that the nation’s economic recovery has stalled due to sluggish conditions abroad and a rising yen, while keeping its policy rate unchanged.
In a statement following its policy meeting, the central bank held its overnight call rate target steady at 0-0.1% by a unanimous vote, as was widely expected, repeating that no changes were planned until prices showed “medium- to long-term” stability.
“The pick-up in Japan’s economic activity has paused, mainly due to the effects of a slowdown in overseas economies and of the appreciation of the yen ... as well as of the flooding in Thailand,” the Bank of Japan said.
The U.S. dollar hasn’t traded above the ¥80 level since the summer, while the euro has languished below ¥110 during the same period, weighing on Japan’s key export sector.
Aside from exports, the central bank was more upbeat, saying:
“As for domestic demand, business fixed investment has been on a moderate increasing trend and private consumption has remained firm.”
But the strong yen and the situation in Thailand, where disastrous floods have hurt plants run there by Japanese multinationals and their suppliers, has slowed improvement in business sentiment, the Bank of Japan said.
It said economic activity would likely remain “more or less flat for the time being,” citing risks from Europe and the U.S.