BOJ reiterates Japan to see 3 years of deflation

TOKYO: The Bank of Japan reiterated today it projects Japan will see at least three years of price declines and kept its key interest steady at 0.1 percent in an effort to combat deflation and help the nation's economy to recover.

In an interim review of its semiannual report on economic and price conditions released in October, the BOJ, however, said it now predicts slightly milder deflation than it thought three months earlier due mainly to the impact of higher crude oil prices.

As for the state of the Japanese economy, the BOJ said it is moving largely in line with its previous forecast for a moderate recovery in the first half of fiscal 2010, and held off on new policy initiatives as widely expected.

"We fully recognise the possibility that the economy's growth pace may slow somewhat temporarily, but we do not expect a break in the recovery trend," BOJ Governor Masaaki Shirakawa said at a press conference after a two-day policy meeting.

He added there is no change in the BOJ's policy of maintaining a very easy monetary policy despite its latest projection of milder deflation.

The BOJ revised upward its projection for the consumer price index excluding volatile perishable foods for fiscal 2010 from the previously projected year-on-year fall of 0.8 percent to a 0.5 percent decline.