BOJ maintains monetary policy, to check impact of yen's rise+

TOKYO, Aug. 10 Kyodo - The Bank of Japan on Tuesday kept its key interest rate at 0.1 percent and maintained its assessment that the nation's economy shows signs of recovery, but also warned of downside risks amid concerns over the U.S. economic outlook and a strong yen.

While noting that the BOJ will ''carefully'' check the impact of the yen's move, BOJ Governor Masaaki Shirakawa was reluctant about further monetary
easing steps, saying that the situation has improved from late last year when
the yen also showed a steep rise.
''We acknowledge that a strong yen could be a negative factor on business
sentiment...but we also have to check (the impact of the yen's moves on the
Japanese economy) in a well-balanced manner,'' Shirakawa told a press
conference after the meeting.
The BOJ also said in a statement that ''attention should be paid'' to how
developments in global financial markets could affect domestic and overseas
economies, apparently taking into mind the yen's recent appreciation.
When the yen rose sharply against the dollar around the end of November last
year because of debt problems at a Dubai government investment fund, the
central bank quickly decided in early December to introduce a new funding
operation.
But private companies are now reporting a rise in profits, the financial
environment is improving, and economic situations in developed countries are
recovering, compared with December, Shirakawa said.
As for the current economic situation, the BOJ's Policy Board maintained that
''Japan's economy shows further signs of a moderate recovery '' and that it
''is likely to be on a recovery trend.''
It also noted that exports and production have been increasing on the back of
high growth in emerging economies and increased global demand for
information-technology related goods, and that private consumption has been
generally picking up.
The BOJ also voted unanimously to keep the target rate for unsecured overnight
call money, a level unchanged since December 2008, as part of efforts to
overcome deflation.
The uncertain outlook for the U.S. economy could spur further yen buying, with
some market players speculating that the U.S. dollar may be heading toward a
15-year low below 85 yen in the wake of recent dismal U.S. economic data.
A strong yen is generally unfavorable for Japanese exporters, a key driving
force of the economy, as it erodes the value of their earnings when
repatriated.
It could also lead to lower import prices and prolonged deflation.
==Kyodo