Bank of Japan holds fire, more optimistic on economy

The Bank of Japan kept monetary policy steady and revised up its assessment of the economy on Tuesday, encouraged by a pickup in factory output and the prospects for recovery in business sentiment, which was hit by the devastating earthquake in March.

As widely expected, the central bank kept the benchmark interest rate steady at a range of zero to 0.1 per cent by a unanimous vote and held off on loosening policy further.

Governor Masaaki Shirakawa will hold an embargoed news conference with his comments expected to come out sometime after 4:15 pm (0715 GMT).

In a quarterly review of its long-term projections, the BOJ cut its economic forecast for the current fiscal year mainly due to a technical revision reflecting changes to last year's figures. It kept its projection for the following fiscal year unchanged.

The BOJ has stood pat on policy since easing credit days after the March disaster by topping up a pool of funds to buy assets ranging from government bonds to corporate debt.

Expectations of an imminent monetary easing have receded as Japan emerges from a post-quake recession, with output rebounding and companies making steady progress in restoring supply chains.

The central bank issues its long-term economic and price forecasts in April and October of each year, and reviews them in January and July.