BEIJING, April 9, (Xinhuanet) -- The Bank of Japan will probably refrain from pumping more cash into the world's second-largest economy this week, as increasing evidence of recovery eases pressure on the central bank to do more, economists said.

    Governor Toshihiko Fukui and his eight policy board colleagues will probably keep interest rates at almost zero and leave the upper limit of the target for reserves available to lenders at 35 trillion yen (US$332 billion) at a two-day meeting ending today in Tokyo, said 14 of 15 economists surveyed by Bloomberg News.

    The yen has risen 6 per cent against the dollar over the past month amid expectations of Japan's recovery spreading to consumer spending, allowing the government to scale back efforts to protect exporters such as Canon Inc and Toyota Motor Corp by selling yen. The central bank has helped the government to weaken the yen by adding extra cash to the economy.

    "The government has sold a massive amount of yen and the central bank has in tandem injected cash into the economy" since the fourth quarter of last year to slow the currency's gains, said Jun Ishii, chief fixed income strategist at Mitsubishi Securities Co in Tokyo. "Now the bank has taken a wait-and-see stance as the economy recovers, stocks rise and the government has ended its campaign to weaken the yen."

    The central bank lowered interest rates to almost zero in March 2001 and has since used its target for reserves available to lenders as its key money market tool. The bank has pledged to keep borrowing costs close to zero until nationwide consumer prices stop falling for at least a few months and the bank is sure they won't resume sliding.

    The central bank policy board will also probably decide to keep the bank's monthly purchases of government bonds from lenders unchanged at 1.2 trillion yen (US$11.42 billion), the economists surveyed by Bloomberg said.

    The benchmark 1.5 per cent bond due in March 2014 rose, pushing its yield down 1.5 basis points to 1.480 per cent as of 9:31 am yesterday in Tokyo, according to Japan Bond Trading Co. A basis point is 0.01 of a percentage point. Bonds trimmed gains on Wednesday after Moody's Investors Service said it raised Japan's foreign-currency rating to Aaa, its highest ranking, and left the local-currency debt ranking unchanged.

    Executives at service companies were optimistic for the first time in seven years, the Bank of Japan's Tankan survey showed last week, suggesting an export-led economic recovery is spurring the consumer spending that makes up more than half of the economy. Retail sales rose for a second month in February and household spending unexpectedly rose.

    The Nikkei 225 Stock Average has gained 12 per cent this year on expectations Japan's recovery is taking root and six years of deflation are easing, boosting the allure of yen-denominated investments. The Japanese currency traded at 105.61 to the dollar at 9:31 am yesterday in Tokyo, from 105.24 late on Wednesday in New York.

    The central bank in January unexpectedly voted to pump more cash into the economy, a step investors said would help slow the yen's gains. A stronger yen also exacerbates deflation by making imported goods cheaper. Enditem

(China Daily)