BOJ raises economic assessment for 1st time in nearly 3 yrs+

TOKYO, May 22 Kyodo -
The Bank of Japan on Friday raised its assessment of the nation's economy for
the first time in two years and 10 months amid emerging signs of improvement in
such areas as industrial output, signaling that the worst may be over for the
world's second-largest economy.
The BOJ's eight-member Policy Board also voted unanimously to leave the key
interest rate unchanged at 0.1 percent. The BOJ last lowered the target rate
for unsecured overnight call money in December, by 20 basis points.
''Economic conditions have been deteriorating, but export and production are
beginning to level out against the backdrop of progress in inventory
adjustments both at home and abroad,'' the BOJ said in a statement.
In its previous assessment in April, the BOJ had said that conditions were
deteriorating ''significantly.''
The change in tone shows that the central bank now has a brighter view on the
Japanese economy, which suffered a record contraction in the first three months
of 2009.
BOJ Governor Masaaki Shirakawa said at a press conference that the time when
economic conditions were bad enough to be described as suffering from a ''free
fall'' has already passed.
However, the BOJ chief fell short of saying the Japanese economy has hit the
bottom.
According to government data released Wednesday, Japan's gross domestic product
shrank at an annual pace of 15.2 percent in real terms, the record largest
drop, in the period from January to March.
''GDP is seen to improve significantly in the April-June quarter, compared with
the period from January to March,'' Shirakawa said.
His remarks are in line with a rosy outlook in the statement saying, ''The pace
of deterioration in economic conditions is likely to moderate gradually,
leading to a leveling out of the economy.''
At a two-day policy meeting through Friday, the BOJ also announced it will
start accepting foreign government bonds issued by the United States, Britain,
France and Germany as collateral for supplying funds to financial institutions.
The new step allows financial institutions to obtain yen funds from the BOJ by
using foreign government bonds, so that fund-raising by Japanese branches of
foreign financial institutions may become easier.
The BOJ has taken a series of unconventional measures to make ample funds
available to cash-strapped financial institutions, and encourage them to lend
more to businesses.
The BOJ aimed at supporting the slumping economy with the emergency measures,
including the outright purchase of corporate bonds and commercial paper from
financial institutions, as there is little room for adjusting conventional
monetary policy with its key interest rate at a rock-bottom 0.1 percent.
==Kyodo