Bank of Japan defies government, holds off easing

Despite mounting calls for bigger economic stimulus, Japan's central bank has refrained from pumping more money into the economy. As it keeps rates steady, it is taking the rap from both government and opposition. Following a two-day policy meeting, the Bank of Japan (BoJ) announced on Tuesday that it would not implement additional monetary easing measures to spur Japan's struggling economy. BoJ's policy board also voted unanimously to hold interest rates between zero and 0.1 percent, in spite of finding the world's third largest economy to be weakening on the back of dropping exports and factory output. In a statement, the central bank said that a "high degree of uncertainty" about Japan's economy prevailed as the country remained mired in deflation, which was undermining demand and would discourage investments. BoJ governor Masaaki Shirakawa said it was unrealistic to overcome deflation with monetary easing, adding that the general public was not hoping simply for an exit from deflation but an improvement in the economy as a whole. Japan's economy contracted by 3.5 percent year-on-year in the third quarter. This has prompted calls from the ruling Democratic Party of Prime Minister Yoshihiko Noda for more monetary action by the central bank. However, in October the BoJ already expanded an existing asset purchasing program from 80 trillion yen ($984 billion) to 91 trillion yen in a bid to generate inflation as a way to drag Japan out of its deflationary spiral. Last week, the BoJ was facing more pressure as Shinzo Abe, the leader of the main opposition Liberal Democratic Party, called for unlimited central bank easing, saying he would try to force the bank to buy government bonds. Highlighting the importance of central bank independence, BoJ governor Shirakawa said Abe's plans were nowhere implemented in any developed country, and that they were on a "never-do list" of the International Monetary Fund (IMF).