At the meeting, the bank unanimously decided to leave its uncollateralized overnight call rate unchanged at 0.10 percent and held off on new policy initiatives. The last change in the rate was a 0.10 percent cut in December 2008.
The bank also retained its assessment of the domestic economy, saying growth is picking up mainly due to various policy measures taken at home and abroad, although there is not yet sufficient momentum to support a self-sustaining recovery in domestic private demand.
"Japan's economy was picking up, against the background of an increase in exports and production and a pick-up in private consumption," the minutes said. "The improvement in the economy had been underpinned by various policy measures taken at home and abroad and by inventory restocking, and there was not yet sufficient momentum to support self-sustaining recovery in private demand."
The BOJ largely stuck with October's long-term growth projections for the economy. The bank nudged up its growth estimate for fiscal year 2009 to minus 2.5 percent from October's minus 3.2 percent. It also revised up the core consumer price inflation rate for the fiscal year 2010 to minus 0.5 percent from minus 0.8 percent, citing the rise in crude oil prices.
The Bank of Japan's baseline scenario projects the pace of improvement in the economy to remain moderate until around the middle of fiscal 2010. Thereafter, the bank expects export-driven growth in the corporate sector to spill over to the household sector, and predicts the economic growth rate to gradually rise.
The bank held off on unveiling further support measures to tackle deflation as was expected in some quarters.
"Given the above assessment of recent developments, members agreed with the following baseline scenario for Japan's economy," the minutes said. "The pace of improvement of the economy was likely to remain moderate until around the middle of fiscal 2010, and thereafter the growth rate of the economy was likely to rise gradually."
The Bank of Japan has been in a running feud with the government on how to handle the threat of deflation. In December, the central bank said it was a critical challenge to overcome deflation and declared that it would not tolerate prices at, or below, zero. The bank is yet to specify how it plans to combat the threat of deflation.
"As for the future conduct of monetary policy, members agreed that, in order for Japan's economy to overcome deflation and return to a sustainable growth path with price stability, the Bank should continue to consistently make contributions as central bank," the minutes said. "They concurred that in its conduct of monetary policy the Bank was determined to maintain the extremely accommodative financial environment by providing ample funds to meet market demand and maintaining the extremely low interest rates."
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