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Change of the Guideline for Money Market Operations

August 11, 2000
Bank of Japan

(For immediate release)

  1. At the Monetary Policy Meeting held today, the Bank of Japan decided, by majority vote, to change the guideline for money market operations for the inter-meeting period as follows:
    The Bank of Japan will encourage the uncollateralized overnight call rate to move on average around 0.25%.
  2. In February 1999, the Bank of Japan adopted the zero interest rate policy, unprecedented both in and out of Japan, to counter the possibility of mounting deflationary pressure and prevent further deterioration in economic conditions.Furthermore, it announced in April 1999 to continue the zero interest rate policy until deflationary concern is dispelled.
  3. Over the past one year and a half, Japan's economy has substantially improved, due to such factors as support from macroeconomic policy, recovery of the world economy, diminishing concerns over the financial system, and technological innovation in the broad information and communications area.At present, Japan's economy is showing clearer signs of recovery, and this gradual upturn, led mainly by business fixed investment, is likely to continue.Under such circumstances, the downward pressure on prices stemming from weak demand has markedly receded.
    Considering these developments, the Bank of Japan feels confident that Japan's economy has reached the stage where deflationary concern has been dispelled, the condition for lifting the zero interest rate policy.
  4. Since the middle of this July, the Bank of Japan has been closely monitoring the possible impact the collapse of Sogo Department Store might have.So far, it has not triggered any significant spread of concern over the financial system, nor induced any notable deterioration in market sentiment.
  5. Today's decision signifies a small adjustment to the degree of monetary easing in line with the improvement of the economy, thereby contributing to long-term sustainable growth.
    Even after the zero interest rate policy is terminated, monetary conditions remain largely relaxed in that the unsecured overnight call rate is still extremely low around 0.25%.The Bank of Japan will conduct monetary policy in an appropriate and flexible manner to support the economic recovery consistent with price stability.

(Reference)

Meeting hours : 9:01 a.m. to 5:18 p.m.

Members present :
Masaru Hayami (Chairman, Governor)
Sakuya Fujiwara (Deputy Governor)
Yutaka Yamaguchi (Deputy Governor)
Susumu Taketomi
Toshio Miki
Nobuyuki Nakahara
Eiko Shinotsuka
Kazuo Ueda
Teizo Taya

(Others present)

From Ministry of Finance:
Yoshitaka Murata, Senior State Secretary for Finance (from 9:01 a.m.)

From Economic Planning Agency:
Eiji Kawade, Director-General of the Co-ordination Bureau (from 9:01 a.m.)

Release of Monthly Report of Recent Economic and Financial Developments:
(Consisting of "The Bank's View" and "The Background")

Japanese version of the entire report and English version of "The Bank's View"
8:50 a.m. on Tuesday, August 15, 2000
English version of "The Background"
End of August 2000

Release of minutes :
2:00 p.m. on Wednesday, October 18, 2000