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TOKYO: Japan's central bank doubled the amount of cash it would make available to banks Wednesday while keeping interest rates at a record low as it tries to kickstart a stuttering economic recovery.
Under government pressure to help fight deflation, the Bank of Japan said it would extend emergency steps taken in December by boosting its short-term loan facility to 20 trillion yen (US$220 billion).
The facility offers three-month loans at 0.1 per cent against collateral such as government bonds and corporate debt. However, the bank surprised markets by not extending the loan duration to at least six months.
The decision, after a two-day policy meeting, came as the economy claws out of its worst post-war recession in a recovery that has been hobbled by falling consumer prices and weak consumption.
The BoJ held its benchmark interest rate unchanged at 0.1 per cent, a level it has kept since December 2008, the height of the global financial market meltdown.
The bank said: "Japan's economy 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."
"The bank recognises that it is a critical challenge for Japan's economy to overcome deflation and return to a sustainable growth path with price stability," it added, maintaining its earlier view.
"The bank will continue to aim to maintain the extremely accommodative environment."
The decision comes after the government raised pressure on the bank to do more to beat deflation, which hurts corporate profits and depresses economic activity as consumers delay spending, hoping for further price drops.
In a fresh nudge to the bank, Finance Minister Naoto Kan told a parliamentary session on Tuesday that he hoped it would "make efforts to combat deflation", in comments cited by Dow Jones Newswires.
- AFP/sc
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