The Bank of Japan (BOJ) adopted on Thursday the policy to abandon its five-year-old super-loose monetary policy and return to a conventional interest-rate targeted policy, Japanese media said.

The BOJ Policy Board, taking a step toward monetary tightening, decided after a two-day meeting to switch to the unsecured overnight call money rate as a monetary adjustment target, rather than using the outstanding balance of current account deposits held by private financial institutions at the central bank.

BOJ Governor Toshihiko Fukui told a news conference that the central bank made the policy change as an uptrend in consumer prices has been rooted in line with the steady economic recovery, which fulfilled its self-imposed conditions to lift the ultra- loose policy.

In a statement, the BOJ said that Japan's economy continues to recover steadily, and the bank expects a sustained recovery.

"Exports have continued to increase reflecting the expansion of overseas economies, and with respect to domestic private demand, business fixed investment has also continued to increase against the backdrop of high corporate profits," the statement said.

Despite termination of the unprecedented cash-flooding policy, the central bank pledged to effectively maintain the so-called zero-interest-rate policy for the time being by holding the unsecured overnight call money rate at near zero.

Since March 2001, the BOJ has supplied extremely ample liquidity with current account balance at the bank as the main operating target, and pledged to maintain the policy until the consumer price index (excluding fresh food, on a nationwide basis) registers stably zero percent or an increase year on year.

Source: Xinhua