The Bank of Japan (BoJ) decided to keep its monetary policy unchanged on Thursday after a two-day Policy Board meeting, an outcome widely expected by markets after a surprise easing just two weeks ago.
The BoJ decided by a unanimous vote to keep its current account deposits target, a benchmark of liquidity in the banking system, at 30-35 trillion yen ($285-332 billion).
It also promised even more funds if it saw risks to financial system stability.
Markets has been wary ahead of a meeting of Group of Seven finance officials on Friday and Saturday in Florida, with some saying it was hard to predict the central bank's decisions after its surprise move last month.
The deposits target was raised at the last meeting from 27-32 trillion yen, shocking investors who had expected no change in view of the BoJ's own assessment that the economy was recovering thanks to healthy exports and rising output.
But the BoJ again showed it was ready to act as it saw fit, announcing changes to its money market operations that included saying it will accept floating rate Japanese government bonds (JGBs) as collateral for market operations from March.
Economic health index rises
A key measure of the health of Japan's economy bounced higher in December, helped by signs of an improving job market and falling inventories as companies shipped more products to meet strong demand.
The diffusion index of leading economic indicators for December rose to a preliminary 70.0 from a revised 54.5 a month earlier, the government said on Thursday.
The figures are the latest to show that Japan's economy ended 2003 on a high note, confirming views that it is pulling out of 10 years of sluggishness. Earlier figures showed unemployment in December fell to its lowest in two and half years, while industrial output in the last three months of 2003 rose at one of its highest quarterly rates in recent years.
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