BoJ holds fire on further easing The Bank of Japan kept its monetary policy settings unchanged on Wednesday noting signs of a pick-up in the domestic economy and a "moderate" recovery in the US. The BoJ said it would encourage its key interest rate to remain at around zero to 0.1 per cent. It also left its asset-purchasing programme untouched, at a total of Y70tn ($880bn). Analysts said that the BoJ may be preserving ammunition for scheduled meetings next month, two days before the Greek election, or more likely in July, when it is due to update the market on its forecasts for inflation. On Wednesday the BoJ said that the year-on-year rate of change in consumer prices in Japan, excluding fresh food, was expected to remain at "around 0 per cent for the time being" - well short of the goal of 1 per cent the BoJ outlined in February. Standing pat is unlikely to deflect criticism from politicians that the BoJ is not doing enough to overturn Japan's persistent state of mild deflation. "Today's result does not change the stance of lawmakers about the need for further easing," said Daiju Aoki, economist at UBS in Tokyo. Separate monthly trade data for April, released earlier on Wednesday, suggested that Japan's manufacturers might also welcome a further round of easing to weaken the yen. While exports to the US were strong, more than doubling the trade surplus from last year's quake-hit levels, exports to China - Japan's biggest single trading partner - and western Europe both fell by 7 per cent, year-on-year. Fitch downgraded Japan's credit ratings on Tuesday due to its high level of public debt Kiichi Murashima, economist at Citi in Japan, expects shipments to China and the EU to post their third consecutive declines in the April-June quarter - the first time that the two export zones have contracted simultaneously, for so long. While Europe remains weak, he said, "China's monetary tightening is weighing on the property market, so exports of capital goods, especially construction machinery, have lost a lot of steam." Meanwhile, imports of liquefied natural gas and oil remain high, as a consequence of the complete shutdown of the country's nuclear power-generation capacity after the Fukushima crisis beginning last March. In April mineral fuels accounted for 36.9 per cent of Japan's imports by value, up from 29 per cent in the calendar year 2010. Overall, Japan's trade deficit in April widened to Y520bn from Y477bn a year earlier, marking the eighth deficit in the past 12 months. That trade picture is one of the main reasons why Japan's economy is already past the post-quake "sweet spot," said Robert Feldman, senior economist at Morgan Stanley in Tokyo. He predicts that annualised growth will moderate from 4.1 per cent in the first quarter to between 1 and 2 per cent for the remainder of the year, as the boost of reconstruction spending fades.