Japan keeps key interest rate unchanged at zero

The bank also downgraded its view of the economy due to last months disasters, which have plunged the nation into its worst crisis since World War II. The bank warned of the pressures on an economy reeling from its biggest recorded earthquake, a tsunami and nuclear crisis, and unveiled a lending scheme for banks in affected areas. “Japans economy is under strong downward pressure, mainly on the production side, due to the effects of the earthquake disaster,” the central bank said, adding, “The earthquake has sharply dampened production in some areas by damaging production facilities, disrupting the supply chain, and constraining electric power supply.”In a bid to ensure financial institutions in disaster-hit areas can meet demand for post-quake reconstruction funds, the BoJ unveiled a 1.0 trillion yen scheme offering 0.1 percent interest one-year loans. It also said it would consider broadening the range of eligible collateral for money market operations for banks in affected regions. However, analysts saw the BoJs move as a small step with limited economic benefits, which suggested it was holding back in anticipation of the need for more dramatic action later. The total cost from collapsed or damaged houses, factories and infrastructure such as roads and bridges is estimated at 16-25 trillion yen over the next three fiscal years, according to the Cabinet Office. Manufacturing activity fell to its lowest reading for two years following the March 11 disaster, a survey by a private research firm showed last week.And domestic sales of new cars, trucks and buses dropped 37 percent from a year earlier last month, as production and supplies to auto dealers were hit.