Japan's central bank has said it is vital for the country's economy to break out of deflation as it maintained its super low interest rates steady.
The Bank of Japan maintained its assessment that the economy is gradually recovering from its worst slump in decades, as it held its key lending rate unchanged at 0.1%, where it has been since December 2008.
'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,' it said in a statement.
At the same time the bank voiced increased concern about deflation, which hurts corporate profits and encourages some consumers to put off purchases in the hope of getting a lower price in the future.
In unusually strident remarks, the BoJ said that it 'does not tolerate' falls in consumer prices. Japan's core consumer prices fell 2.2% in October from a year earlier, marking an eighth straight month of drops.
The BoJ, under pressure from the government to step up the fight against deflation, decided earlier this month to pump 10 trillion yen ($112 billion) into the financial system through a new loan facility.
Japan's economy returned to positive growth in this year's second quarter after a severe year-long recession. But the government reported last week that the world's number-two economy grew at a much slower rate than previously thought in the third quarter, re-igniting fears that the fledgling recovery could stall.
