Bank of Japan ends ultra-loose monetary policy (AFP)

(Did you hear that? Sounded like something Popping!?! Sounded like the end of "free money" to fiance our 8.2 TRILLION Dollar Debt to me.)

Bank of Japan ends ultra-loose monetary policy

09/03/2006 07h08

TOKYO (AFP) - The Bank of Japan has announced an end to its five-year-old, ultra-loose monetary policy in a first step towards raising interest rates as the economy snaps out of its deflationary doldrums. The central bank will aim to keep short-term interest rates at effectively zero percent and inflation below 2.0 percent as it returns to a conventional monetary policy of focusing on lending costs.

The Bank of Japan signaled it was in no rush to start jacking up borrowing costs, saying that as long as inflation remained subdued "very low interest rates will probably be maintained for some time."

For almost five years the Bank of Japan has been flooding the financial market with virtually free money, a policy known as "quantitative easing", in an unprecedented measure to try to curb deflation. The central bank said it did not expect any significant disruption to financial markets from the end of this policy.

"Given that the effects of the quantitative easing policy on economic activity and prices now mainly result from short-term interest rates being zero, there will be no abrupt change as a result of today's policy decision," it said in a statement. It said there would now be a period in which short-term official interest rates are held at almost zero percent, followed by a "gradual adjustment in the light of developments in economic activity and prices."

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