The following is an unedited transcript of the news release from the Bank of Japan.


Policy Board Members Present

Mr. M. Shirakawa, Chairman, Governor of the Bank of Japan
Mr. H. Yamaguchi, Deputy Governor of the Bank of Japan
Mr. K. G. Nishimura, Deputy Governor of the Bank of Japan
Ms. M. Suda
Mr. A. Mizuno
Mr. T. Noda
Mr. S. Nakamura
Mr. H. Kamezaki
Government Representatives Present
Mr. W. Takeshita, Senior Vice Minister of Finance, Ministry of Finance
Mr. B. Fujioka, Vice Minister for Policy Coordination, Cabinet Office
Reporting Staff
Mr. A. Horii, Executive Director (Assistant Governor)
Mr. K. Ido, Executive Director
Mr. H. Nakaso, Executive Director
Mr. M. Amamiya, Director-General, Monetary Affairs Department
Mr. T. Sekine, Associate Director-General, Monetary Affairs Department
Mr. H. Toyama, Director-General, Financial Markets Department
Mr. K. Momma, Director-General, Research and Statistics Department
Mr. E. Maeda, Associate Director-General, Research and Statistics Department
Mr. T. Nunami, Director-General, International Department
1 The minutes of this meeting were approved by the Policy Board at the Monetary Policy Meeting
held on May 21 and 22, 2009 as """"a document describing an outline of the discussion at the meeting""""
stipulated in Article 20, paragraph 1 of the Bank of Japan Act of 1997. Those present are referred
to by their titles at the time of the meeting.

Secretariat of the Monetary Policy Meeting
Mr. Y. Iino, Director-General, Secretariat of the Policy Board
Mr. K. Shigyoh, Director, Deputy Head of Secretarial Services for the Board, Secretariat
of the Policy Board
Mr. T. Kato, Senior Economist, Monetary Affairs Department
Mr. K. Nakamura, Senior Economist, Monetary Affairs Department
Mr. A. Okuno, Senior Economist, Monetary Affairs Department

Summary of Staff Reports on Economic and Financial Developments

Money Market Operations in the Intermeeting Period

The Bank conducted money market operations in accordance with the guideline decided at the previous meeting on April 6 and 7, 2009.3 The uncollateralized overnight call rate had been at around 0.1 percent.

To ensure market stability in Japan, the Bank actively purchased Japanese government securities (JGSs) and CP under repurchase agreements. The Bank continued to conduct outright purchases of CP, special funds-supplying operations to facilitate corporate financing, and U.S. dollar funds-supplying operations against pooled collateral.

Recent Developments in Financial Markets

Japan''s money market had generally been nervous, although upward pressure on interest rates was moderating gradually. Yields on government bills had been more or less unchanged. The general collateral (GC) repo rates had been volatile. Meanwhile, Euroyen rates had declined moderately partly due to the expansion of funds-supplying measures taken by the Bank, although they remained at a relatively elevated level, particularly those on term instruments with longer maturities. Interest rates on CP, particularly with high ratings, continued declining, although investors remained highly selective about the issues they purchased.

As for Japanese stock prices, the Nikkei 225 Stock Average had generally been slightly below 9,000 yen recently. After the previous meeting, long-term interest rates in Japan rose slightly and then leveled off. They had recently declined to the 1.40-1.45 percent range.

The yen had appreciated somewhat against the U.S. dollar, and had recently been at around 97 yen to the dollar.Reports were made based on information available at the time of the meeting.

The guideline was as follows:
The Bank of Japan will encourage the uncollateralized overnight call rate to remain at around 0.1 percent.

Overseas Economic and Financial Developments

U.S. economic conditions had continued to deteriorate significantly. Housing investment declined substantially, and home prices continued to be on a declining trend. Business fixed investment had been contracting noticeably. Private consumption had been on a declining trend, but the pace of decrease was moderating. In this situation, production had been decreasing, but there were indications of some progress in inventory adjustments. The number of employees had been declining considerably, and the unemployment rate had been rising. Funding conditions for firms and households had remained tight. As for prices, the year-on-year rate of increase in the consumer price index (CPI) for all items had become negative, as increases in food prices had been leveling off and energy prices had been low. That in the CPI for all items less energy and food, or the core CPI, had been in the range of 1.5-2.0 percent.

Economic conditions in the euro area had continued to deteriorate significantly.Private consumption, business fixed investment, and housing investment had decreased, in addition to the continuing decline in exports. As for prices, the year-on-year rate of increase in the Harmonized Index of Consumer Prices (HICP) had declined substantially. Economic conditions in the United Kingdom had also continued to deteriorate significantly, mainly reflecting the ongoing considerable adjustments in the housing market and a declining trend in private consumption.

In China, the economic deceleration had come to a halt: although exports had declined, domestic demand continued to show high growth. Economic growth in India had decelerated significantly, and economic conditions in the NIEs and the ASEAN countries had deteriorated significantly. As for prices, the year-on-year rate of increase in the CPI had been on a declining trend in many Asian economies.

Global financial markets remained under strain. Treasury-Eurodollar (TED) spreads and credit spreads on CP had been more or less unchanged at relatively high levels. Credit spreads on corporate bonds also remained at high levels. Meanwhile, U.S. and European stock prices had increased somewhat recently, although remaining volatile reflecting both positive and negative information on the financial soundness of financial institutions. U.S. long-term interest rates had risen recently due partly to the rise in stock prices, while European long-term interest rates had been more or less unchanged.

Economic and Financial Developments in Japan