The Bank of Japan abstained from announcing more stimulus on Friday after lifting its asset purchase by JPY 10 trillion last month despite mounting political pressure and further weakening of economic activity.

The policy board led by Governor Masaaki Shirakawa, retained the benchmark overnight uncollateralized call rate at 0-0.1 percent. The board also decided to maintain the size of the asset purchase and credit facility at JPY 55 trillion and JPY 25 trillion respectively.

In September, the central bank announced a fresh round of stimulus to revive the economy by expanding the asset purchase by JPY 10 trillion to JPY 80 trillion.

Today's decision was unanimous. Meanwhile, in an unusual gesture, Minister of State for Economic and Fiscal Policy Seiji Maehara attended the meeting. Maehara has been demanding decisive measures from BoJ to pull the economy out of the deflationary cycle.

The policy board downgraded its economic assessment for a second time this month, saying the "economic activity is leveling off more or less." Last month, it said the "pick-up in economic activity has come to a pause."

The bank noted that exports and industrial production have been relatively weak as overseas economies moved somewhat deeper into the "deceleration phase."

However, the central bank's inflation target of 1 percent looked far from attainable as the board predicted the year-on-year rate of change in the CPI will remain "at around 0 percent for the time being."

"The Bank recognizes that Japan's economy faces the critical challenge of overcoming deflation and returning to a sustainable growth path with price stability," the Board said in a statement.

"This challenge will be met through efforts by a wide range of economic agents to strengthen the economy's growth potential and support from the financial side."

The BoJ reiterated that it will "proceed with the monetary easing in a continuous manner by steadily increasing the amount outstanding of the Asset Purchase Program."

RTTNews