Bank of Japan (BOJ) Governor Mr Toshihiko Fukui said today markets were calm and long-term rates low, bolstering expectations the bank's policy board will not ease credit policy this week.
The BOJ meets tomorrow amid worries about a recent surge in long-term Japanese government bond yields, but analysts said recovering stock prices would probably encourage the central bank to keep policy unchanged.
"Long-term rates continue to be low. There was a slight rise recently, but in general they are stable at a low level," Mr Fukui said in a speech to business leaders.
He also said financial markets were now stable and that there were no signs of any fallout from a government bailout of Resona Holdings, the country's fifth-largest bank, which had suffered a shortage in capital.
He said the central bank's additional easing measures in April and May had helped to soothe worries in the market. "Concerns over liquidity have been eradicated".
Mr Fukui said Japan's economy had weakened slightly in recent months due to slower exports and production, a view shared by Economics and Financial Services Minister Mr Heizo Takenaka, who gave a speech to the same audience.