BOJ sticks to zero interest rate policy

TOKYO, Apr 11 (Reuters) The Bank of Japan said it will stick to its new policy of guiding a key short-term interest rate around zero percent on Tuesday, a month after ending its five-year-old super-loose policy.

The widely expected decision followed a two-day regular Policy Board meeting and was by a unanimous vote.

Taking its cue from modest but sustained rises in consumer prices, the BOJ scrapped its ''quantitative easing'' policy of flooding the banking system with excess funds on March 9 and returned to a conventional policy of targeting interest rates.

Traders now await a news conference by BOJ Governor Toshihiko Fukui from 3:30 p.m. (0630 GMT) for clues on when the central bank could start raising interest rates.

The Japanese government bond market has been nervous as speculation grows that the BOJ could start raising rates soon, with investors seeing a move as soon as July and a second rise by the year-end, each by a quarter of a percentage point.

The central bank is expected to sit tight for the next few months as it has yet to finish mopping up the excess liquidity in the money market, the legacy of quantitative easing.

REUTERS SB RK1106