This photo shows the Bank of Japan headquarters building in Tokyo. (Mainichi)

       TOKYO (Kyodo) -- The Bank of Japan on Wednesday kept its ultraeasy monetary policy intact to help the economy weather curbs to combat COVID-19 and supply chain disruptions in Southeast Asia.

       At the end of a two-day policy-setting meeting, the BOJ decided to set short-term interest rates at minus 0.1 percent while guiding 10-year Japanese government bond yields around zero percent to keep borrowing costs low for companies and households.

       The Japanese central bank will continue to buy exchange-traded funds as needed, with its annual limit at 12 trillion yen ($110 billion).

       The BOJ's meeting came a week before the ruling Liberal Democratic Party elects its new president who will almost certainly become Japan's next prime minister as incumbent Yoshihide Suga's current term as LDP leader expires at the end of this month.

       Four candidates in the LDP race recognize the need to keep crisis-mode support for the pandemic-hit economy with financial markets looking for any hints of change from "Abenomics," which relies heavily on bold monetary easing and fiscal stimulus.

       The BOJ stuck to its overall assessment of the economy, saying that it has "picked up as a trend, although it has remained in a severe situation" due to the impact of COVID-19.

       It noted some impact of "supply-side constraints," even though overall exports and industrial output have continued to recover.

       The Japanese central bank said it will maintain support for companies struggling with the fallout of the pandemic so they can gain access to funding needs.

       The spread of the highly contagious Delta variant of the novel coronavirus has forced the Japanese government to place prefectures with relatively high infection numbers under a state of emergency.

       The current declaration is due to end on Sept. 30, and the government is considering lifting it partially or entirely, government and ruling party sources said Tuesday.

       Casting a pall over the outlook for a recovery led by manufacturers, a global semiconductor shortage and factory shutdowns in Southeast Asia due to the spread of COVID-19 have made it difficult for Japanese carmakers including Toyota Motor Corp. and Honda Motor Co. to secure enough parts, leading to sharp production cuts.

       Soaring material costs are another source of headache for Japanese companies as they appear reluctant to pass them onto consumers by raising prices, which in turn would squeeze their profits. Recent sharp gains in wholesale prices have yet to translate into higher consumer prices in Japan.

       The BOJ stands in sharp contrast with the U.S. Federal Reserve which is expected to start dialing back asset-buying as early as this year. Financial markets are looking to see when the U.S. central bank will begin raising interest rates.

       Governor Haruhiko Kuroda is scheduled to explain the policy decision at a press conference, with remarks on any implications of the LDP presidential election and market concerns about a potential default by major Chinese property developer Evergrande Group in focus.

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