/www.bloomberg.com/ By Mayumi Otsuma
Tokyo, Feb. 17 (Bloomberg) -- Japan's economic activity is ``flat'' as net exports and industrial production level off, the Bank of Japan said, keeping its evaluation unchanged for a third month.
``Activity remains flat amid substantial uncertainty about the outlook,'' the bank said in its monthly evaluation of the world's No. 2 economy.
The bank's report comes after the government Friday said a surge in exports powered economic growth of 0.5 percent last quarter from the previous three months, beating expectations of a 0.4 percent contraction.
At its meeting Friday, the central bank kept monthly purchases of government bonds unchanged at 1.2 trillion yen ($10 billion.) Increasing bond purchases is among the few tools left to the bank to revive the economy since it cut interest rates almost to zero in March 2001.
Friday's report makes it less likely the central bank will yield to government pressure to pump more money into the financial system, analysts said
. ``The bank may stand pat again at its March board meeting,'' said Masaharu Motohashi, who helps oversee 500 billion yen at ING Mutual Funds Management Co.
The No. 246 bond, which carries a 0.8 percent coupon and matures in 2012, fell 0.226 to 99.456 as of 2:17 p.m. in Tokyo. Its yield rose 2.5 basis points to 0.86 percent. A basis point is 0.01 percentage point.
Japan's growth will probably falter, economists said, as rising oil prices and concern that the U.S. will lead an attack on Iraq hurt global growth. Exports, which accounted for half of fourth-quarter growth, fell 7.3 percent in December from November.
Succession
Prime Minister Junichiro Koizumi is preparing to name a successor to central bank governor Masaru Hayami, whose five-year term ends March 19. Koizumi has said he will choose someone who will ``aggressively'' fight the falling prices that have cut company profits for more than four years.
The bank will also see how Japan's stock market performs with the approach of the March 31 fiscal year-end, when banks and companies must book investment gains and losses, before changing policy, analysts said.
Bank of Japan policy makers next meet on March 4 and 5 at the final board meeting for Hayami.
Consumer prices will keep falling because of weak demand, the bank said. The pace of declines will slow because of rising oil prices and increases in medical insurance payments for salaried workers, the bank said.