By Jay AlabasterTOKYO -- Japan's central bank on Friday upgraded its assessment of the world's second-largest economy, taking a cautiously upbeat stance that recession may be easing. The Bank of Japan's eight-member policy board voted unanimously to leave its overnight call rate at 0.1%, a move that was widely expected. The low rate is in place to encourage lending and the flow of capital, but there is little room to cut it further. But the central bank modestly upgraded its economic assessment. It said the economy was still deteriorating, but exports and production are beginning to level out. Previous assessments said the economy had been deteriorating significantly. This is a glimmer of good news for big names in Japan's corporate ranks such as Sony ( SNE) and Toyota ( TM), for which sales abroad are a major source of profit. Such companies have booked huge losses, cut workers and shut down plants as they feel the effects of a global economy mired in recession. Hope for an end to the current malaise has come from other areas as well. Earlier this week, government data showed Japan's economy shrank at a record 15.2% annual pace in the first quarter, the biggest drop since the country began compiling such numbers in 1955, but the numbers also raised hopes that the worst is over. The current administration is banking on elephantine spending packages to spark a turnaround. Prime Minister Taro Aso's latest $150 billion stimulus package includes incentives to buy energy-efficient appliances and cars, plus help for the unemployed and small businesses.
With interest rates near zero, the Bank of Japan has tried to shore up the balance sheets of the country's banks and other lenders. The central bank takes some financial risk off of such companies' books by buying up commercial paper, corporate bonds and even stocks. On Friday, the central bank also said it would accept foreign bonds in foreign currencies as collateral from banks when providing credit for market operations, which could make it easier for such banks to raise funds.