Japan interest rate unchanged

The Bank of Japan kept its benchmark interest rate steady at 0.5 percent Wednesday as uncertainty in the global economy and financial markets continues to cloud the outlook for Japan.

The decision at the one-day policy meeting was widely expected after BOJ officials warned of downside risk to the U.S. economy and volatility in global markets.

The bank is scheduled to release its semiannual economic outlook report later in the day.

BOJ Governor Toshihiko Fukui is also slated to hold a news conference.

Analysts said the bank will lower its forecast for real economic growth this fiscal year because of expected weak growth in the fiscal third quarter and continued weakness in prices due to sluggish wages.

Fukui reiterated earlier this month the BOJ's stance that interest rates will be adjusted "gradually" based on the degree of improvement in the economy and price conditions.

But he also indicated the bank wasn't likely to consider raising interest rates anytime soon due to "uncertain factors" such as global market volatility that are making it difficult to predict the economy's future path.


Some analysts and investors are speculating the bank may raise its key interest rate to 0.75 percent before the end of the year since Japan has not felt a strong impact from the U.S. subprime crisis.

Many others are betting the cloudy outlook for the U.S. economy will keep the BOJ from raising rates the rest of the year.

Source: edition.cnn.com