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Bank of Japan keeps interest rates on hold at 0.5 percent

Japan's central bank left its super-low interest rates unchanged for a 12th straight meeting yesterday amid growing worries about the health of the global economy.

The decision by the Bank of Japan to leave rates on hold at 0.5 percent, where they have been since February, came as no surprise to financial markets, which see little chance of another rate rise before the middle of next year.

UNANIMOUS VOTE

The vote was unanimous as one of the nine board members dropped his earlier call for higher interest rates, the central bank said in a statement.

Markets had been watching with interest to see whether board member Atsushi Mizuno, who is seen as a policy hawk, would maintain his call at the previous six meetings for a rate hike.

Japan's economic growth has fallen short of market and government expectations this year because of slowing business investment, a housing sector slump and falling exports to the shaky US economy.

GROWTH FORECAST

On Wednesday the government slashed its economic growth forecast to 1.3 percent for the current fiscal year to next March from an earlier projection of 2.1 percent, but predicted a pick-up to 2.0 percent next year.

Japan's economy is slowly recovering from a slump stretching back more than a decade, but it has taken longer than expected to decisively exit deflation, or falling consumer prices.

Japan's core consumer prices rose for the first time in 10 months in October, edging up 0.1 percent.

OTHER ECONOMIES

Japan's benchmark interest rate is by far the lowest among the major economies, and the central bank has warned that low borrowing costs risk creating a boom-bust cycle that could threaten long-term growth.

The bank last year raised interest rates for the first time in almost six years. It hiked rates again in February but has held them steady since then amid domestic political uncertainty and financial market volatility.
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