The Bank of Japan left its super-low interest rates unchanged today amid mounting worries on the global economy amid market speculation that borrowing costs could be cut even further.
The central bank said in a brief statement that its policy board decided unanimously to keep the benchmark cost of borrowing at 0.5%, the lowest among the world's major economies.
The Bank of Japan has not raised interest rates since February last year amid domestic political uncertainty and volatility on financial markets over the US housing downturn.
Economists said that the Bank of Japan is most likely to leave interest rates for the rest of this year, unless the economies of emerging markets drastically slow down and the yen appreciates more sharply.
BoJ governor Toshihiko Fukui has warned that the Japanese economy was due to slow down in the near term, but the economy would pick up soon thereafter to post a modest expansion. However he warned of effects of a slowdown in the US, one of Japan's key export market.
In a bid to reassure markets, Prime Minister Yasuo Fukuda said today that Japan's economic fundamentals remained sound despite a slowdown in domestic housing investment due to tighter construction regulations.
