Japan's central bank said today that it had decided to leave its main interest rate unchanged at 0.5% at the end of a one-day meeting, amid worries about the health of the global economy.

The Bank of Japan in 2006 raised interest rates for the first  time in almost six years. It hiked rates again in February last year but has held them steady since then amid worries about the economic climate and financial market volatility.

The decision was made unanimously by seven members of the  monetary policy board, which currently has two vacancies.

The bank gave no immediate explanation for the decision, which had been widely expected in financial markets. Central bank governor Masaaki Shirakawa, who chaired his first monetary policy meeting since officially taking up the top post earlier this month, is due to hold a press conference later today. 

Japan's central bank is expected to cut its forecast for 2.1% economic growth in this fiscal year to March, when it releases its twice-yearly outlook for the economy and consumer prices later today.

Analysts also expect the Bank of Japan to soften its previous stance under former governor Toshihiko Fukui in favour of gradual interest rate rises.

Reflecting the fragile health of Asia's largest economy, the government reported earlier that Japan's factory output  fell by 3.1% in March, the fastest pace in five years, amid a decline in US-bound exports.

Many economists expect the BoJ to leave interest rates unchanged  at 0.5% for the foreseeable future, although some still see a chance of a rate hike later this year after inflation hit a decade high of 1.2% in March.

Japan's central bank for years battled to end deflation with an unprecedented policy of virtually free credit. But the return of inflation in Asia's largest economy has also been met with concern among policymakers because it is being driven by rising oil and food costs that are making life tougher for households and companies.