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Saturday, Nov. 22, 2008

BOJ leaves key interest rate unchanged at 0.3%

Staff writer

The Bank of Japan left the key interest rate unchanged Friday at 0.3 percent, as widely expected, amid a stagnating domestic economy, a decelerating global economy and financial turmoil.

The eight-member BOJ Policy Board voted unanimously to keep the uncollateralized overnight call rate at its current level at the end of its two-day meeting.

The BOJ last month cut its benchmark interest rate to 0.3 percent, its first rate cut since 2001, joining other central banks in moving to limit further damage from the global financial crisis.

BOJ Gov. Masaaki Shirakawa told reporters Friday the economy is seeing some changes.

"In the past month, the world economy has largely changed," Shirakawa said, highlighting two major trends.

Japan's exports declined as the world economy stagnated, and changes in the international financial market affected the domestic market and real economy, he said.

Meanwhile, inflation is expected to be moderate given declines in the prices of petroleum products and the stabilization of food prices, the BOJ predicted.

With price stability, the economy is likely to return to a sustainable growth path in the long run, it said.

But the outlook remains uncertain, the bank said.

Given the slowdown in the world economy and global financial market turmoil, it will take time before conditions for an economic recovery are met, the bank said.

Shirakawa showed reluctance to make further rate cuts under current conditions.

"We plan to appropriately judge how to implement policies based on the conditions of the economy, commodity prices and finances," he said.

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The Japan Times

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