MercoPress. South Atlantic News Agency

Japan leaves key interest rate unchanged at 0.5%

Japan's central bank keep interest rate unchanged

The Bank of Japan decided Thursday to keep its key interest rate unchanged at 0.5% for the sixth month in a row.

The move supported by eight out of the board's nine members had been widely expected in the wake of recent turmoil in financial markets worldwide. Board member Atsushi Mizuno was the only member who favored raising rates. While Japan's economy has been recovering, recent data has implied a slowdown. Analysts had feared a rate rise could hamper further growth. Fears of the spill of the US sub-prime credit crunch also reached Japan which saw its Central Bank pump generously, liquidity to the market. In its monthly report which came out just after the rates decision, the Bank left its assessment of the economy unchanged, saying it continued to expand moderately - mainly driven by exports. Meanwhile figures from the Finance Ministry released on Wednesday showed the trade surplus had shrunk for the first time in nine months, as a consequence of higher fuel prices that had increased the cost of imports. The country last raised rates in February from 0.25%, the first rise since July 2006. A few weeks ago it had been expected that Japan would raise rates as early as August. But with financial markets worldwide struggling from problems triggered by a crisis in the US mortgage sector, analysts began to expect that the Bank of Japan would keep rates on hold. The combination of a weaker US economy - Japan's largest trading partner - and the stronger yen, which makes Japanese goods more expensive relative to other countries' products, both threaten to undermine Japan's recovery.