Japanese interest rates on hold

Japan fears that exports could fall if the US economy cools further

The Bank of Japan's rate-setting committee has voted unanimously to keep interest rates unchanged at 0.5%.

The widely expected move came as the bank downgraded its economic forecast, citing a cooling economy spurred by a housing slowdown and rising inflation.

There are fears that Japan, which relies heavily on the US to sell exports, could suffer further in the wake of the US slowdown.

The decision comes as the central bank is set to have a new governor soon.

The bank's latest decision is the last one to be made under current governor Toshihiko Fukui, who is scheduled to retire in two weeks.

But there are fears that the government's nomination of deputy governor Toshiro Muto as the bank's new chief could be vetoed by the opposition, causing further uncertainty in the markets.

The central bank has promised to increase interest rates slowly from the 0.5%.

Japanese stocks closed sharply lower on Friday, with the benchmark Nikkei down 3.3%, as investors sold off shares in export firms including Honda.

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