The Bank of Japan said Tuesday that it will leave its benchmark interest rate unchanged at 0.5 percent this month, a decision that had been widely expected after its February rate hike.The monetary policy board's decision was reached by a unanimous vote, the central bank said in a short statement.The Bank of Japan last month raised its key lending rate from 0.25 percent to 0.50 percent, its first hike since last July when it ended over five years of virtually free credit.The BoJ has faced political pressure not to raise interest rates too quickly and with inflation still very subdued, the central bank is expected to move cautiously with further monetary tightening.Analysts say that political sensitivities linked to the July elections in Japan's upper house of parliament mean that the BoJ's next increase in interest rates is unlikely to come before the second half of 2007."Minus a full-throttle slowdown in the US economy, the market is likely to grow hopeful of another rate hike after the release of January-March (gross domestic product) data and once the upper house elections enter the picture in May-June," predicted Morgan Stanley economist Takehiro Sato.Tuesday's widely expected decision had a muted impact on financial markets.The dollar continued its rise against the Japanese currency, reaching 117.84 yen by early afternoon in Tokyo, up from 117.73 yen in morning deals and from 117.59 in New York late Monday.Tokyo share prices remained in positive territory, with the Nikkei-225 index 151.88 points or 0.89 percent higher at 17,161.43 by early afternoon.Markets were waiting for a post-meeting press conference from BoJ governor Toshihiko Fukui for clues on the outlook for further interest rate rises.
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