Bank of Japan Governor Shirakawa bows to greet reporters after a news conference at the BOJ headquarters in Tokyo
Bank of Japan Governor Shirakawa bows to greet reporters after a news conference at the BOJ headquarters in Tokyo Reuters

The Bank of Japan (BoJ) continued to keep interest rates steady between zero and 0.1 percent as the economic recovery seems to be faltering in Japan and the yen grows weaker against the U.S. dollar.

The BoJ had launched a new 5-trillion-yen asset buying program in October and cut rates to zero in an attempt to boost economic growth.

The bank said that there had been some recovery from the deep recession seen last year but the recovery was 'pausing.' It is also dependent on the wider economic recovery seen in the world.

Growth is only expected to pick up again as the global economy accelerates, led by emerging economies and commodity exporters, Julian Jessop, an economist at Capital Economics, said in a note.

Consumer spending also weakened during the quarter and could fall as much as 1 percent in the final three months of the year, he added.

In November, the BoJ had forecast that economic growth in 2010 is likely to be at a level above the potential growth rate but lower than the projection in the July 2010 interim forecast.

We remain confident that the Bank of Japan will have to ease policy substantially further in 2011 as the global recovery ultimately disappoints and the hoped-for reacceleration in Japan fails to materialize, Jessop said.

The bank reiterated its previous forecast that the economy will return to a moderate recovery path in 2011, as exports rise and Japan will see growth above its potential in fiscal 2012.