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Bank of Japan Holds Rates Steady

Bank of Japan holds rates steady at 0.1% and addresses fears of deflation

TOKYO (TheStreet) -- The Bank of Japan decided by a unanimous vote to hold the uncollateralized overnight call rate at around 0.1%, sending Asian markets lower.

The Bank of Japan also left its view of the domestic economy unchanged, saying it "shows further signs of a moderate recovery," helped by improvement in overseas economic conditions.

The Bank of Japan, which has left the overnight rate at 0.1% since December 2008, did not announce additional measures to expand liquidity. Japan has struggled with a stronger yen and lower prices, which has stoked fears of deflation.

"The bank recognizes that Japan's economy faces the critical challenge of overcoming deflation and returning to a sustainable growth path with price stability," the Bank of Japan said in the accompanying statement. "In the conduct of monetary policy, the bank will aim to maintain the extremely accommodative financial environment."

In overseas trading, the Nikkei 225 fell 0.2% to 9,551.05, the Hang Seng was down 1.5% to 21,473.60, and China's Shanghai index tumbled 2.9% to 21,473.60.

The Bank of Japan's announcement comes hours before the

Federal Reserve's

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policy-making arm will release its own statement on interest rates in the U.S.

-- Written by Robert Holmes in Boston


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