The Bank of Japan Tuesday cut Japan's growth forecast for both fiscal 2011 and 2012, citing a slowdown in overseas economies and a higher yen.
The central bank, noting the country's recovery from the devastating earthquake and tsunami last March had stalled productivity, held its key interest rate steady at effectively zero percent to support the economy, Kyodo News reported.
Japan's gross domestic product for this fiscal year ending in March was expected to shrink by 0.4 percent instead of posting 0.3 percent growth forecast earlier, the BOJ said. For fiscal 2012 starting in April, GDP growth forecast was cut to 2 percent from the previous forecast of 2.2 percent.
"Japan's economic activity has been more or less flat, mainly due to the effects of a slowdown in overseas economies and the appreciation of the yen," the bank said in its statement.
The interest rate will remain between zero and 0.1 percent.
The bank's forecast revisions were expected because of lackluster export and consumption data since October, economist Junko Nishioka at RBS Securities told the Financial Times.