September 20, 2007 (LPAC)--The Bank of Japan held its interest rate steady at 0.5%, after its Board met yesterday. While no change was expected, "The Bank of Japan is eager to tighten its monetary policy and 'normalize' Japan's ultra-low interest rates...but...worsening credit conditions have undermined that ambition," according to Jonathan Soble of the Financial Times. There was also massive pressure on the Bank of Japan not to raise rates from the British, the U.S. Federal Reserve, and the European Central Bank, according to many sources, including the Japanese press.

Kiichi Murashima, Chief economist at Nikko Citigroup, said that a rate rise was unlikely until the First Quarter 2008. At yesterday's Board meeting, Atsushi Mizuno voted for a .25% rise, as he had at the August Board meeting. Toshihiko Fukui, Governor of the Bank of Japan, expressed dissatisfaction with the slow pace of Japan's monetary tightening, saying Japan's interest rates were "extremely low" given an economic growth trend of 2%, and that keeping rates too low for too long could lead to "distortions" in global financial flows, according to the Financial Times.