The Bank of Japan left its policy rate target unchanged at 0.50% on Thursday as expected, as it waits for more evidence that U.S. subprime woes will not threaten its scenario for modest growth in Japan.
The decision by the central bank's nine-member board was made by a vote of 8-1, with board member Atsushi Mizuno dissenting.
The BOJ has kept monetary policy on hold since raising the key overnight call rate target from 0.25% in February, which was the first hike since July last year.
The BOJ will release its monthly economic report later in the afternoon followed by a news conference by the central bank governor, Toshihiko Fukui.
The rate decision followed disappointing core private-sector machinery orders data released this morning. This fell slightly more than expected in August, signaling that capital spending growth will remain modest.
Core machinery orders, a highly volatile figure regarded as a leading gauge of capital spending, fell 7.7% in August from July, government data showed on Thursday. That compared with a median market forecast of a 6.0% decline and followed a 17.0% jump in July.
"Machinery orders were weaker than expected, but that is a pullback from a 17% rise in July," said Mamoru Yamazaki, chief economist at RBS Securities. "Since this month's figures were minus, you can't say this is positive for the BOJ to raise interest rates, but the trend of machinery orders itself isn't a major impediment," he said.