Japan growth 'to slow' on US woes

Japan has cut its growth forecast amid continuing worries about the impact of the US slowdown on global markets.

The move came as data showed that Japan's industrial output - a key measure of growth - had slowed sharply in March as exports to the US slumped.

Higher oil and food prices also drove down Japanese household spending, adding to the gloom.

Separately, rate-setters at the Bank of Japan voted unanimously on Wednesday to keep interest rates at 0.5%.

'Growing risk'

With the brakes being put on Asia's largest economy, the central bank cut its economic growth forecast to 1.5% for the year to March 2009, from an earlier forecast of 2.1%.

Government figures showed that industrial output slipped by 3.1% in March from the same month a year ago, while household spending was 1% lower.

"Looking forward, the slowdown phase will continue in the near future," said the central bank's new governor, Masayuki Shirakawa.

"However we see a high possibility that (Japan's economy) will remain on a path of gradual growth."

Japan last raised interest rates in February 2007, to 0.5% from 0.25%.

The central bank has previously promised to increase interest rates slowly from 0.5%, although it is now being more cautious.

Mr Shirakawa said that with the economy slowing more than the bank expected, and with "growing" risks, a more flexible approach to rates was needed.

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