TOKYO, July 12: The Bank of Japan on Thursday left its super-low interest rates on hold for a sixth straight meeting, opting to wait for further evidence that the economic recovery is taking root.

But the vote was split 8-1, with one policy board member calling for a quarter-point rate hike -- underpinning expectations of another rate rise within the next couple of months.

Atsushi Mizuno, who has a reputation for being a policy hawk, opposed the decision to leave the overnight call rate at 0.5 per cent, where it has been since February.

BoJ governor Toshihiko Fukui provided few obvious clues on when the central bank might raise its interest rates, which are by far the lowest out of the major economies, contributing to the weakness of the yen.

He reiterated that the central bank would adjust interest rates gradually but said the policy board members wanted to be sure that the economy will continue to enjoy robust growth before making their next move.

“It is highly probable that the Japanese economy will take a path of sustained growth,” Fukui told a press conference.

“We will increase the level of rates gradually in line with the improvement in the economic and price situation, while reviewing risk factors.” Overall the BoJ chief appeared to be more upbeat than at the time of the June meeting, analysts said.

His comments were “somewhat more hawkish than last month,” noted Hiromichi Shirakawa, chief economist at Credit Suisse in Tokyo.

“We believe that the risk of the BoJ postponing a rate hike until the fourth quarter has more or less gone,” he said.

Fukui said that household consumption “is well supported” and while industrial production is relatively flat the long-term trend is positive.

Mamoru Yamazaki, chief Japan economist at RBS Securities, said Fukui's remarks suggested “that the governor wants to change monetary policy in the near future.” “The possibility is still high (for a rate hike) in August,” he added.

Japan's economy is in the midst of its longest recovery since World War-II but inflation has been slow to return, with core consumer prices down for a fourth straight month in May while economic growth remains moderate.

The BoJ is also expected to keep a close watch on the results of the July 29 upper house elections given the potential for political upheaval that could spook investors, analysts said.

“The political situation is now quite uncertain and anything could happen after the election,” said Shirakawa at Credit Suisse, who believes the BoJ is more likely to wait until September before hiking rates again.

The government of Prime Minister Shinzo Abe, whose popularity has been battered by a series of scandals involving cabinet ministers, is staunchly opposed to another interest rate rise at this point given lingering deflation.

Fukui said the BoJ would review future data to see if the result of the election has any impact on the economy.

“There is no way we can predict what impact it might have on the economy as a whole,” Fukui said.—AFP