InsideJapan News Network

The Organisation for Economic Cooperation and Development (OECD) has warned against an increase in interest rates in Japan.

According to the Paris-based organisation, the Bank of Japan should avoid increasing rates from their current level of 0.5 per cent until the risk of deflation no longer poses a threat.

Following growth levels of 2.1 per cent in 2007, the OECD has announced its expectation that Japan's economy will grow at a rate of 1.6 per cent over the course of 2007, followed by growth of 1.8 per cent the following year.

"Waiting until inflation is significantly above zero would support the expansion and reduce the risk that a negative shock could push Japan back into deflation," said the OECD, an organisation established in 1961.

"Further hikes would not be warranted until inflation is firmly positive."

Interest rates have remained unchanged since February 2007.

The OECD has a membership base of 30 different countries.