InsideJapan News Network

Japan must be prepared for a slow and cautious financial climate before the country's economy shows sign of recovery, it has been suggested.

Bank of Japan (BOJ) governor Masaaki Shirakawa has admitted the nation's economy is "sluggish" and suggested that financial slowdowns outside the US and Europe could continue, reports Reuters.

It comes as the BOJ held interest rates at 0.5 per cent and amid calls from the US for a global coordinated response to tackling the credit crunch.

The option of an interest rate cuts in union with other major central banks remains a possibility, speculation of which has mounted after the Reserve Bank of Australia slashed its base rate by one percentage point, the article noted.

"Strains in global financial markets have intensified in the wake of failures and rescues of US and European financial institutions," the BOJ added.

Last month the BOJ made a series of emergency interventions into the country's banking system, injecting the equivalent of around £13.7 billion.