The Bank of Japan has kept interest rates on hold at 0.5% amid worries over the global credit crisis and dips in domestic business confidence.
The widely-expected move came as the central bank revised down its economic growth forecast for Japan for the year to March 2008.
Many analysts believe the central bank will not raise rates until the middle of next year.
Japan last raised interest rates in February to 0.5% from 0.25%.
Lacklustre domestic demand has raised concern about Japan's growth.
And there are persistent concerns that an economic slowdown in the US - Japan's biggest export market - as well as the weak dollar could also hinder Japan's economic recovery.
The bank's nine-member board voted unanimously to peg rates - the first time since June that hawkish member Atsushi Mizuno has dropped a call for a rate rise.
This reinforced the market feeling that there was no hurry to lift rates, analysts said.
"Mizuno's action is symbolic for changing views within the Bank," said Seiji Shiraihi of HSBC Securities.
"He must have changed his mind as the Federal Reserve has clearly expressed worries about downside risks to the US economy."
The chief economist at JP Morgan Securities, Masaaki Kanno, said that Mr Mizuno's approach may have a "psychological effect" on the markets.
"It may heighten speculation that the bank's next move will be to cut rates, not hike them," he said.
"The impact of the financial turmoil ensuing from sub-prime woes seems to be lasting longer than expected, so it's natural for bank board members, including Mizuno, to decide on spending more time to see how conditions develop."