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BOJ Cuts Growth Forecast, Keeps Interest Rate at 0.5% The Bank of Japan cut its economic growth forecast, raised its inflation estimate and kept the benchmark interest rate at 0.5 percent, saying higher commodity prices are hurting the expansion. The world's second-largest economy will grow 1.2 percent in the year ending March 31, slower than the 1.5 percent forecast on April 30, the central bank said in a statement in Tokyo. Consumer prices excluding fresh food will climb 1.8 percent, more than the 1.1 percent projected three months ago, it said. Growth is ``slowing further'' because higher energy and raw-materials costs are discouraging businesses and consumers from spending, the bank said. ``Downside risks to the economy demand attention,'' it said, indicating the bank has no plans to resume a policy of gradually raising interest rates anytime soon. ``They're more concerned about the downside risks to growth,'' said Masaaki Kanno, chief economist at JPMorgan Chase & Co. in Tokyo, who used to work at the bank. ``Unless wage rates pick up, the bank isn't so concerned about inflation.'' In April, the central bank shelved a policy calling for higher borrowing costs. The benchmark rate, doubled in February 2007, is the lowest among major economies. The yen traded at 105.62 per dollar at 3:59 p.m. in Tokyo compared with 105.80 before the announcement. The yield on Japan's 10-year bond fell 3.5 basis points to 1.545 percent.