Aug 10 - The Bank of Japan kept interest rates steady and held off on new policy steps on Tuesday, saving its limited policy options for when yen rises accelerate enough to damage a fragile economic recovery.
As widely expected, the central bank kept interest rates at 0.1 percent in a unanimous vote.
The BOJ also kept its economic assessment unchanged and said that the central bank needed to watch how fiscal problems in some European countries could, through developments in global financial markets, affect the Japanese and global economies.
Governor Masaaki Shirakawa will hold an embargoed news conference later on Tuesday, with his comments expected to come out sometime after 4:15 p.m. (0715 GMT).
Signs of U.S. economic weakness have pushed the dollar/yen rate within reach of levels not seen in 15 years, clouding the outlook for Japan's export-reliant growth and putting pressure on the BOJ to loosen its already very easy monetary policy.
Analysts had expected the BOJ to hold off on easing policy unless the yen headed for the all-time high of 79.75 per dollar at a pace fast enough to damage business sentiment.
The BOJ has kept interest rates at 0.1 percent since late 2008. In the wake of sharp yen gains, it eased monetary policy last December by setting up a facility offering cheap funds to banks, which was expanded in March. (Reporting by Leika Kihara; Editing by Edmund Klamann)

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