TOKYO (AFP) ― The Bank of Japan on Wednesday left its key rate unchanged at between zero and 0.1 percent, and held steady on monetary policy despite concerns over the high yen and eurozone debt crisis.

In its assessment of the economy, it warned Japan will “face an adverse effect from the slowdown in overseas economies and the appreciation of the yen as well as from the flooding in Thailand.”

The central bank, which expects Japan to eventually return to “a moderate recovery path,” added that its policy board voted unanimously to keep its key rate unchanged between zero and 0.1 percent.

Japanese companies have been heavily impacted after Thailand’s worst flooding in decades hit their supply chains hard, with Toyota and others withdrawing their earnings forecasts as they assess the scale of disruption.

The BOJ also warned on Wednesday: “The sovereign debt problem in Europe could result in weaker growth not only in the European economy but also in the global economy particularly through its effects on global financial markets.”

The central bank last month announced further easing measures to help safeguard Japan’s fragile economic recovery from the impact of a strong yen and a slowing global economy gripped by concerns over the ongoing eurozone crisis. 

Pedestrians walk past the Bank of Japan headquarters in Tokyo. (Bloomberg)

In October the bank said it would boost its asset buying fund, a key policy tool, by 5.0 trillion yen to 55 trillion yen ($713 billion), with the extra amount earmarked for the purchase of Japanese government bonds.

The bank’s asset purchase fund is a key policy tool it uses to buy Japanese government bonds, corporate bonds and exchange traded funds.

By pouring liquidity into the market, the BOJ hopes to improve flows to help encourage investment and boost business.

It also hopes, by relaxing credit conditions, to help put downward pressure on a strong yen that has undermined efforts by Japanese companies in their recovery from the impact of the March earthquake and tsunami.

“The Bank ... is steadily implementing the program mainly through the purchase of financial assets,” it said in a statement.

Last month the BOJ trimmed its Japan growth forecast for 2011 and 2012 while indicating the world’s third largest economy would not exit deflation before the end of fiscal 2013.

“The bank has also made it clear that it is committed to continuing the virtually zero interest rate policy until it judges that price stability is in sight,” it said Wednesday.