* Policy rate kept on hold at 0-0.1 pct * BOJ holds off on boosting asset buying * BOJ cuts economic assessment, warns of slowdown * Europe debt crisis may hurt global growth-Shirakawa By Leika Kihara TOKYO, Nov 16 Bank of Japan Governor Masaaki Shirakawa voiced growing concern on Wednesday that Europe's debt crisis may trip up the global economy and warned that it was already affecting emerging nations and Japan in multiple ways. Some central bank board members thought risks for Europe have heightened recently, Shirakawa said after a two-day policy review, but the BOJ nevertheless refrained from further action, as it had eased monetary policy just three weeks ago. "Market concern over Europe's sovereign debt problem and the region's banks have not been eliminated," as seen in the recent spike in Italian bond yields, Shirakawa told a news conference. "Europe's debt problem is having a huge impact on the global economy, and may hurt growth not just of Europe but of the world." Japan is not immune, with the fallout coming through various channels, such as the slowdown in its key Asian export markets and a surge in the value of the yen as investors shy away from riskier assets and look for safe havens from global financial market turmoil, he said. His stern tone suggested the central bank was ready to offer further monetary stimulus if risks to Japan's economic recovery increase. The BOJ sounded more cautious on exports and output, describing their growth as moderating, reflecting weakening global demand. "Japan's economy continues to pick up but at a more moderate pace, mainly due to the effects of a slowdown in overseas economies," it said in a statement. In October, it said the economy continued to pick up with exports and output rising as a trend. "By downgrading its economic assessment, the BOJ indicated its vigilance to risks regarding overseas economies, chiefly uncertainty over Europe's debt crisis and the effect of Thai floods," said Yuichi Kodama, an economist at Meiji Yasuda Life Insurance in Tokyo. "It's hard to predict the timing of the next action as it solely depends on currency moves. But the BOJ may ease early next year when the effects of last month's currency intervention and monetary easing will fade," he said. As expected, the central bank kept its key interest rate at a range of zero to 0.1 percent by a unanimous vote and held off on loosening policy further after it expanded its asset buying scheme in late October. YEN RISE KEEPS BOJ UNDER PRESSURE Japan was the best performer among major advanced economies in the third quarter, rebounding from an earthquake-triggered recession. But growth is seen stagnating for the rest of this year as the export-reliant economy begins to feel the pain from a strong yen and slowing overseas demand. The decision to stand pat on policy on Wednesday reflects the dominant view within the central bank that last month's monetary easing already took into account the recent slump in output and business sentiment. With rates near zero, policymakers also want to save their limited ammunition in case Europe's debt crisis escalates into a global shock similar to that sparked by the collapse of Lehman Brothers in 2008. But pessimists in the board may argue for imminent action. In a rare revelation by the chair of the consensus-favouring BOJ, Shirakawa said some in the board -- though not a majority -- saw a higher risk of Europe spiralling into a negative feedback loop in which tighter bank credit, less fiscal spending and an economic downturn feed into one another. While Shirakawa did not disclose who voiced such concerns, it might have been Ryuzo Miyao, who had his proposal for a bigger stimulus voted down last month, or Seiji Nakamura, who has said risks to Japan's economy have heightened even after last month's monetary easing. Despite toning down its economic assessment, the BOJ stuck to its forecast that Japan is headed for a moderate recovery on hope that fiscal spending for reconstruction from the March earthquake will help make up for cooling overseas demand. But the yen's persistent strength casts doubt over such a scenario. The currency has returned close to levels before Tokyo spent an estimated 7.7 trillion yen intervening in the currency market two weeks ago, which is likely to keep the pressure on the central bank to take more aggressive action to support the economy. Sources familiar with its thinking have said that the BOJ is ready to respond to any signs of contagion from Europe's debt crisis by injecting huge amounts of liquidity via market operations and loosening monetary policy. Any future easing will come via another increase in purchases of financial assets, predominantly government bonds. The central bank cut its growth forecasts and eased policy on Oct. 27 by adding another 5 trillion yen ($65 billion) to its asset buying scheme, bringing it to 20 trillion yen.