BOJ seen holding fire on rates, eye on global econ

(For more on the Bank of Japan meeting see [ID:nBOJTOP])

By Leika Kihara

TOKYO, Oct 10 (Reuters) - The Bank of Japan is seen standing pat on monetary policy at a two-day meeting starting on Wednesday as it waits for more evidence that the economic fallout from U.S. subprime woes is small enough for it to go ahead and raise rates.

While surprisingly firm U.S. employment data on Friday eased investor fears of a possible recession in the U.S. economy, the BOJ will likely scrutinise more data to see whether slowing growth in the United States -- Japan's biggest export market -- could hurt Japanese exports.

With little chance that the central bank will carry through on its desire to raise rates, markets will focus on BOJ Governor Toshihiko Fukui's post-meeting news conference for clues on the timing of the next rate hike and his views on recent global economic conditions.

"At last month's news conference, Fukui's message was that the BOJ will raise rates once uncertainty over global economies clears," said Yasuhiro Onakado, chief economist at Daiwa SB Investments.

"We'd like to see whether his tone changes much and how he would describe risks for Japan's economy," he said.

The BOJ will likely announce its rate decision sometime between noon and 2 p.m. (0300-0500 GMT) on Thursday. Fukui is then due to hold a news conference at 3:30 p.m. (0630 GMT).

Many market participants expect the BOJ's next rate rise will not come until December or even early next year in light of still shaky world financial markets and slowing U.S. economic growth.