ANALYST VIEW-BOJ cuts growth outlook, ups inflation view

TOKYO (Reuters) - Japan's central bank cut sharply its growth outlook and raised its inflation forecast on Wednesday, warning of highly uncertain times as industrial output figures painted a gloomy picture of how the credit crisis is hitting the world's No.2 economy.

The Bank of Japan cut its growth forecast for the year to March 2009 to 1.5 percent from a pick of 2.1 percent in its previous half-yearly economic report in October. It almost tripled its forecast for consumer price inflation to 1.1 percent in the year to next March, from 0.4 percent.

The BOJ kept its key overnight call rate target unchanged at 0.5 percent as widely expected at a policy meeting on Wednesday.

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COMMENTARY:

JOSEPH KRAFT, HEAD OF CAPITAL MARKETS JAPAN, DRESDNER

KLEINWORT

"The BOJ's outlook report was as expected, and the policy bias was brought to neutral from a tightening mode. With this, any expectation for a rate hike was removed completely.

"The BOJ is unlikely to move to raise interest rates until it confirms stability in the U.S. economy."