Japan central bank warns of economic standstill

Japan’s central bank offered a bleaker view of the economy and the government warned of worsening business sentiment as exports slumped, adding to evidence of the pain Europe’s debt crisis is inflicting on global growth and Japan’s recovery prospects. But in a sign Japan's tattered finances leave it with little room for more fiscal stimulus, Rating and Investment Information Inc stripped the country of its AAA status, the first downgrade by a domestic credit ratings agency.

That puts the onus on the Bank of Japan, which kept monetary settings unchanged at a rate review on Wednesday but cut its economic assessment and acknowledged that growth will stagnate at least until spring next year.

BOJ Governor Masaaki Shirakawa said that while Japan's economy was still headed towards a moderate recovery, Europe's sovereign debt crisis and economic stagnation were hurting global growth including Japan.

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