The Bank of Japan's decision on the unsecured overnight call money was widely anticipated due to further worsening of global as well and domestic economic conditions, Kyodo news service reported.
The bank, led by its new governor, Masaaki Shirakawa, had estimated the growth rate at 2.1 percent in its October report.
It is now expecting more downside risks to economic growth brought on by slowing U.S. economy, which affects Japanese exports.
Separately, the bank also found in its Tankan survey that Japanese companies are less eager to increase their capital spending, Kyodo reported.
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