Amid concerns over the nation's economic future following the collapse last week of department store operator Sogo Co., the Bank of Japan on Monday once again decided against raising interest rates.

The nine-member Policy Board decided in a majority vote to keep the 17-month-old policy of steering the unsecured overnight call money rate to near zero for at least another month. The rate has not been raised in a decade.

The board decided after seven grueling hours of discussions to keep its policy unchanged because it wants to see more evidence of improvements in employment and household income conditions, the bank said in a statement.

The bank also said that it had decided to wait to see how Sogo's application for court protection from creditors last Wednesday will affect market and business sentiments.

"(It) was pointed out that the Board needed to see how the commencement of reconstruction proceedings of Sogo Co. could affect market developments and business sentiments," the statement said.

Speculation had mounted in recent weeks that the BOJ would soon lift its "zero rate" policy, which the bank itself has called "abnormal," and push the short-term rate back to 0.25 percent.

The BOJ started steering the short-term key money rate down to near zero in February 1999, to spur economic activities by allowing private banks to raise short-term funds effectively for free.

The BOJ has pledged that it will continue the policy until it can "foresee the dissipation of the threat of deflation." But Hayami and other board members have hinted at a forthcoming end to the policy.

The BOJ further strengthened its confidence in the economy after the July 4 release of its "tankan" business sentiment survey. Large manufacturers' sentiment bounced back into positive territory on the index for the first time in nearly three years, igniting speculation that a rate rise is imminent.

But Sogo's bankruptcy last week dashed the BOJ's hope, observers say.

Prime Minister Yoshiro Mori, usually silent on the monetary policy, warned the BOJ to stick to the "zero-interest-rate" policy, saying the economy is not yet on a full-fledged recovery track and that a rate hike at this point would "affect stock prices and currency rates in many ways."

The next time the BOJ will be able to to consider a rate hike will be Aug. 11.