Bank of Japan delivers gloomy message

Japan's central bank predicts a grim future for the country's already troubled economy.

The Bank of Japan's monthly report offers little comfort for investors hoping for an upturn.

While Japan's industrial production declines rapidly, the economy is also being hit by a slowdown in corporate profits.

The report comes days after the Japanese government admitted that the economy was weakening for the first time since the mid 1990s.

A downturn in the export market has been the main cause of Japan's woes.

The bank said that, although domestic demand remains steady, net exports are falling rapidly, reflecting a sharp slowdown in overseas economies .

The report adds: "Mainly due to these developments, industrial production is declining more sharply and excessive inventories of electronic parts and some materials are building up."

The Bank of Japan returned interest rates to zero last month in a further bid to encourage growth.

At its latest monetary policy meeting on Friday, the bank decided to leave interest rates unchanged.

Economics minister Taro Aso warned that the country could slide into recession.