5:00AM New York, 7:00PM Tokyo – The Bank of Japan left the key interest rate at 0.5% but expresses a concern on the rising food and energy prices.

Stock indexes in Japan tumbled from a 4.27% advance yesterday to close down on resurgent fears that subprime-related losses will widen and on a government report that noted that the pace of growth seems to be slowing as a result of dropping housing investment.

In Tokyo trading Nikkei 225 slipped 0.03% or 3.89 to 13,622.56, and the Topix Index rose 0.2% or 1,334.89.

In the first section of the Tokyo Stock Exchange 9.6 million shares valued at 1 trillion yen changed hands and in the second section 300 million shares valued at 3 billion yen changed hands.

Of the Nikkei 225 stocks 122 gained, 97 declined and 16 were unchanged. Pioneer Corp led the advancers with a rise of 15.53% followed by Showa Shell gaining 9.97%.

Bank of Japan Holds Rates

The Bank of Japan announced on its website today that it had unanimously voted to keep its key interest rate unchanged at 0.5%. In the previous two votes Atsushi Mizuno had disagreed with other members.

Economy Slows on Drop In Housing Investment

Separately, the bank also reported in its recent report on economic and financial developments published today that the country’s economy seems to be slowing due to the drop in housing investment.

The bank also noted that public investment has remained sluggish and housing investment has declined substantially.

Japan''s economy is expanding moderately as a trend, although the pace of growth seems to be slowing on the downturn in housing investment, while production is expected to be flat in the short run.

BOJ forecasts that domestic corporate goods prices will continue rising as international commodity prices continues to rise.

Although the financial environment is regarded as accommodative, credit demand in the in the private sector “has been more or less flat.”

The Yen Drops

The yen fell 0.62% from 107.64 to 107.65 against the dollar.

Gainers and Losers

Pioneer Corp. led advancers in the Nikkei 225 index with a rise of 15.53% followed by gains of Showa Shell of 9.97%, in Mitsubishi Heavy Industries of 6.98%, in Sumitomo Chemical Company of 6.13%, and in Sanyo Electric of 5.85%.

Shipping lines also continued to gain on growing demand and rising prices of metals. Kawasaki rose 5.70%, Mitsui Engineering & Shipbuilding increased 5.67% and Mitsui O.S.K. Lines advanced 3.72%.

Trend Micro led decliners in the Nikkei 225 index shares with a drop of 9.76% followed by losses in Daikin Industries of 7.21%, in Tokyu Land Corp. of 4.98%, in Nikon Corp of 3.28%, and in Sumitomo Realty of 3.26%.

Financial institutions also fell after UBS AG reported full-year loss of 4.3 billion loss and a fourth quarter loss of 12.4 billion francs in line with losses from U.S. mortgage-related positions outweighing strong performance in other businesses.