TOKYO, April 30 (Reuters) - Japan's economy is likely to start recovering moderately in the October-March second half of this financial year, the Bank of Japan said in its half-yearly outlook report on the economy on Thursday.
"Economic conditions are likely to continue deteriorating in the coming months but gradually level out thereafter," the central bank said in the report.
The BOJ kept interest rates on hold on Thursday and held off on any new initiatives as it gauges whether the measures it has taken so far to ease credit strains are helping ease the country's worst recession since World War Two.
Japan is mired in its worst recession since World War Two and after a 3.2 percent slump in the fourth quarter is expected to contract even more in the first quarter, despite some early tentative signs of recovery in exports.
The central bank releases long-term forecasts in April and October that form a basis for its monetary policy decisions. It reviews the forecasts in January and July. (Reporting by Leika Kihara, Tetsushi Kajimoto and Hideyuki Sano)