Tokyo  - Japan's central bank said Thursday it saw sings that the world's second-largest economy was on a moderate path of recovery from the worst recession since the end of World War II.

At the end of a two-day meeting, the Bank of Japan left its overnight call rate unchanged at 0.1 per cent. The key interest rate has remained at near zero since December, when the bank cut it from previously 0.3 per cent.

"Japan's economic conditions show signs of recovery," the bank said, in a more upbeat tone a previous statement last month, when it had said the economy had "stopped worsening."

Bank of Japan Governor Masaaki Shirakawa cautioned that despite some remaining risks, the economy was heading towards recovery, expected in the second half of the current fiscal year through March 2010.

Japan's economy grew for the first time in a year in the April-June quarter. The bank said growing exports and sinking inventories were an indication of improving conditions.

However, weak consumer spending and unemployment at a new record high of 5.7 per cent remained causes for concern.