The Bank of Japan cut interest rates for the first time in seven years on Friday, lowering its main rate to 0.3 per cent amid concerns about the outlook for the Japanese economy.

The decision by the central bank highlights the way growth prospects have deteriorated sharply for the world’s second largest economy in just the past few weeks as the yen touched 13-year highs against the US dollar and Japanese shares plunged to a 26-year low.