Bank of Japan cuts interest rate 30 basis points, first in 7 years

Governor Masaaki Shirakawa cast the deciding vote to lower the key overnight lending rate from 0.5 percent after four of the eight board members dissented, the central bank said in Tokyo on Friday.

However, the rate reduction was a close call at the Bank of Japan and was not as big as many had expected, sending a mixed message to financial markets.

Japan's Nikkei share average fell 5 percent, making its drop this month a record 24 percent.

The rate reduction is the latest in a series of rate cuts globally as central banks move rapidly to try to cushion growth now that interbank lending rates have been consistently falling.

Policy makers have been struggling to find the right response to a rapid slowdown in the global economy that has hurt corporate profits and which sparked a record freefall in global stock markets in October.

Companies world wide have reported job cuts, warned of falling profits and battered balance sheets in what Japanese Prime Minister Taro Aso described as a "harsh storm seen only once in 100 years".

Economists widely expected Australia, Britain and the euro zone to cut rates next week.