Yen extends decline, bonds off lows after BOJ holds rates steady

The Japanese central bank held the key rate at 1%, having just raised it in June, while signalling its resolve to continue pushing up borrowing costs, warning for the first time that underlying inflation could exceed its target.

"I got the impression that the statement was somewhat hawkish," said Masato Koike, senior economist at Sompo Institute Plus. "The likelihood of an October hike has increased."

Over the remainder of this year, the BOJ has policy meetings in September, October and December.

TOKYO, July 31 (Reuters) - The yen added to losses while Japanese government bonds were off lows on Friday after the Bank of Japan held interest rates steady, as widely predicted.

The yen was 0.8% weaker at 160.70 per U.S. dollar JPY= as of 0425 GMT, from around 160.58 before the BOJ's announcement, which came when most other financial instruments were in the midday trading recess.