The Bank of Japan kept interest rates on hold Friday amid lingering political uncertainty and economic concerns but said it would start offloading funds bought as part of its earlier monetary easing campaign.

The announcement came hours after official data showed inflation in the fourth-largest economy slowed to 2.7 percent in August, with rice price rises slowing following a sharp spike that rattled the government.

In a widely expected decision the central bank decided against hiking borrowing costs, keeping them at 0.5 percent, but said it would begin reducing its exchange-traded fund and real estate investment trust holdings.

The BoJ began buying the funds -- in a bid to boost liquidity and reduce the cost of capital for firms, among other things -- more than a decade ago as part of

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