The Bank of Japan should avoid raising interest rates until the specter of deflation has vanished, the Organization for Economic Cooperation and Development said Monday.

"Further hikes would not be warranted until inflation is firmly positive and the risk of renewed deflation is negligible, hence avoiding the risk of derailing the expansion," the Paris-based OECD said in a report on the Japanese economy.

The 2008 OECD Economic Survey of Japan comes at a time when the economic outlook is clouded by growing concerns about global growth triggered by the U.S. subprime housing loan crisis.