The Bank of Japan released Friday a more sober assessment of the world's third largest economy, while a wider global slowdown is impacting exports and production.
The central bank has maintained its very loose monetary policy after a two-day meeting of the board, as it struggles to preserve fragile growth and stoke inflation that remains stubbornly under its two-for-one goal. hundred.
The bank added to its monetary policy statement that "exports and production have been affected by the slowdown in overseas economies".
But the BoJ also claimed that "the Japanese economy was expanding moderately" and maintained its objective of keeping the key rate at around 0.1% and the 10-year bond yield at zero.
BoJ Governor Haruhiko Kuroda said Japan 's willingness to reach its inflation target remained intact, and that the Chinese economy – one of the main drivers of the global growth – is expected to recover in the second half of the year.
"We are convinced that the momentum to reach two percent has been maintained," he said at a press conference.
"It is important that we do this in order to fulfill the Bank of Japan's obligation to stabilize prices," he said.
An analyst said Kuroda had no choice but to stay the course.
"The target set by the central bank remains inflation of 2% and the current price levels are not high enough to justify a tightening," said Katsunori Kitakura, senior strategist at Sumitomo Mitsui Trust Asset Management.
"While the risk of a global economic downturn exists, Japanese monetary policy has gradually shifted from" normalization "to" new detente "."
Kuroda has been criticized for the effectiveness of his monetary easing program and for his intention to bring the bank's policy back to normal.
In January, the governor was forced to revise down the BoJ's inflation forecast, a measure seen as further evidence that the authorities are not able to raise prices.
The bank wants to achieve stable growth with prices rising by 2% a year, but it expects inflation of 0.9% for the fiscal year ending next March.
The measured downgrading of the Japanese economy by the central bank comes as economists are increasingly looking at China with caution.
The deceleration of Beijing's exports and imports, as it struggles against intense trade conflict with the United States, has contributed to Japan's growing trade deficit. Exports to China fell 17.4% in January, the largest decline since January 2016.