The Bank of Japan today issued a more downbeat assessment of the world's third biggest economy, as a broader global slowdown impacts exports and production.
The central bank kept its ultra-loose monetary policy in place after a two-day policy board meeting.
It is battling to safeguard fragile growth and kindle inflation that is stuck stubbornly below its 2%target.
The bank added to its monetary policy statement the view that "exports and production have been affected by the slowdown in overseas economies".
But the Bank of Japan also argued that "Japan's economy is expanding moderately" and maintained its aim of keeping the short-term policy interest rate around -0.1% and the yield on 10-year bonds around zero.
Bank of Japan Governor Haruhiko Kuroda has come under fire over the effectiveness of his monetary easing programme and how he intends to return the bank's policy to normal.
In January, the governor was forced to revise down the Bank of Japan's inflation forecasts, a step seen as further evidence that authorities are unable to boost prices.
The bank wants to achieve stable growth with prices rising 2% a year, but it expects inflation for the fiscal year ending next March of 0.9%.
The central bank's measured downgrade of the Japanese economy comes as economists are increasingly viewing China with caution.
Beijing's decelerating exports and imports, as it battles a tense trade row with the US, have contributed to Japan's expanding trade deficit, with China-bound exports in January falling 17.4%, the sharpest drop since January 2016.