The Bank of Japan held off on expanding stimulus on Wednesday, even as slumping exports and falling oil prices threaten its rosy projection that the economy is on track to hit its ambitious 2 percent inflation target next year.
But lingering fears of recession will keep the central bank under pressure to ease at a more crucial meeting on Oct. 30, when it is expected to cut its long-term economic and price forecasts, analysts say.
As widely expected, the central bank maintained its pledge to increase base money at an annual pace of 80 trillion yen ($666 billion)through aggressive asset purchases.
"Japan's economy continues to recover moderately although exports and production have been affected by the slowdown in emerging economies," the BOJ said in a statement, keeping its assessment of the economy unchanged from the previous month.
BOJ Governor Haruhiko Kuroda will hold a news conference at 3:30 p.m. (0630 GMT) to explain the policy decision.
The BOJ has kept monetary policy steady since expanding stimulus in October last year.
"The decision came as expected. I still expect the BOJ will ease policy further later this month," said Yasunari Ueno, chief market economist at Mizuho Securities.
"If the BOJ stands pat later this month even as cuts its bullish forecasts, investors would take it as a sign its commitment to hit 2 percent inflation has weakened," he said.
Japan's economy shrank in April-June and some analysts expect another contraction in July-September on slumping global demand and weak consumption.
Core consumer prices slid in August to mark the first annual drop since the BOJ deployed its massive stimulus programme more than two years ago, casting doubt on whether heavy money printing alone can accelerate inflation to 2 percent.