Japan's central bank opted Thursday to keep its monetary policy unchanged despite the growing signs of trouble that prompted the Federal Reserve to cut its benchmark rate.
The Bank of Japan said in its policy statement that exports, industrial output and business sentiment had been affected by the slowdown in overseas markets.
The China-U.S. tariff war has pummeled Japan's exports. But the BOJ said strong corporate profits were supporting business investment.
The BOJ's key interest rate has been at minus 0.1% for years, while it has continued massive asset purchases to help inject money into the economy. So far, it has failed to attain the 2% inflation rate target it says is needed to help sustain growth.
It said that "downside risks concerning overseas economies seem to be increasing."
The bank said it would monitor the situation to see if momentum toward higher inflation was failing, but given strains on banks and the potential impact on the Japanese yen it might not follow through on promises to act if necessary, Marcel Thieliant of Capital Economics said in a commentary.
It said that "concerns over the impact of looser policy on the health of banks have intensified. As such, we reiterate our view that the bank will keep its interest rate targets unchanged over the coming year."