In a sign of growing pessimism over China, the government also said its monthly economic report for August that "concern over China's outlook" was among risks to Japan's recovery.
"Exports to China had already been weak and headwinds to inbound tourism are clearly bad for Japan's economy," said Toru Suehiro, chief economist at Daiwa Securities.
"All in all, it's hard to justify tightening monetary policy any time soon."
Firms also promised wage hikes unseen in three decades this year, heightening the case for a retreat from decades of ultra-loose monetary policy.
The darkening outlook for Japan's recovery may push back the timing of a BOJ policy shift.
Persons:
Marko Djurica, Kazuo Ueda's, Hiroyuki Ogawa, Ogawa, Takeshi Niinami, Toru Suehiro, Ueda, Toyoaki Nakamura, Seisaku Kameda, Tetsushi Kajimoto, Sam Holmes
Organizations:
REUTERS, Bank of Japan's, Reuters, Japan, Komatsu Ltd, Komatsu, Suntory Holdings, Daiwa Securities, Japan's Sompo Holdings, Thomson
Locations:
Tokyo, Japan, China, TOKYO, Beijing, United States