The economy is likely to remain stagnant for the time being as pressure to adjust inventory builds due to sluggish demand, the Bank of Japan said Tuesday.

In the monthly economic report, which was slightly less optimistic than last month's, the BOJ said corporate fixed investment has recently become lackluster following its recent upward trend.

Domestic demand, especially household expenditures, remains sluggish and has had a negative impact on production, employment and income, the central bank said in its summary of the overall economy. This is the second consecutive report in which the BOJ has assessed the economy as stagnant.