The Bank of Japan on Monday kept its monthly assessment of the domestic economy intact, stating that it has "almost stabilized as a whole."
This assessment, which follows five monthly upward revisions, suggests that Japan's fragile recovery may already be losing momentum.
Although exports and production are still rising amid a recovery in corporate profits, the horizon is becoming increasingly unclear, the BOJ said in its report.
Share prices remain volatile both in the U.S. and on other markets across the globe, the BOJ said.
The central bank also pointed to the volatility of the dollar, and stated that global demand for information technology-related goods may be slowing down.
"Uncertainty regarding external conditions seems to have increased somewhat further" from the previous month, the BOJ said. "Under these circumstances, it should continue to be heeded that further destabilization in the foreign exchange and financial markets at home and abroad could easily exert a negative influence on the economy."
Despite sluggish corporate spending and household consumption, export strength is pulling industrial production and corporate profits forward.
This trend represents the only hope for stabilizing domestic private demand, according to the BOJ.
The BOJ warned, nevertheless, that a strong rebound is increasingly unlikely.
Overemployment and debt continue to restrain growth, while a weak dollar threatens gains made by exporters.
"It should continue to be heeded that further destabilization in the foreign-exchange and financial markets at home and abroad would easily exert a negative influence on the economy," the report says.