Bank of Japan Deputy Gov. Kikuo Iwata said Wednesday that a further slowdown in China and other emerging economies is the "most significant risk" to achieving the central bank's 2 percent inflation target.

"The bank will make adjustments without hesitation" if the slowdown has negative effects on the Japanese economy, thus giving downward pressure to the underlying trend in inflation, Iwata said in a speech in Okayama Prefecture.

On prices, Iwata said a sales tax hike in April last year had depressed private consumption and inflation, pushing the economy to "the verge of returning to deflation."

But the underlying trend in inflation has returned "since the turn of 2015 on a rising path toward 2 percent" thanks to an expansion in monetary easing, he said, referring to the BOJ's additional easing steps in October last year.

On the domestic economy, Iwata admitted that the pace of increases in capital investment and wages were "still relatively slow," considering firms are making record profits. This is possibly due to the uncertain prospects of emerging economies.

Iwata said business investment is expected to firm up soon given companies' upbeat plans and expectations that private consumption will remain resilient on the back of an improvement in employment and income, he said.