Masaaki Shirakawa, governor of the Bank of Japan, has warned of continuing “downside risks” to the world’s second-largest economy in remarks that will keep alive slim expectations of a rate cut later this year.

Speaking after a policy board meeting on Tuesday at which the central bank left overnight rates unchanged at 0.5 per cent, Mr Shirakawa, said: “I am closely watching possible downside risks from the economy’s weakening capacity to generate income, which could hurt domestic demand.”