The Bank of Japan (BoJ) on Wednesday cut its growth and inflation forecasts for the world's third-largest economy, but said a recovery was still underway as it held fire on more easing measures.

Following a two-day policy meeting, the BoJ said Japan's economy would expand 1.7 percent in the fiscal year to March 2016, down from an earlier 2.0 percent forecast, while inflation would come in at 0.7 percent, compared with its 0.8 percent outlook in April.