The members of the Bank of Japan's monetary policy board said that the Japanese economy is seeing a moderate recovery, minutes from the board's meeting on September 4 and 5 revealed on Wednesday - upgrading its previous assessment.
However, the members cautioned that the Japanese economy is not yet out of the woods and continues to face a high degree of uncertainty.
"There remains a high degree of uncertainty concerning Japan's economy, including the prospects for the European debt problem, developments in the emerging and commodity-exporting economies, and the pace of recovery in the U.S. economy," the minutes said.
The members added that there have been signs of progress in the war against deflation, with prices expected to rise gradually over the next year.
The BoJ also noted that the year-on-year rate of change in the core consumer price index is now in the range of 0.5-1.0 percent.
"Members expressed the view that recent movements in the CPI were attributable to not only upward pressure from movements in energy-related goods but also price rises observed across a wide range of items," the minutes said.
Exports have been picking up and industrial production is increasing moderately, the BoJ said. Business fixed investment is starting to pick up amid an improvement in corporate profits. Public investment is also increasing and housing investment recovery is becoming more evident.
Private consumption has remained resilient, with some improvement observed in the employment and income situation, the bank said.
"The bank will continue with quantitative and qualitative monetary easing, aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. It will examine both upside and downside risks to economic activity and prices, and make adjustments as appropriate," the minutes said.
At the meeting, the BoJ unanimously voted to keep interest rates unchanged while holding the target of the monetary base expansion at an annual pace of JPY 60-70 trillion.
The BoJ will continue to increase its purchases of Japanese government bonds at an annual pace of about JPY 50 trillion. The average remaining maturity of the bank's JGB buying will be around seven years.
"Such conduct of monetary policy will support the positive movements in economic activity and financial markets, contribute to a rise in inflation expectations, and lead Japan's economy to overcome the deflation that has lasted for nearly 15 years," the minutes said.
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