The Bank of Japan kept its monetary stimulus unchanged as widely expected and raised its assessment of the economy.
Governor Haruhiko Kuroda and his board members on Tuesday decided by a 7-2 majority vote to maintain the central bank's target of raising the amount of outstanding Japan government bond holdings at an annual pace of about JPY 80 trillion.
The BoJ board also decided to maintain the -0.1 percent interest rate on current accounts that financial institutions maintain at the bank.
The bank will purchase government bonds so that the yield of 10-year JGBs will remain at around zero percent.
The bank said the Japan's economy has continued its moderate recovery trend. The bank has raised its view on both exports and industrial production.
Earlier in the day, the Cabinet Office said the real GDP will grow around 1.5 percent for the fiscal year starting April 2017 and nominal growth will be 2.5 percent. Inflation is expected to be around 1.1 percent.
The BoJ said annual inflation is likely to be slightly negative or about 0 percent for the time being, due to the effects of the decline in energy prices, and, as the output gap improves and inflation expectations rise, it is expected to increase toward 2 percent.
Marcel Thieliant, a senior Japan economist at Capital Economics, expects both headline and underlying inflation to rebound strongly in coming months as the economic outlook brightens and the yen weakens sharply.
The economist expects the bank to leave both its policy rate as well as its target for the 10-year yields unchanged for the foreseeable future.
However, policymakers are likely to scale back the annual pace of JGB purchases to JPY 75 trillion sometime next year, though the Bank will want to avoid the impression that this constitutes a withdrawal of stimulus, Thieliant added.
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