The Bank of Japan (BOJ) maintained its target for asset purchases and the monetary base and largely repeated its economic assessment from May, saying the "Japan's economy has been picking up" and the economy is expected to return to a path of moderate recovery.
The BOJ, which launched its new phase of monetary easing in April, repeated that it aims to increase the monetary base by an annual pace of about 60-70 trillion yen and it will buy Japanese government bonds so the outstanding amount rises by an annual pace of 50 trillion yen along with purchases of exchange-traded-funds, real estate investment trusts, commercial paper and corporate bonds.
The central bank also confirmed that it would continue with its "quantitative and qualitative monetary easing" as long as it is necessary to reach its target of 2.0 percent inflation, looking at both upside and downside risks to economic activity and prices, and make adjustments as appropriate.
The BOJ's new and aggressive easing is aimed at boosting years of tepid economic growth and overcoming some 15 years of deflation.
Japan's government on Monday revised upwards its estimate for first quarter growth, showing Gross Domestic Product rising 0.6 percent from the fourth quarter from an earlier estimate of 0.4 percent as domestic demand was revised up to a rise of 0.6 percent from 0.5 percent.
But deflation continues to grip Japan, with consumer prices down another 0.7 percent in April, the 11th month in a row with a drop in the headline inflation rate.
The BOJ acknowledged that consumer prices remain negative due to the reversal of the previous year's movement in energy-related and durable consumer goods. However, it added that "some indicators suggest a rise in inflation expectations."
"The year-on-year rate of change in the CPI is likely to gradually turn positive," the BOJ said, based on improving exports as overseas manufacturing is picking up and the effect of better domestic demand from the monetary easing and other economic measures.
However, the BOJ also underlined that there is still a "high degree of uncertainty concerning Japan's economy, including the prospects for the European debt problem and the growth momentum of the U.S. economy as well as the emerging and commodity-exporting economies."
In April, the BOJ forecast that inflation, excluding the effect of planned consumption tax hikes, would rise to 1.4 percent in fiscal 2014 and then 1.9 percent in fiscal 2015. In the current fiscal year, inflation is forecast at 0.7 percent.