Japan's central bank maintained its target for asset purchases, as expected, and said the country's economy was "recovering moderately" and is expected to continue to recover on the back of resilient domestic demand and a pick-up in overseas economies.
The latest observation by The Bank of Japan (BOJ) is slightly more confident than last month when the BOJ said the economy "is starting recover moderately," reflecting an increase in business fixed investment on the back of improving corporate profits.
With regard to inflation, the BOJ repeated that the annual rise in the consumer price index is likely to increase gradually and inflation expectations appear to be rising on the whole.
The BOJ embarked on its current aggressive monetary easing in April to rid Japan of 15 years of deflation and repeated that it would continue with its easing policy with the aim of hitting the price stability target of 2.0 percent.
In July Japan's inflation rate rose to 0.7 percent after 0.3 percent in June, breaking 12 months of continuous deflation.
Boosted by the BOJ's aggressive monetary easing, Japan's economy is starting to improve, with the Gross Domestic Product up by 0.6 percent in the second quarter from the first for annual growth of 0.9 percent, the sixth quarter in a row with growth.
The BOJ maintained its guidelines for money market operations, saying it aims to increase the monetary base - cash and banks' deposits at the BOJ - at an annual pace of about 60-7- trillion yen, purchase Japanese government bonds so the amount rises by an annual pace of about 50 trillion along with purchases of exchange-traded funds, Japanese real estate trusts, commercial paper and corporate bonds.
Financial markets are already speculating that the BOJ will have to take additional easing measures next year to achieve its 2.0 percent inflation goal, especially if the government proceeds with its planned sales tax increase in April.