Japan's central bank maintained its policy stance that is aimed at expanding the country's monetary base by an annual 60-70 trillion yen and repeated that it will continue for "as long as necessary" to boost inflation to 2 percent.
The Bank of Japan (BOJ), which embarked on its aggressive easing campaign in April to rid the country of almost two decades of deflation, repeated its view from November that the economy was "recovering moderately" and the country is expected to "continue a moderate recovery."
However, there were a few important changes to this month's statement, signaling a growing confidence in the economic recovery.
The BOJ added that the recovery is expected to continue "as a trend" although the bank acknowledged that this would be affected by the front-loading and then a subsequent decline in demand prior to an after the hike in consumption taxes in April.
The BOJ also tipped its hat to the strong improvement seen in this week's quarterly December "tankan" survey, saying the "improvement in business sentiment has continued and become widespread" and that "private consumption has remained resilient, with improvement in the employment and income situation."
The BOJ did not make any reference to the U.S. Federal Reserve's decision to begin tapering its asset purchases by $10 billion next month, but repeated that "there remains a high degree of uncertainty concerning Japan's economy" due to Europe's debt problem, developments in emerging and commodity-exporting markets and the pace of recovery of the U.S. economy.
Overseas economies were still described as "picking up moderately, although a lackluster performance is partly seen."
The scheduled increase in sales taxes in April has led financial markets to speculate that the BOJ may further expand its policy of quantitative easing though the BOJ has in the past said the economy would be able to handle the dent to consumer spending based on its current stimulus.
In addition, Japan's government earlier this month approved a new 5.5 trillion yen spending package to help the economy weather any impact of the sales tax rise.
In its statement, the BOJ also noted the rise in headline inflation to "around 1 percent" and repeated that "inflation expectations appeared to be rising on the whole." In October Japan's inflation rate rose to 1.10 percent, steady from September.
Japan's Gross Domestic Product expanded by 0.3 percent in the third quarter from the second for annual growth of 2.4 percent, double the pace of the second quarter for the third consecutive quarter of accelerating growth.
Helped by the Fed's decision this week to start winding down its asset purchase program from September 2012, the Japanese yen has weakened further, providing a further boost to exporters.
The yen is down some 17 percent against the U.S. dollar this year, trading at 104.46 today compared with 86.74 end-2012.
In April the BOJ started its aggressive stimulus program, aiming to double the country's monetary base by purchasing Japanese government bonds so their amount rises by an annual 50 trillion yen, buying exchange-traded funds (ETFs) and real estate investment trust so their outstanding amounts rise by 1.0 trillion and 30 billion yen, along with purchases of commercial paper and corporate bonds so their amounts outstanding reach 2.2 trillion and 3.2 trillion respectively by end-2013.