The Bank of Japan on Wednesday held off launching fresh stimulus, even as weak growth figures earlier this week aggravate concerns about the strength of a recovery in the world`s number three economy.
Policymakers said Japan was seeing a "moderate recovery trend", after wrapping up a two-day meeting, but they further cut back on their inflation expectations, in a sign that the BoJ`s price targets look increasingly out of reach.
The central bank`s decision to keep its already massive stimulus unchanged was widely expected, but analysts have said that weak growth figures may force the BoJ`s hand on further easing later this year.
On Monday, official data showed that Japan`s economy limped out of recession in the last quarter of 2014, with a weaker-than-expected 0.6 percent expansion between October and December -- or 2.2 percent on an annualised basis.
That followed two consecutive quarters of contraction that came as an April sales tax rise hammered consumer spending.
But economists had expected a stronger 0.9 percent expansion on-quarter, and over the full year the preliminary data showed zero growth, compared with 1.6 percent in 2013. Revised figures will be released in the following weeks.
Markets were now looking to BoJ governor Haruhiko Kuroda`s regular post-meeting press briefing later in the day.
Last month, the bank slashed its inflation outlook as plunging oil prices dent efforts to slay years of deflation, but policymakers still boosted their growth forecasts and said the economy was rebounding.
On Wednesday, the BoJ`s post-meeting statement said inflation, excluding the effects of the tax hike, was hovering around 0.5 percent, down from an earlier range of 0.5-1.0 percent that the bank used last month.
The price downgrades underscore how reaching the BoJ`s 2.0 percent inflation target by early next year looks unlikely, and it may ramp up expectations for another round of monetary easing.
