TOKYO (AFP) - The Bank of Japan Thursday held off pulling the trigger on fresh policy action, after it announced an indefinite easing programme last month, while serving up a slightly rosier view of the economy.
Following a two-day policy meeting, the BoJ also held rates steady at zero to 0.1 percent, a widely expected move as its Governor Masaaki Shirakawa prepares to make way for new leadership.
The bank gave a cautious view of the world's third-largest economy, which remained stuck in a recession after contracting in the last three months of 2012, according to official data released earlier Thursday.
It said in a statement the economy appeared to have stopped.
"Exports continue to decrease, but the pace of decrease has been moderating," it added, citing signs of a pick-up in overseas export markets.
Investor risk sentiment has improved while stronger domestic demand would help push the struggling economy forward, it said.
"Japan's economy is expected to level off more or less for the time being, and thereafter, it will return to a moderate recovery path," the BoJ said.
Facing relentless pressure from Japan's new government, the bank last month announced a two-percent inflation target aimed at beating the deflation that has haunted the economy for years.
It also outlined plans for indefinite monetary easing, following demands for strong action from Prime Minister Shinzo Abe and his Liberal Democratic Party, which swept to power in December on a pledge to revive Japan's fortunes.
The policy is similar to the US Federal Reserve's unlimited monthly bond-buying programme, known as quantitative easing, unveiled in September.
Mr Shirakawa has said he would step down from his five-year term next month, about three weeks early, after butting with Mr Abe on policy matters.