The Bank of Japan kept monetary policy steady on Thursday even as sluggish global growth and anemic inflation put policymakers under pressure to do more to reflate the economy out of stagnation. The BOJ's decision bolstered the yen and battered Tokyo stocks.
While the central bank maintained its optimistic view of the economy, it cut its view on consumer inflation to say prices are likely to fall slightly year-on-year or remain roughly flat for the time being.
The yen rose more than 1 percent against the dollar to hit a 20-month high, while the Nikkei stock average fell 2 percent after the BOJ's decision.
"There is nothing in recent economic indicators that would lead the BOJ to change its economic outlook now," said Norio Miyagawa, senior economist at Mizuho Securities.
"However, the rising yen will place more downward pressure on consumer prices, so I expect the BOJ to ease in July, using all three dimensions of its current policy framework."
The BOJ maintained its massive asset buying program at the two-day rate review that ended Thursday, pledging to increase base money at an annual pace of ¥80 trillion.
It also left unchanged a 0.1 percent negative interest rate applied to some of the excess reserves financial institutions park with the central bank.
The decision to maintain the base money target was made by an 8-to-1 vote, while maintaining the 0.1 percent negative rate was agreed in a 7-to-2 vote.