The Bank of Japan on Tuesday kept monetary policy steady and nudged up its economic growth forecasts as the government's stimulus package and receding pessimism over the global outlook took some pressure off the central bank to alter course.

The BOJ also signaled cautious optimism over the global economy after the United States and China agreed on a preliminary deal to defuse their bitter trade war, saying that risks surrounding the outlook have "subsided somewhat."

As widely expected, the BOJ kept its short-term interest rate target at minus 0.1 percent and a pledge to guide 10-year government bond yields around zero percent.