The Bank of Japan held off further easing measures today despite struggling to drag up flat-lining inflation that is defying a massive stimulus plan launched two years ago.
Japan's central bank kept its record easy money programme, which is adding about 80 trillion yen ($663 billion) to the money supply every year.
But economists said Bank of Japan Governor Haruhiko Kuroda will have to boost the scheme, possibly later this month, in a further attempt to bring Japan closer to achieving 2% inflation.
The bank's inflation target is a cornerstone of Prime Minister Shinzo Abe's drive to conquer deflation and revive the long-sluggish economy.
After a two-day meeting, the Bank of Japan said in a statement consumer inflation was likely to be about zero "for the time being" due to lower energy prices.
However, it added "inflation expectations appear to be rising on the whole from a somewhat longer-term perspective".
Kuroda told a press conference that the bank expected price levels will start to rise later this year as general economic conditions improve.
"We believe the rise of the inflation rate will accelerate perhaps after the coming autumn, considering that expected inflation will likely rise over the long run, as the impact of the fall in energy prices diminishes, while the gap between supply and demand continues to improve," Kuroda said.
But he added that the bank stood ready to loosen monetary policy if necessary, recalling his surprise move in October that expanded the scheme earlier than expected.
Kuroda's announcement prompted economists to strengthen their belief that the Bank of Japan will expand the easing programme soon.
Tokyo's campaign to stimulate spending faltered after the government raised the sales tax last year to help pay down the enormous national debt.
That hammered consumers and led to a brief recession, while falling oil prices have hammered energy inflation.
Japan limped out of recession in the last quarter of 2014 with an unimpressive 0.4% growth rate.
Kuroda said the negative impact of the consumption tax rise was weakening, while the US economy continues its recovery.
"Japan's economy is expected to continue its moderate recovery trend," with demand both at home and abroad picking up, the bank said.
