At the two-day meeting that ended Friday, the Bank of Japan left its short-term interest rate target unchanged at -0.1 percent and the 10-year government bond yield around 0 percent.

It also left unchanged a reference range that allows the 10-year yield to move 50 basis points up and down around the 0 percent target and the fixed 1.0 percent cap set in July.

Economists polled by Reuters had expected the Bank of Japan to keep its monetary policy unchanged.

At its previous meeting in July, the Bank of Japan relaxed control of the yield curve, in an unexpected move with widespread repercussions.

Controlling the yield curve is a long-term policy, which sees the central bank as targeting an interest rate, then buying and selling bonds as necessary to achieve that goal. It is currently targeting a 0 percent yield on ten-year government bonds aimed at stimulating Japan's economy, which has struggled for many years as inflation has fallen.

"The Japanese economy is likely to continue to recover moderately," the Bank of Japan said in a statement, adding that inflation expectations showed renewed signs of rising.

In a statement on Friday, the Bank of Japan reiterated its pledge to maintain ultra-accommodative monetary policy "for as long as necessary to maintain the (2 percent inflation) target in a stable manner."

The Bank of Japan's decision contrasts with those of US and European central banks, which have signaled in recent meetings their intention to keep borrowing costs high to rein in inflation.

The BoJ has made no change to its future guidance, which has reserved its pledge to "take additional easing measures without hesitation" — language that some market players believe may have changed to a more neutral tone.

Inflation

Data released earlier on Friday showed Japan's core inflation hit 3.1 percent in August, remaining above the central bank's target of 2 percent for the <>th straight month, a sign of widening price pressures in the world's third-largest economy.

In a move seen by markets as a step toward exiting loose monetary policy, the Bank of Japan in July loosened its grip on long-term interest rates to allow them to rise more freely, in a sign of rising inflation.

In a recent interview, Ueda said the Bank of Japan may have enough data by the end of the year to determine whether to end negative interest rates, raising market expectations of a policy shift in the near term.

A Reuters poll for September showed that most economists expect negative interest rates to end in 2024. The prospect of a rate hike helped push Japan's 10-year government bond yield to a new high in nearly 10 years on Thursday.

The Bank of Japan faces various challenges in emerging from the radical stimulus offered by former Governor Haruhiko Kuroda, including weak signals in the global economy and the risk of triggering a rise in yields that increase the cost of financing Japan's huge public debt.

Bank of Japan officials, including Ueda, also stressed the need to maintain easing until they are convinced that inflation will steadily reach 2 percent, driven by strong consumption and wage growth.

But some analysts see the yen, not wage growth or inflation, as the main driver of the BoJ's actions.

Growing expectations of a longer U.S. interest rate hike have pushed the yen down near the 150-yen per dollar level, which for Tokyo is the limit for potential currency intervention.

The yen's renewed decline has sparked fresh verbal warnings from government officials, increasing pressure on the Bank of Japan to play its part to ease the pain caused by rising import costs.