The Bank of Japan on Tuesday left its monetary policy unchanged and pronounced an improved outlook for the economy, but disappointed investors who had expected more from the central bank in terms of measures to curb volatility in the country’s bond markets.

"Japan's economy is picking up," the Bank of Japan, or BoJ, said in a statement, revising up its view from last month when it had said the economy is beginning to pick up.

The BoJ's decision to refrain from announcing further stimulus, or take measures to stem volatility in Japanese government bonds, disappointed the markets. Economists were expecting that the central bank would extend the time frame of its stimulus or change the frequency of its bond purchases to curtail volatility.

“Those betting that the BOJ would do something were left a little disappointed,” Jonathan Cavanaugh, a strategist at Westpac Banking Corp. in Singapore, told Bloomberg. “The near-term risk is still skewed to the downside for dollar-yen.”

After the announcement, the Nikkei stock index fell 1.5 percent and the yen is up 0.49 percent against the dollar at 98.26, at 12:40 a.m. EDT.

The bank also unanimously voted to continue an annual increase in monetary base or cash and deposits at the BoJ by 60 trillion yen to 70 trillion yen ($610 billion to $710 billion), the central bank said after the two-day meeting.

The BoJ also voted down a proposal by board member Takahide Kiuchi that the bank make its 2 percent inflation target a mid- to-long-term goal. Kiuchi's proposal was rejected in an 8-1 vote. The bank has chalked out a two-year time frame to achieve its inflation target of 2 percent, which many economists believe is unrealistic.