The Bank of Japan on Tuesday revised up its consumer price forecast for the fiscal year beginning in April, a move that reflects the impact of recent rises in commodity prices.
The central bank roughly maintained its economic growth forecast for fiscal years 2011 and 2012, from its projections three months ago.
On the underlying economy it kept its assessment that while the economy was showing signs of a moderate recovery, the improvement seems to be pausing.
It cuts its assessment on exports, saying they were weakening somewhat.
As widely expected, the central bank kept interest rates unchanged at a range of zero to 0.1 percent and held off on new policy initiatives by a unanimous vote.
Governor Masaaki Shirakawa will hold an embargoed news conference with his comments expected to come out sometime after 4:15 p.m. (0715 GMT).
The BOJ issues its long-term economic and price forecasts in April and October of each year, and reviews them in January and July.
The government last week raised its economic assessment for the first time in seven months, citing signs of output bottoming out and exports supported by firm demand in Asia.
Analysts polled by Reuters predict Japan's economy will expand modestly this year after an expected mild contraction in the final quarter of 2010, as exports pick up on demand from fast-growing emerging economies.
That will underscore the BOJ's view that Japan's economy will recover moderately around the spring, helping to ease the grinding deflation that is plaguing Japan.
The BOJ has pledged to keep interest rates effectively at zero until price stability, which it views as consumer inflation around 1 percent, is in sight.
(Reporting by Leika Kihara and Rie Ishiguro; Editing by Edmund Klamann)