Bank of Japan more upbeat about economic recovery

TOKYO Japan's central bank Thursday upgraded its assessment of the economy's prospects after earlier this year implementing an ambitious monetary policy aimed at boosting inflation and growth.

The Bank of Japan, ending a two-day policy board meeting, chose more optimistic language to describe the world's third largest economy. It said in a statement that the economy was "starting to recover moderately." Last month, it described the economy as "picking up."

It reiterated that exports and company profits were improving.

The bank has been engineering a key part of a stimulus program, known as "Abenomics" for the new Prime Minister Shinzo Abe, who took office late last year.

It kept its super-easy monetary policy unchanged. The BOJ is expanding the monetary base by about 60 trillion yen ($606 billion) to 70 trillion yen ($707 billion) over two years by mopping up Japanese government bonds.

"The bank will continue with quantitative and qualitative monetary easing, aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner," it said.

The Japanese economy has been stagnant for two decades, undermined by deflation and an aging, shrinking population.

Hopes are high Abenomics will provide a solution, or at least help prod along reforms and growth, although some of its goals are untested and unclear.

The drawback for Abenomics is that Japan's already massive public debt is growing even bigger, meaning possible fiscal catastrophe for the nation if it doesn't achieve real growth.

An upper house election set for July 21 is expected to serve as a litmus test for the public's approval of Abenomics, which has already sent the benchmark stock index higher and the yen lower in a big plus for exporters.