The Bank of Japan on Thursday kept its monetary policy unchanged and lowered its inflation forecast for this fiscal year, saying its stimulus measures will be kept in place to achieve its reflation goal.

In line with market expectations, the BOJ maintained its short-term interest rate target at minus 0.1 percent and committed to keeping the 10-year government debt yield at around zero percent.

In the bank's quarterly economic outlook report, the BOJ upgraded its assessment of the economy, saying that "Japan's economy has been turning toward a moderate expansion on the back of global economic growth and recovery in domestic demand."

It was the first time since March 2008 that the BOJ used the word "expansion" to describe the state of the domestic economy in an embryonic sign that the export-driven economy is benefiting from a pickup in overseas demand.

But its core consumer inflation forecast for the year ending in March 2018 was lowered to 1.4 percent from 1.5 percent, owing to weak services and durable goods prices, the BOJ said in its quarterly economic outlook report.

The BOJ's stance has been that it will adjust its yield curve control policy, aimed at keeping the 10-year government debt yield around zero percent, by adjusting the amount of its bond buying.

The bank will continue to promote powerful monetary easing under the yield curve control framework to achieve its price target at the earliest date possible, the bank's Governor Haruhiko Kuroda has stated.

The BOJ since September adopted a yield control curve policy which functions to keep long-term interest rates exceedingly low by adjusting the amount of its bond purchases.

The policy has come under scrutiny and criticism recently for its durability and sustainability, as yield and debt prices move inversely to each other.

Kuroda has said that some market participants believe core consumer inflation will approach 1 percent in the latter half of this year, adding that he believes this might happen too.

But the bank will not automatically raise its yield target just because this happens, the BOJ chief has stated.

The bank plans to keep intact its negative interest rate at minus 0.1 percent, as part of its massive stimulus program and ultra-loose monetary policy.