The BoJ said at the end of a regular two-day policy board meeting it would conduct money market operations to maintain an outstanding balance of current accounts held at the bank of some 27-30 trillion yen (230.8-256.4 billion dollars).

"Should there be a risk of financial market instability, such as a surge in liquidity demand, the bank will provide more liquidity irrespective of the above target," it added.

The decision had been widely anticipated in the light of Japan's positive recent economic indicators, and Masatoshi Sato, senior strategist at Mizuho Investors Securities, said monetary policy was unlikely to change in the near future.

"The Bank of Japan is likely to maintain its current stance for the time being following a series of signs of economic recovery. Attention now is being paid to how the BoJ sees the recent gains in long term interest rates," he said.

The BoJ said in a separate statement that BoJ governor Toshihiko Fukui had instructed bank staff to study the issue of extending the maturities of government securities it buys in repurchase operations.

In its monthly economic assessment in August, the central bank had already presented a scenario of domestic revovery thanks to improving growth rates overseas, even though it characterised economic activity as "virtually flat" at the time.

That was borne out to some extent by the government's revision Wednesday of its gross domestic product figures for the June quarter, showing the world's second largest economy grew a revised 1.0 per cent from the previous quarter, the highest growth rate since the end of 2000.