The Bank of Japan raised its economic forecasts at its policy meeting outcome on Thursday, but it kept policy steady, as was widely expected.

The BOJ raised its economic assessment. It increased its real gross domestic product (GDP) growth forecast for the 2017-18 fiscal year to 1.6 percent from the 1.5 percent projected in January. But it lowered its core consumer price index (CPI) growth forecast to 1.4 percent from 1.5 percent in the same period.

The yen moved only slightly on the announcement, with the dollar fetching around 111.23 yen before the announcement, compared with 111.16 yen at 11:36 a.m. HK/SIN.

Marcel Thieliant, a senior Japan economist at Capital Economics, said in a Thursday note that despite the BOJ raising some growth forecasts, he didn't follow the consensus view that the yield target might be increased by the end of next year.

"The bank now sees the economy 'expanding' rather than just 'recovering,'" he noted, but added that lowering the inflation forecast indicated the BOJ was still struggling to increase inflation.

"We believe that the bank remains too optimistic about inflation. The main reason is that wage growth remains tepid despite a tight labor market," Thieliant said, expecting monetary policy would remain unchanged for "the foreseeable future."

The central bank has been pursuing a yield-curve control policy, introduced at its late-September meeting.