Bank of Japan Governor Haruhiko Kuroda acknowledged that recent data has painted a patchy picture of the economic recovery but stressed that conditions were falling into place for inflation to head toward his ambitious 2 percent target.
He said the timing for hitting the target may be swayed by oil price moves, suggesting the BOJ won't expand stimulus if any delay in achieving the goal is due primarily to slumping oil costs.
"It's unavoidable for our inflation forecasts to fluctuate depending on oil price developments," Kuroda told parliament on Friday.
With a policy-setting meeting looming next week, Kuroda offered few clues on whether and when the BOJ might next ease monetary policy.
But he ruled out one step considered by markets as a possible policy option, which is to cut a 0.1 percent floor the central bank sets on money market rates.
"We're not considering cutting or abandoning" the 0.1 percent interest the BOJ pays on excess reserves financial institutions park with the central bank, he said.
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Kuroda, however, added that he will consider various monetary policy measures, taking into account the effects they have on the economy, prices and the banking system.
The BOJ has stood pat since expanding its massive stimulus programme last October, hoping that a steady recovery will accelerate inflation toward its 2 percent target.
It now projects inflation to hit 2 percent by around September next year. But many analysts doubt price growth will accelerate so quickly with oil falls forcing inflation to a halt, and the economy having contracted in April-June on weak exports and household spending.
"There has been various data coming out lately, which has shown a somewhat patchy picture of the economy," Kuroda said.
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"There's a good chance, however, that Japan's economic growth will turn positive in July-September," he added, stressing that a steady recovery will help push up prices.
The BOJ is expected to offer a bleaker view on overseas economies and may lower its assessment on Japan's exports at next week's rate review, sources told Reuters.