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Bank of Japan ups growth outlook; inflation target intact

Tomohiro Ohsumi | Bloomberg | Getty Images

The Bank of Japan (BOJ) has revised upwards its growth targets for the economy and stuck to its view that the country is on track to achieve the bank's 2 percent inflation target, the central bank said in its twice-yearly economic outlook Thursday.

The BOJ now expects the Japan's economy to grow 1.5 percent in fiscal 2014, up from a previous target of a 13 percent expansion.

It kept its growth forecast for fiscal 2015 unchanged at 1.5 percent.

Earlier on Thursday, the BOJ made no changes to its monetary policy as widely expected, pledging to keep its massive stimulus launched in April to double the monetary base through asset purchases intact.

(Read more: Is Japan finally defeating its deflation demons?)

Japan's economy expanded for a third straight quarter in April-June as Prime Minister Shinzo Abe's stimulus policies, also known as 'Abenomics,' boosted business sentiment and household spending.

"We are definitely on the verge of a comeback stage in Japan. There are a lot of signs on the private consumption side. They have to continue with his current mode & to make the third arrow of Abenomics a success; they would have to perpetuate this momentum," said Sejiro Takeshita, director at Mizuho International.

(Read more: The verdict on Abenomics, one year on)

The dollar-yen traded around the 98-handle for most of Thursday's session, and analysts are keeping a their targets on the Japanese currency fairly conservative.

"We project 2014 range to be 97 to 101 for dollar-yen, of course that could be dramatically impacted if the Fed suddenly moves," said Ed Rogers, CEO & CIO at Rogers Investment Advisors.

(Read more: Why Japan stocks may storm higher even if the yen firms)

Rogers expects 'Abenomics' to keep the rally going in stock markets, where the Nikkei has soared nearly 40 percent this year.

"We expect to see more dispersion of return amongst the public equity space and that's a great environment for stock pickers and hedge funds. Overall, the environment for returns is going to be very strong going forward."

— Follow CNBC on Twitter: @CNBCWorld

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