A few months ago, economists suspected further stimulus from the Bank of Japan was likely this year to help take the sting out of a rise in Japan's sales tax. That prospect now looks less likely as the economy is showing signs of holding up well.
Read MoreJapan machinery orders soar in March
"Market economists increasingly expect the Bank of Japan (BOJ) is unlikely to take additional action in haste because of the good numbers we've had," said Junko Nishioka, chief Japan economist at Royal Bank of Scotland in Tokyo. "Better economic fundamentals are encouraging the BOJ to keep its monetary policy on hold."
The BOJ ends a two-day meeting on Wednesday and is expected to maintain its current monetary policy, under which it plans to increase Japan's base money by 60-70 trillion yen ($589-$688 billion) a year via aggressive asset purchases.
While analysts do not rule out further stimulus this year, positive economic news gives the central bank more time for maneuver.
Read MoreJapan's economy grows at fastest pace in nearly 3 years
Data on Monday showed corporate Japan lifted orders for machinery by the most ever in March and expect to book more orders this quarter. That followed news last week that Japan's economy grew at a stronger-than-expected annual pace of 5.9 percent in the first quarter – its fastest pace in almost three years.
"The BOJ is quite right to wait and watch now because if they did jump the gun that would raise some questions about credibility. It is quite right they don't do anything now and acknowledge improvements in the economy," said Vishnu Varathan, market economist at Mizuho Corporate Bank.
A scaling back of expectations for further monetary stimulus may help explain a pull-back in Japan's blue-chip stock index.
The Nikkei, which soared almost 57 percent last year amid aggressive monetary stimulus from the BOJ and a weak yen, has tumbled 14 percent so far this year.
Read MoreAre Japan stocks set to slide further?
"From a fundamental perspective Japan looks interesting, valuations are good and earnings are descent," said Charles Blankley, chief investment officer at Gemmer Asset Management, in California.
"But many investors have lost faith in the administration and it will take policy moves, both from the BOJ coming out with more quantitative easing and probably more importantly structural reforms from the administration to boost the Nikkei," he added.
For some economists, the BOJ will have to ramp up its asset-purchase program if it's to achieve its goal of lifting inflation to 2 percent over a two year horizon.
"I am a big fan of the BOJ, it's been doing some good work for Japan but it's probably got two more stimulus packages to come before we start to see inflation go towards 2 percent," Mark McFarland, global chief economist, at Coutts told CNBC's "Squawk Box" Tuesday. "They need to do it."