The Bank of Japan kept interest rates unchanged at 0.50% on Friday in a unanimous decision by its Policy Board, though expectations are growing that it will raise them in the coming months.
The lack of any proposal for a rate hike from the central bank's nine Policy Board members, though widely expected, soothed Japanese bond market players, as some feared such a call would stoke speculation of a tightening at their next meeting on July 11-12.
"If the vote had been split, markets would have factored in the chance of a rate hike in July," said Naoki Iizuka, a senior economist at Mizuho Securities.
"But the vote was in fact unanimous, so I think the market consensus would now be for the BOJ to act in August," he said.
The benchmark Japanese government bond futures contract rose to a session high of 131.42, up 0.30 point on the day, following the BOJ decision.
Financial markets now await remarks by Governor Toshihiko Fukui at a news conference starting at 3:30 p.m. (0630 GMT).
"I think he will try to avoid sounding too hawkish at this stage. A hike by the summer is already priced in and bond yields have gone up quite a bit," said Hiroshi Shiraishi, an economist at Lehman Brothers.
The central bank will also release its monthly report on the economy at 3 p.m. (0600 GMT).
Many in the markets expect the BOJ to raise its overnight call rate target to 0.75% from the current 0.50% at its August 22-23 meeting.
That timing would allow the central bank to check economic growth figures for April-June due in mid-August and also to avoid a rate hike just before an election for parliament's upper house, which is expected in late July unless parliament extends its current session.
Market players also think the BOJ will raise rates at a pace of roughly once every half year or so, making August seem likely after the last rate hike in February.
Since February's hike the BOJ has said it will continue to gradually raise rates, keeping pace with improvements in the economy and prices.
At the same time, Fukui has made it clear he will not be dropping any explicit hints on exactly when the bank will move, as some other central bankers
He will only give his views on the economy, he says, and market players should look at economic data to guess the timing.
Data in the past month has supported views that the economy is growing steadily, mostly in line with what the BOJ has said.
Strong responses to a corporate survey last week eased concerns that capital spending, a major engine of the economy, may be losing steam.
Data issued on Friday also showed Japanese wage earners' total cash earnings in April fell at a slower pace than initially estimated.
While subdued wages have so far limited inflationary pressures, the BOJ thinks that should change eventually.
The unemployment rate hit a nine-year low of 3.8% in April, which may signal a tighter job market that could lead to rises in wages and push up prices.
Falls in consumer prices also eased to 0.1 percent in April from 0.3%
Many economists -- including those at the BOJ -- think consumer prices will start rising again later this year.
Some BOJ officials say consumers may no longer feel prices are falling, as CPI falls in recent months were largely due to price drops in a limited number of goods, such as flat TVs.
But many BOJ officials also say they want to see the bank's next tankan corporate sentiment survey, due out on July 2, to confirm their expected economic scenario is playing out.
The BOJ scrapped its zero rate policy and raised rates to 0.25% last July, then hiked them to 0.50% in February.
The BOJ has also said it needs to keep an eye on asset prices and the yen's exchange rates.
The yen hit a 4-1/2-year low against the dollar of 123.13 yen on Thursday as investors shun it due to Japan's low interest rates. The rate hovered around 123.00 yen on Friday.
Property prices in central Tokyo are also rising.
According to the government's annual survey, land prices of some upmarket area in big cities rose by 30 to 40% last year. Nationwide, land prices rose in 2006 for the first time in 16 years.