The Bank of Japan (BOJ) on Thursday refrained from announcing fresh stimulus, in a widely-expected decision, despite increasing evidence the recovery in the world's third-biggest economy is sputtering.
The central bank stuck to its pledge to increase base money by 60-70 trillion yen ($572-$667 billion) per year via aggressive asset purchases, mostly in Japanese government bonds.
Read MoreAbenomics approaches a moment of reckoning
One board member, Takahide Kiuchi, proposed making the central bank's 2 percent inflation target a medium-to-long-term goal but the proposal was turned down by an 8-1 vote.
In an accompanying statement the BOJ said it expects the trend of moderate economic recovery to continue. It cut its view on housing investment citing the continued effect of the April sales tax hike but noted that private consumption remains firm.
"I think the BOJ is optimistic because corporate profitability is very high and wages are still growing to some extent, so the BOJ is hoping this kind of growing income will stimulate spending," said Masayuki Kichikawa, managing director and chief Japan economist at Bank of America Merrill Lynch.
"The big question [is whether] the actual data for August and September support this outlook. The future course for monetary policy will strongly depend on data," he said. "Given the recent data on wages and inflation... I think it will take a little bit longer than the BOJ expected [to achieve its goal]. Inflation is improving but 2 percent inflation will be achieved in 2016, rather than next year."
The Japanese economy has taken a harder-than-expected hit from the nationwide sales tax hike that took effect in April; recent data from household spending to factory output showed weakness. The economy shrunk an annualized 6.8 percent in the second quarter, its worst showing since 2011.
Markets are also increasingly doubtful whether the BOJ can meet its target of 2 percent inflation by next year. Most recent data showed consumer inflation excluding the effects of the sales tax hike remained at 1.3 percent in July.
The BOJ has kept steadfast to its upbeat view, maintaining that the economy will ride out the 3 percentage point hike in the consumption tax to 8 percent, which took effect in April.
Read MoreJapan's Abe kicks off cabinet reshuffle
The broad view is that the BOJ will continue to hold off on further stimulus in the near term, taking a wait-and-see approach. Some analysts cite recent wage data, which showed regular pay among Japanese growing for the second straight month, as a positive sign.
"We did have a bad quarter for growth but that was well-anticipated due to the consumption tax hike. Moreover we do have some signals of labor market tightness," said Naomi Fink, CEO at Europacifica Consulting. "If need be, the best move for them right now is to wait and see for the rebound later in the year."
The Nikkei stock average's performance has offered policymakers some relief. The index hit seven-month highs on Wednesday, on hopes that a cabinet reshuffle by Prime Minister Shinzo Abe would give fresh momentum to his growth-oriented policies.
Read MoreWhy Japan's economy is stuck in 'no man's land'
"The moves in the JPY and the Nikkei suggest stimulus is just around the corner; if the BOJ concurs, the Nikkei will continue its march back to 16,000," said Evan Lucas, market strategist at IG.
Japanese stocks were unchanged from where they were trading before the decision, while the yen was flat against the U.S. dollar.