Using its most optimistic language in more than two years, the Bank of Japan upgraded its assessment of the economy Thursday, saying it is starting to "recover moderately" and signaling that no additional easing steps are in the cards in the near term.

At the end of a two-day policy board meeting, the central bank left its policy unchanged and stuck to its optimistic outlook for achieving its target of 2% inflation in two years, reflecting confidence in the massive bond-purchasing program launched in April to reverse 15 years of falling prices.

"Clearly our country's economy is starting to recover moderately. That's a straightforward conclusion I can draw by looking at various economic indicators," BOJ Gov. Haruhiko Kuroda told a news conference following the meeting, reiterating that the steps now in place are enough to achieve the inflation target.

Earlier in the day, official data showed that machinery orders—regarded as a leading indicator of corporate capital investment—rose by a stronger-than-expected 10.5% in May from the previous month to ¥799.2 billion ($8 billion), the highest level in more than four and half years.

The BOJ's decision to raise its economic view—the seventh straight month of upgrades—reflects its more upbeat assessment of exports, business investment and industrial production. The BOJ last described the economy as recovering in January 2011. And it adds to signs that, little more than three months since Mr. Kuroda orchestrated a dramatic shift in the central bank's policy, the BOJ is becoming more confident about its policies and economic projections as Japan's recovery gains momentum.

"The BOJ is strengthening its confidence in its own economic and price outlook," said Mari Iwashita, a bond strategist at SMBC Nikko Securities. "There is no need for it to take policy measures."

The central bank's policy board decided unanimously to maintain its key policy of increasing Japan's monetary base by ¥60 trillion to ¥70 trillion per year, mostly through purchases of government bonds. The result was just as expected by 12 analysts polled by Dow Jones Newswires.

But expectations for fresh easing measures may surface in the autumn or later, some economists said. In an interim review of its semiannual growth and inflation projections in April, the central bank slightly lowered its inflation projections for the current and subsequent fiscal years and cut its growth forecast for the current and next two fiscal years.

The board members' median forecast tipped Japan's core Consumer Price Index, which excludes volatile fresh-food costs, to rise 1.9% in the fiscal year starting April 2015, unchanged from its April forecast. But the board also cut its inflation forecast for this fiscal year and next by 0.1 percentage point each to 0.6% and 1.3% respectively, citing falls in the prices of imported commodities.

"The probability of additional monetary easing would strengthen if they continue to revise down their inflation forecast," said Yoshimasa Maruyama, a senior economist at the Itochu Economic Research Institute. Given the considerable gap between the BOJ's price outlook and that of private-sector analysts, "the door is open for further downward revisions," he said.

A July poll of 41 economists by the private-sector Japan Center for Economic Research think thank, released Thursday, showed they expect on average a 0.95% increase in Japan's core CPI in fiscal 2015. That's down from a 1.0% rise in the June survey.

"I still think it's hard to achieve the CPI forecast of a 1.9% increase," said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance.

There also appears to be a sense of doubt within the central bank. While most board members think core CPI could hit 2% between the autumn of 2014 and spring of 2016, "some board members expressed more cautious views on price movement," Mr. Kuroda said.

Board member Takahide Kiuchi, formerly an economist at Nomura Securities, proposed for a third straight month that the central bank's inflation commitment be made more flexible. Mr. Kiuchi urged the rest of the board to characterize the 2% target as something to be implemented in "the medium to long term," and designate the current easing policy as "as an intensive measure with a time frame of about two years." His proposal was voted down 8-1.

And Japan's economic prospects aren't risk free. "There remains a high degree of uncertainty concerning Japan's economy," the BOJ said in a statement after the board meeting, referring to Europe's lingering debt problems, weak movements in emerging economies and the pace of the U.S. economic recovery. Asked about signs of a slowdown in China, Mr. Kuroda acknowledged that Beijing "is gradually making it clear that its priority is the quality, not the speed" of growth.

Noting changing overseas economic conditions, the BOJ cut 0.1 percentage point off its growth forecast rate for each of the three years covered by the semiannual report. It now sees a 2.8% expansion this fiscal year ending March, 1.3% growth for the next fiscal year, and a 1.5% increase for fiscal 2015.

But Mr. Kuroda emphasized that Japan's economy is growing "basically in line with our forecast," and economists shrugged off the revisions as within the margin of error.

The Wall Street Journal