The Bank of Japan Policy Board left its monetary policy unchanged Friday.

The board decided unanimously after a two-day meeting to keep its target for the outstanding balance of deposits in current accounts held by private financial institutions at the central bank in a range of 27 trillion yen to 32 trillion yen.

But the BOJ said that if there is any risk of financial market instability, such as a surge in liquidity demand, it would provide more liquidity irrespective of the target.

Analysts said the decision was widely expected, given a slew of recent upbeat economic indicators underlining Japan's nascent economic recovery, led by growing exports in line with the robust recoveries of the U.S. and other Asian economies.

On Thursday, the government upgraded its assessment of Japan's economy, saying in its monthly economic report for November that the world's second-largest economy is showing an incipient recovery.

The upgrade came after government data showed Nov. 14 that Japan's gross domestic product rose 0.6 percent in real terms in the July-September period for the seventh straight quarter of growth, topping market projections of average quarterly growth of 0.3 percent.

But BOJ Gov. Toshihiko Fukui and key economic ministers, including Financial Services Minister Heizo Takenaka, have voiced concern that the yen's strength and recent stock price falls may hinder the recovery.

A strong yen has the potential to hurt Japanese exporters by making their goods more expensive in dollar terms and could cause export-driven growth to falter.

For now, the BOJ and government are expected to keep a close eye on developments in the stock and currency markets and refrain from adopting fresh policy measures unless the dollar falls toward 105 yen and the Nikkei stock index moves below 9,500, analysts said.