The Bank of Japan on Monday began a two-day meeting of its policy-setting panel, with analysts expecting no change in monetary policy despite the recent surge in long-term interest rates.

The Policy Board is expected to keep its current quantitative credit-easing policy, adopted in March 2001, in line with BOJ Gov. Toshihiko Fukui's pledge to maintain that stance until Japan moves out of deflation.

The BOJ has been injecting ample liquidity into the banking system by targeting the balance of current account deposits held by commercial financial institutions at the central bank in a range of 30 trillion yen to 35 trillion yen.

Some government officials have voiced concern over rising interest rates, but the BOJ appears to hold the view that rises should be viewed as natural as long as they are within the pace of economic recovery.

In the bond market, the yield on the benchmark 10-year Japanese government bond ended at 1.775 percent last Wednesday, the highest close since November 2000. On Monday, it was 1.850 percent at the close of trade, up 0.075.

A jump in rates would work to damage government finances by expanding debt-servicing costs, now helped by near-zero interest rates.

Meanwhile, the central bank may revise upward its assessment of the economy in its monthly report to be released after the two-day meeting, with the economic expansion having become stronger on the back of a pickup in personal spending and a falling unemployment rate.

The economic recovery was highlighted in recent upbeat data, including gross domestic product, which grew a real 1.5 percent in the January-March period from the preceding quarter.