In its economic assessment, the Bank of Japan said the "economy has stopped weakening" as overseas economies show signs of picking up.
The bank, on its website, said exports appear to have stopped decreasing, mainly because of the developments in overseas economies.
Public investment has continued to increase, housing investment has generally been picking up and industrial production has stopped decreasing, the bank said.
The bank said Japan's economy is expected to level off for a time and then return to a moderate recovery path.
Last month, the bank doubled its inflation target to 2 percent as part of the new Prime Minister Shinzo Abe's effort to get the economy out of chronic deflation and kick-start the economy, which has been hit by declining exports and a weak domestic demand. The Abe government has urged the central bank to undertake aggressive monetary-easing policies.
Bank Gov. Masaaki Shirakawa and his two deputies are expected to leave office this month with Haruhiko Kuroda, currently president of the Asian Development Bank nominated to take over the BOJ.
The government has nominated Gakushuin University Professor Kikuo Iwata and BOJ Executive Director Hiroshi Nakaso as the next deputy governors.