Bank of Japan Governor Ueda Kazuo says recent projections show inflation has yet to reach the BOJ's 2 percent target.

"A variety of forecasts show the inflation rate is picking up slightly, but it has not yet reached 2 percent," he said. "When the forecasts stabilize at the target rate, an actual rate of 2 percent will be realized in a stable manner."

Some market sources now expect the BOJ to announce that it is reducing purchases of government bonds at next week's policy board meeting. It would be a shift from its massive monetary easing program.

Ueda said the BOJ has been assessing market conditions since changing the framework of its monetary policy in March.

He added he thinks it is appropriate for the bank to reduce bond purchases as it proceeds with an exit strategy.

The BOJ ended negative interest rates and its yield curve control on long-term bonds in March. The bank's policy board is scheduled to meet and provide some kind of direction on Friday. Members are expected to discuss prices and monetary policy, among other issues.