But new board member Goushi Kataoka dissented to the BOJ's decision to maintain its interest rate targets, saying current monetary policy was insufficient to push inflation up to 2 percent during fiscal 2019.
The Reuters' monthly poll - which tracks the Bank of Japan's closely watched quarterly tankan - found the service-sector mood fell but still remained at a relatively high level, underscoring the firmness in domestic demand which drove robust expansion in the second quarter.
The data underscores the Bank of Japan's view the world's third-largest economy is showing increasing signs of strength as private consumption adds momentum to an export-led recovery.
Former BOJ Deputy Governor Kazumasa Iwata criticised the central bank's price forecasts as too optimistic and warned that even hitting 1 percent inflation could be challenging given a recent batch of weak price data.
In a widely expected move, the BOJ maintained the 0.1 percent interest it charges on a portion of excess reserves that financial institutions park at the central bank.
Sayuri Shirai, a former BOJ board member, said the central bank may temporarily accelerate purchases of Japanese government bonds (JGB) to contain rises in bond yield, but won't have to buy huge amounts to cap yields around its zero percent target.
At a rate review on July 19-20, the Bank of Japan is set to keep monetary policy steady and offer a more upbeat assessment of the economy than it did in June to say it is expanding moderately, said sources familiar with the central bank's thinking.
Companies surveyed by the Bank of Japan expect consumer prices to rise 0.8 percent a year from now, higher than their projection for a 0.7 percent increase three months ago.
The Bank of Japan's Tankan report -- a quarterly survey of more than 10,000 companies -- showed a reading of 17 among major manufacturers, the highest since the first quarter of 2014.
Japan's low inflation expectations mean its short-term real interest rate, which is calculated by subtracting inflation expectations from nominal interest rates, remains higher than that of the United States, Iwata said.
The BOJ raised its economic assessment. It increased its real gross domestic product (GDP) growth forecast for the 2017-18 fiscal year to 1.6 percent from the 1.5 percent projected in January. But it lowered its core consumer price index (CPI) growth forecast to 1.4 percent from 1.5 percent in the same period.
Governor Kuroda will also dispel market speculation the BOJ is engaging in "stealth tapering" by stressing that the recent slowdown in the bank's bond buying is not intentional and simply the result of a stable bond market, say sources familiar with its thinking.
But while the central bank reached a major milestone in money printing, it is nowhere near achieving the ultimate goal of its policy, to lift inflation to 2 percent, highlighting the difficulty the BOJ is facing as the pace of its bond buying appears unsustainable.
The Reuters' monthly poll - which tracks the Bank of Japan's key quarterly tankan - showed confidence at service-sector firms hit a four-month high, a tentative sign of a pickup in domestic demand.
Speaking at a lower house fiscal and monetary policy committee meeting, Kuroda affirmed yield curve control as the main focus of monetary policy.
Speaking in the lower house fiscal and monetary policy committee, Kuroda said that the BOJ would adjust policy if needed, but that the central bank had recently upgraded Japan's economic outlook and the global economy was growing stronger.
"Infrastructure needs are huge and it's simply not possible for the Asian Development Bank and the World Bank to fill the gap completely," Kuroda, who was formerly head of the ADB, tolda seminar hosted by an ADB-affiliated think tank.
The central bank slightly cut its inflation forecast for this fiscal year in a quarterly review of its projections, suggesting that it will maintain its massive monetary stimulus for the time being to achieve its ambitious 2 percent target.
Kuroda also said that while Japan's economic prospects were brightening, inflation was lacking momentum and justified maintaining the BOJ's massive monetary stimulus for some time.
Kuroda, speaking in the upper house of parliament, also said he felt the BOJ would be able to manage its exit smoothly, including reducing the size of its balance sheet.
There is still a year left in Kuroda's current five-year stint, and the selection process won't begin in earnest until the latter half of this year, but some of Prime Minister Shinzo Abe's closest aides and senior financial officials say reappointment is a real possibility.
Any such downgrade of the BOJ's 1.5 percent inflation target will make it difficult for the central bank to seek an early exit from its massive stimulus, said Kazuo Momma, a former BOJ official who oversaw its monetary policy and international affairs.
Service-sector sentiment improved for the first time in six quarters and companies remained upbeat on their capital expenditure plans, the Bank of Japan's "tankan" survey showed, offering hope the economic recovery will gather momentum in coming months.
The Bank of Japan's quarterly tankan business sentiment survey will likely show the headline index for big manufacturers' sentiment improved by four points to plus 14 in March from plus 10 in December, the poll of 19 economists found.
But household spending remained soft and consumer inflation was flat when stripping away the effect of rising energy costs, underscoring the challenges the Bank of Japan faces in generating sustained price rises backed by steady wage growth.