The Japanese central bank says the world's third largest economy will suffer a contraction in its nearly ended current fiscal year but then rebound.

The Bank of Japan ended a policy meeting Wednesday without any major change to its ultra-loose monetary policy. Its massive asset purchases are injecting trillions of yen (billions of dollars) into Japan's economy each month to overcome deflation and economic stagnation.

The economy is in recession after a sales tax hike in April 2014 stifled demand.

The BOJ estimates the economy will contract 0.5 percent in the April 2014-March 2015 fiscal year. It previously forecast 0.5 percent growth. The bank cut its inflation forecast to 0.9 percent from 1.7 percent.

It raised its growth forecast for the upcoming fiscal year to 2.1 percent from 1.5 percent.