The Bank of Japan (BOJ) decided Tuesday to maintain its easing policy while allowing long-term interest rates to move in a wider range to increase policy flexibility.

The policy adjustment came at a time when the central bank's target of achieving two-percent inflation remains far-flung as core consumer price index rose only 0.8 percent in June from a year earlier.

Following a two-day policy meeting, the Japanese central bank decided to maintain its target level for the yield on the 10-year government bond at around zero percent, but said the yield "may move upward and downward to some extent."

According to BOJ Governor Haruhiko Kuroda, the bank would allow the yield to move within a range between minus 0.2 percent and 0.2 percent, while the previous de facto limits were minus 0.1 percent and 0.1 percent.

"The BOJ decision was not intended to raise interest rates," said Kuroda at a press conference, adding that the move was aimed at increasing the sustainability of the bank's massive stimulus program.

He added that the BOJ remains committed to keeping policy highly accommodative in an attempt to reach the two-percent inflation target.

"Inflation will gradually rise toward the two-percent target," said Kuroda.

Meanwhile, concerns have been mounting over the negative side effects of the easing policies.

Kuroda admitted that the stimulus policies had distorted the market by soaking up liquidity and said that the policy adjustment would improve the "sustainability" of the monetary easing measures.

During the two-day meeting, the BOJ also decided to maintain its short-term interest rate at minus 0.1 percent, but said that it will reduce the amount of funds subject to the rate that financial institutions keep parked at the central bank.

The Japanese central bank has also decided to change the composition of its purchases of exchange-traded funds, by buying more Topix-related ETFs while reducing the purchase of Nikkei index-linked funds.

The BOJ choosing to maintain its hefty easing policy also runs contrary to other major central banks, with the U.S. Federal Reserve having signaled for two more interest rate hikes by the end of this year.

The BOJ has been pursuing the two percent inflation target since Kuroda took office in 2013 in a bid to lift Japan out of years of deflationary stagnation.

But after more than five years of aggressive monetary easing, the target remains far-flung, leading the bank to push back the time frame for achieving the goal several times and to drop the time frame from its quarterly economic outlook report earlier this year.

In a report on the economic outlook released on Tuesday, the BOJ cut inflation forecasts for the next three years, projecting price gains of 1.1 percent in fiscal 2018, 1.5 percent in fiscal 2019, and 1.6 percent in fiscal 2020.