The Bank of Japan is widely expected to leave its ultra-easy monetary policy unchanged at its two-day Policy Board meeting starting on Thursday, but financial markets are likely to carefully assess whether there will be any change in the BOJ's message on inflation and the sharp fall in the yen, a by-product of its easy monetary stance.
The Policy Board will hold its first meeting since core consumer inflation in Japan exceeded the BoJ's inflation target in April for the first time in almost seven years, exceeding 2 percent. The meeting also comes after Governor Haruhiko Kuroda made headlines last week when he said that households had become "more tolerant" of price increases, which he later retracted as "inappropriate".
Analysts say the BoJ needs to strike a delicate balance between justifying continued monetary easing and taking note of criticism that it is out of touch with consumers.
The recent 24-year low of the yen against the US dollar has added to the BOJ's woes, as it has not adopted a policy of targeting the exchange rate. A renewed commitment to monetary easing would further differentiate its approach from the more hawkish US and European central banks and spur a weakening of the yen.
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