The Bank of Japan began its two-day policy meeting Thursday amid expectations that the central bank will keep monetary policy steady while examining downside risks to the economy, including weak exports and industrial output.
The BOJ Policy Board is widely expected to vote Friday to keep its radical quantitative and qualitative monetary easing program in place. The scheme, aimed at ending deflation, involves massive asset purchases from banks to saturate the economy with money to artificially boost inflation to 2 percent in or around fiscal 2015, which starts next April.
The board, headed by Gov. Haruhiko Kuroda, will continue to examine the adverse impact of the April 1 sales tax hike, which is slowing household and corporate spending.
Citing some data, the BOJ has said that there seem to be fewer negative effects than anticipated and that it is likely to keep its overall assessment that "Japan's economy has continued to recover moderately as a trend," unchanged, sources familiar with the matter said.
The BOJ will likely stick to its view on inflation as well, expecting its preferred measure, the core consumer price index, which excludes fresh food but not energy, to keep rising at around 1.25 percent year on year for some time, excluding the effect of the sales tax hike.
In June, the index grew 1.3 percent from a year before, down from 1.5 percent in April and 1.4 percent in May.