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The Bank of Japan Policy Board was expected to discuss the central bank’s growing difficulties in increasing market liquidity during its two-day meeting that began Thursday.

No change in monetary policy is expected, analysts said.

Under examination is the central bank’s March 19 decision to switch from targeting the overnight call rate — the interest rate at which banks lend funds to each other — to targeting the amount that banks deposit in accounts with the central bank. Both policies raise market liquidity, but in different ways.

The central bank was also expected to discuss the pros and cons of further monetary easing if economic conditions worsen in the future.

Since the previous policy board meeting in April, economic indicators have shown falls in industrial production and machinery orders, mainly due to declining exports.

Ever since the BOJ adopted quantitative easing by pursuing the 5 trillion yen reserve target, short-term money markets have been awash with funds, driving interest rates down to near zero.

For six business days in a row this month, the BOJ was unable to find enough sellers of short-term treasury bills which it uses to inject liquidity into the market.

The BOJ is concerned that furthering monetary easing, such as raising the target for reserves to 6 trillion yen, would result in a commitment to make a series of outright purchases of government bonds, an action viewed as condoning fiscal laxity.

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