The Bank of Japan began a two-day Policy Board meeting Monday, with its members expected to retain the BOJ's cautious view on the economy and hold its key interest rate unchanged at 0.1 percent.
After deciding in a July policy meeting to extend its emergency measures to support corporate financing for three more months, the main focus of this meeting will be how the central bank regards the prospects of the economy and prices.
Although the April-June gross domestic product is widely expected to grow for the first time in five quarters on recoveries in exports and production, the BOJ remains cautious over the outlook for the export-oriented economy as the prospects of the European and U.S. economies remain uncertain, sources said.
Deteriorating job and income conditions are also a source of concern as they could throw cold water on consumption, which has just started to show signs of improvement on the back of the government's economic pump-priming measures, they added.
The BOJ is likely to confirm its basic assessment that domestic economic conditions have stopped worsening, the sources said.
The bank may also stick to its expectation that the economy will start recovering in the latter half of fiscal 2009 but is likely to say the outlook is highly uncertain, they added.
At the last policy meeting July 14 and 15, the BOJ decided to extend its temporary programs of buying corporate debt from banks and providing them with unlimited loans until Dec. 31.