China’s devaluation of the yuan exposes an undefended flank in the Bank of Japan’s efforts to jolt its flagging economy out of decades of deflation, which rely heavily on a solid pick-up in overseas demand.

A growing number of Japan’s central bankers are privately voicing concern that the problems behind China’s currency move will hit Asian demand harder than expected, threatening a Japanese export rebound they hope will stave off the need for another splurge of monetary easing.

Since April 2013 the bank has ploughed ¥170 trillion into a radical quantitative easing program that some, including some policymakers on the bank’s board, think has gone far enough — particularly given its questionable returns. Inflation remains barely above zero, for all the firepower thrown at it.

Many are wary of the rising costs of the program, the potential for asset bubbles, and the distortion to markets — especially the government bond market, which is increasingly dominated by the BOJ. Some also fear the program lets the central government off the hook on fiscal reform, too.

When the BOJ reviews its long-term forecasts in October, sources familiar with its thinking say it would be very reluctant — and at this point still unlikely — to act again, but if China’s woes hit exports enough to push Japan into recession this quarter, it cannot be ruled out.

“The risks surrounding Asia have risen. But it’s too early to give up,” said one of the sources, adding that China’s troubles alone will not trigger immediate BOJ action.

At the moment, analysts still mostly agree with the bank that growth will rebound in July-September after contracting in April-June.

But a new slump in oil prices, weak domestic consumption and fragile overseas demand have rekindled market speculation the BOJ may be forced to ease in October.

For now, Japanese policymakers remain sanguine on the yuan’s devaluation. As long as it does not go much further than the 3 percent it has already fallen, an uptick in cheaper Chinese imports will have a negligible impact on its efforts to raise inflation.

But some fear Beijing’s action might be just the opening salvo in a bid to use currency policy to arrest a deepening slowdown that could hurt broader Asian demand and therefore Japan’s exporters.

The BOJ is banking on export profits to help fuel a rise in wages that in turn would underpin growth in domestic consumption and a virtuous cycle that would push inflation toward its 2 percent target.

If that cycle is disrupted, the head of steam generated by its massive money-printing stimulus would fall flat.

The importance of an export drive loomed ever larger after data on Monday showed Japanese GDP shrank in April-June thanks to soft consumption.

Japanese exporters are already feeling the pinch in China.

Industrial and military equipment maker Komatsu saw operating profit slide 22 percent in April-June as demand for its construction machinery in China halved from a year ago.

Hitachi Construction Machinery also took a hit from slumping Chinese demand for its power shovels.

“The Chinese government calls it the new normal, but from where we’re standing things are abnormal right now,” said Tetsuo Katsurayama, the company’s chief financial officer.

There is as yet scant political pressure for BOJ action.

Government officials have even signaled that further BOJ easing would be unwelcome if it spurs further falls in the yen, pushing up import costs and denting consumption.

But some analysts suspect the political tide could turn if the economy remains weak, especially with premier Shinzo Abe’s support slipping ahead of upper house elections next year.

While Economics Minister Akira Amari said there were no plans to prepare a fresh stimulus package, some lawmakers are already calling for extra fiscal spending of around ¥3 trillion.

“The BOJ has blamed oil for tame inflation, but the economy has also been too weak to accelerate inflation,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute.

“If growth remains weak enough to trigger fiscal spending, the BOJ probably has no choice but to deploy stimulus too.”

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