A lack of detail from Japan's Prime Minister Shinzo Abe about how the government will buffer the economy from a controversial rise in the sales tax adds pressure on the Bank of Japan to step up its monetary stimulus in the months ahead, analysts say.
Abe, who implemented radical economic policies – dubbed Abenomics – to revive the world's third-biggest economy, said on Tuesday the country's sales tax would rise to 8 percent from 5 next year as planned. The hike is seen as necessary to help ease Japan's heavy debt load.
(Read more: Japan's Abe calls for cut in corporate tax rate)
But an announcement on a stimulus package to offset the impact of the tax hike fell short of expectations. Instead of unveiling a cut in corporate tax, as anticipated by analysts, Abe said he had asked ruling parties to start a debate on corporate tax cuts and that a 5 trillion yen ($51 billion) stimulus package would be compiled in December.
"The stimulus announcement probably erred to the downside of what the market was looking for and there was some disappointment with substantial progress towards structural reform. We didn't get an immediate announcement on corporate tax reform and that also disappointed some investors," Citi Currency Strategist Todd Elmer told CNBC Asia's "Squawk Box."
"Ultimately, what this does is put a bigger burden on the Bank of Japan (BOJ) to offset the impact of the sales tax hike and I think that means the yen will weaken," he added, referring to a move in the currency in the months ahead.