A deluge of Japanese economic data on Friday is set to influence expectations on whether the Bank of Japan (BOJ) will top up its stimulus program.
Data are expected to show the world's third-largest economy remained in a soft patch in July following the April consumption tax hike to 8 percent from 5 percent.
The nationwide core consumer price index will be the key focus. The index, which excludes volatile prices of fresh food, is forecast to rise 3.3 percent on year in July - or 1.3 percent excluding the impact of the tax increase – far below BOJ's 2 percent inflation target.
"With inflation forecast to be stagnant, there are growing expectations that Kuroda will be forced to increase stimulus," said Evan Lucas, market strategist at IG.
Over the weekend, BOJ Governor Haruhiko Kuroda said the central bank will remain committed to its accommodative stance until the 2 percent inflation target is met and maintained in a sustainable manner.
The central bank launched an aggressive easing program in April last year to lift the economy out of two decades of stagnation, but has stood pat on policy since.
Other indicators due Friday including retail sales, household spending and industrial output, are also expected to indicate weak domestic demand.
Retail sales are forecast to tick up 0.1 percent on year in July after falling 0.6 percent in the previous month.