Nikkei seen edging up, expectations high for BOJ action

TOKYO, Jan 21 (Reuters) - Japan's Nikkei share average was seen rising slightly on Monday as the Bank of Japan begins a two-day policy meeting, building its 31-month closing high logged in the previous session on expectations that the central bank will set a 2 percent inflation target. Market players said the Nikkei was likely to trade between 10,850 to 11,000 after Nikkei futures in Chicago closed at 10,965 on Friday, up 0.4 percent from the close in Osaka of 10,920. "After the BOJ meeting tomorrow the market is likely to fall as all factors will be exhausted, but because domestic earnings reports start next week I don't think it will really fall that much," said Masayuki Otani, chief market analyst at Securities Japan. U.S. earnings have been largely positive, helping to lift the Dow and S&P 500 to five-year highs on Friday, with Morgan Stanley the latest bank to trump expectations, although Intel Corp's disappointing results left it down 6.3 percent. Overall, S&P 500 fourth-quarter earnings are forecast to have risen 2.5 percent, according to Thomson Reuters data. That estimate is above the 1.9 percent forecast from a week ago but well below the 9.9 percent fourth-quarter earnings forecast from Oct. 1, the data showed. The Nikkei has notched up 10 straight weekly gains, its longest winning streak since 1987, after heightened expectations of easing from the Bank of Japan pushed the yen to a 31-month low against the dollar. The yen sank to a fresh 2-1/2 year low on Monday morning of 90.25 to the dollar. A deputy economics minister said on Friday that the central bank and the government have agreed to set a 2 percent inflation as a policy target in a joint statement, although no clear timeframe has been fixed to meet the goal. The Nikkei has risen around 26 percent over the past two months since then-incoming prime minister Shinzo Abe began calling for aggressive easing.

> Dow, S&P 500 end at 5-yr highs on early earnings beats

> Yen slumps to 31-month low on expected BoJ action

> Bond prices climb as buyers emerge after sell-off

> Gold slightly lower after weak U.S. consumer data

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