The Bank of Japan is in a bind: cheaper oil prices are almost certain to slow inflation and force the central bank to miss its 2 percent target set for this year. But economists are divided over whether the BOJ will act.
The central bank fired its last bazooka back in October, when it expanded its quantitative easing program, swelling Japan's monetary base by around 80 trillion yen ($682.9bn) per annum. While the BOJ is unlikely to announce anything new when it wraps up its two-day meeting on Wednesday, it is expected to cut its CPI (consumer price index) forecasts to 1.5 percent, according to local media reports.
Shinichiro Kobyashi, Mitsubishi UFJ Research and Consulting's (MURC) senior economist, believes "the BOJ will stick to its guns for now," but launch one more round of quantitative easing in April.
"The whole point of its policy is an unwavering commitment to beating deflation so they will just keep on claiming they can meet their targets – just at a later date," Kobyashi said.