Be on guard, the Bank of Japan (BOJ) could spring a surprise at its monetary policy meeting this week, according to Goldman Sachs.
The BOJ, which has stood pat since expanding its vast bond-buying program last October, faces a less sturdy economy. Industrial production has tanked, business confidence has worsened, and wage growth has been sluggish in recent months.
The central bank kicks off its two-day meeting on Tuesday with a decision due on Wednesday at 0330-0430 GMT.
"We maintain our base-case for the BOJ to take additional easing action on October 30, although we do not fully rule out the possibility of an earlier move this week," Goldman economists led by Naohiko Baba wrote in a note.
The central bank will hold a second monetary policy meeting on October 30, when it is scheduled to publish its biannual outlook report on the economy and inflation. It is expected to unveil downward revisions to both growth and prices.
"We think Japan's economy can narrowly escape a technical recession, but the current state of the economy is far below the BOJ's outlook," Baba said.
"Expected inflation rates, on which the BOJ place large importance as a QQE [quantitative and qualitative monetary easing] transmission channel, have been on a downtrend almost across the board with the corporate outlook in the Tankan Survey providing the latest clear evidence," he said.
Last week, the BOJ's quarterly Tankan survey of corporate sentiment showed big manufacturers' confidence worsened in the three months to September, underscoring the lackluster state of the nation's economy.