Bank of Japan (BoJ) Governor Haruhiko Kuroda has poured cold water on mounting expectations for a fresh round of quantitative easing (QE) in October .
In an interview on the sidelines of an International Monetary Fund meeting (IMF) in Peru, Kuroda told CNBC that Japan's inflation rate was in line with the central bank's expectations.
"If necessary, we can further ease our monetary policy but at this moment the inflation dynamics is as we anticipated. So, at this stage we just continue QE, but if necessary we can adjust."
Widely seen as Japan's key indicator for monetary policy, core consumer prices (also known as headline prices) contracted 0.1 percent in August after July's flat reading, underscoring the impact of falling energy prices and fueling calls for stimulus to accelerate inflation to the BoJ's 2 percent target by 2016.
August's report marked the first annual decline since the central bank began its 'kitchen sink' stimulus package in April 2013.
The BoJ left policy unchanged at its monthly review last week in a widely anticipated move, but several economists, including those at the IMF, believe additional easing is necessary to counterbalance weak industrial production and exports and disappointing wage growth that are heightening risks for Japan to enter a technical recession in the third quarter. The economy also faces risks from external factors, including weakness in emerging markets and higher U.S. interest rates.
As of late, calls have loudened for the bank to take action as early as October .
"The slowing economy could trigger a technical recession in Japan, which would intensify deflationary pressure. To counterbalance these negative developments, the BoJ is expected to provide additional monetary stimulus measures at the October 30th meeting, when it will release its new economic outlook," Natixis said in a report last week.
Societe Generale echoed those concerns in a recent note, saying it expected the bank to increase its monetary base to 85 trillion yen at the October 30th meeting, with the increase mainly allocated to risk assets, including ETFs.
"Given that the government is likely to declare a successful exit from deflation by the time the upper house election is held next summer, the next QE measure will probably be the last one in the current monetary cycle," SocGen added.