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Abenomics reloaded: Double shot of easing from Japan government, Bank of Japan set to take down yen

Macquarie: Japan is set to roll out a new type of stimulus

Don't get used to a strong yen.

Whether or not Japan calls in the helicopters, an expected double bazooka of fiscal and monetary easing trained on its economy will bring down the high-flying currency.

The big catalyst for a change in the yen's direction was likely to come from Prime Minister Shinzo Abe's ruling coalition winning a landslide victory in upper house elections over the weekend, a development analysts said would make it far easier to push through his economic agenda, dubbed Abenomics.

Analysts expected Abe's coalition would now be able to push through fiscal stimulus of potentially as much as 20 trillion yen ($190 billion), which would be around 4 percent of gross domestic product (GDP).

The Bank of Japan (BOJ) was already widely expected to introduce further easing, potentially as soon as its next meeting, which ends July 29.

The government and the central bank now appear poised to coordinate their firepower.

"The end of this month is D-day," Gareth Berry, a foreign-exchange strategist at Macquarie, told CNBC's "Street Signs."

"We're about to witness the birth of a new type of stimulus which combines fiscal stimulus with monetary stimulus," he said.

"We should see at least 20 trillion yen as an expansion of fiscal stimulus and a corresponding, and by no means coincidental, increase in the BOJ's Japanese government bond (JGB) purchases by the same amount, 20 trillion yen," he said. "It will be explosively yen negative if it's rolled out as we expect at the end of this month."

Berry expected the dollar/yen currency pair would climb to 110 by the end of this month and possibly rise to around 115 after that, compared with 104.14 against the greenback on Thursday morning Asia time.

While speculation that Japan would introduce "helicopter money," or printing money to distribute to the public has risen, the government has denied that's what it has in store. But Berry noted that the name given to the policy didn't matter very much, with the structure of the plan far more important.

Recent strength in the yen had complicated the BOJ's effort to stimulate inflation in Japan's long moribund economy. The currency was already counter-intuitively trending higher after the market turned sour on the central bank's surprise introduction of a negative interest rate policy in late January.

The yen got another shove higher after the U.K. referendum vote to exit the European Union (EU) in late June spurred safe-haven flows into the currency. The dollar went from fetching as much as 121 yen before the negative-rate policy was introduced to as little as 99.08 yen, its lowest since 2013, in the wake of the Brexit vote.

Macquarie's Berry wasn't alone in expecting a two-flanked attack from Japan's policymakers, although others aren't anticipating such large figures.

"The markets are probably right to assume that fiscal and monetary stimulus will go hand in hand," Julian Jessop, an economist at Capital Economics, said in a note Tuesday, but he added in a note Wednesday that speculation of helicopter money was likely "overdone."

Jessop expected that the BOJ would increase its JGB purchases, potentially from the end of this month, but he noted that the government had already planned a 10 trillion yen supplementary budget prior to the election.

"While it is larger than in most years, supplementary budgets have become an annual event," he said, but added that he still expected the dollar-yen would fall to 110 by year-end and to 120 in 2017.

To be sure, some questioned whether yet another round of easing would be effective.

Sonia Recchia | WireImage | Getty Images

In a note Wednesday, economists at ANZ noted that while the BOJ's purchases of government bonds successfully pushed bond yields lower, there hasn't been much sign it spurred increased demand for credit.

"Access to funding is not an impediment for corporate Japan. Indeed, they are sitting on record levels of cash. The problem for corporate Japan is that there is insufficient incentive to invest," ANZ said, adding that at the same time, the move to negative interest rates appeared to be getting customers to hoard cash, rather than boost spending.

The new stimulus plan needs to be more radical, ANZ said.

"The BOJ and government need to try something different to more forcefully and sustainably lift inflation and inflation expectations," it said. "The public must view the increase in monetary supply as permanent."

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—By CNBC.Com's Leslie Shaffer; Follow her on Twitter