The Bank of Japan is likely to end its two-day rate review on Thursday with no change in monetary policy as the country’s inflation rate remains way below target despite an improving economy.

Central banks are signaling a gradual rollback of massive stimulus from the aftermath of the Global Financial Crisis, but the BOJ may stay put as inflation remains stubbornly low in the world’s third largest economy.

The Bank of Japan’s nine-member board is widely expected to keep the short-term interest rate target at minus 0.1 percent and the 10-year government bond yield target of around zero percent.

The BOJ is also seen maintaining a loose pledge to keep buying bonds so its holdings increase at an annual pace of 80 trillion yen ($717.6 billion), diverting from the U.S. Federal Reserve’s plan to steadily pull back from crisis-era measures.

Debate at the BOJ board will likely focus on why inflation remains puzzlingly low despite growing signs of strength in the economy, sources say.

Markets, on the other hand, will look for clues from BOJ Governor Haruhiko Kuroda’s post-meeting news conference on how the changing political landscape could affect monetary policy.

Government sources have told Reuters Abe is considering calling a snap election for as early as next month and will pledge to use some of the revenue from a scheduled sales tax hike in 2019 to fund spending on education and child care.

That would force the government to delay the timing for achieving its fiscal consolidation target, a set-back for Kuroda who has consistently called on the need to get Japan’s tattered fiscal house in order.

—Reuters contributed to this report.

Source: cnbc china
Bank of Japan is set to announce its rate decision — here's what investors expect