TOKYO (AFP) - Japan on Friday (July 29) published another batch of tepid inflation and spending data, heaping pressure on the central bank to respond with a fresh round of stimulus to boost the faltering economy.
Bank of Japan policymakers wrap up a meeting later in the day as speculation runs high that it will make a move, in a one-two punch after Tokyo announced a huge government stimulus package this week.
Japanese officials are under intense pressure to deliver as many economists increasingly write off Prime Minister Shinzo Abe's faltering bid to fire up the world's number three economy, dubbed Abenomics.
Friday's meeting is the BoJ's first since Britain's shock vote last month to quit the European Union.
The referendum result hammered financial markets and sparked a yen rally that is threatening corporate Japan's bottom line - and aggravating concerns about growth.
Government figures on Friday morning did little to soothe those worries.
Spending by households across the country fell in June while inflation dropped for a fourth straight month, in a fresh blow to Mr Abe's war on deflation.
While the labour market remained tight and industrial production rebounded, rising 1.9 per cent, there are growing fears about second-quarter economic growth.
Japan dodged a recession in the first three months of the year.
Business confidence has slumped to levels last seen when Abe swept to power in late 2012 on a ticket to fire up an economy beset by years of falling prices and weak growth.
"The BOJ is widely expected to announce further significant monetary stimulus measures to support the large fiscal stimulus package that Shinzo Abe announced this week," said Craig Erlam, senior market analyst at forex trader OANDA.
Among its options, the BOJ could inflate its mammoth 80 trillion yen asset-buying plan, which holds government bonds and other investments, and is a cornerstone of Abenomics.
The bank could also cut interest rates deeper into negative territory in a bid to stir lending and stoke the wider economy.
The rate plan has been unpopular among Japanese banks, however, as it encourages them to loan out money to people and businesses by effectively charging them to keep excess reserves in the BOJ's vaults.
There has also been growing speculation that the bank may turn to unconventional measures, such as so-called "helicopter money".
The term refers to a controversial policy of central banks to funnel funds directly into the economy - such as into people's bank accounts - rather than through the banking system by means of more traditional bond-buying and asset purchases.
BOJ governor Haruhiko Kuroda, who holds a regular post-meeting press briefing on Friday afternoon, has denied such plans.
The expected decision comes two days after Japan's government announced a whopping 28 trillion yen (S$360 billion) package aimed at kickstarting growth.
Tokyo released few details about its plans, and analysts questioned how much of it was immediate fresh spending.
Japan's spend-for-growth policies have set it apart from some of its rich nation counterparts, including Germany which has been reluctant to endorse the use of government spending to boost the economy, seeing it as ineffective.
Japan's leader had promised to unveil this week's package in response to Brexit and the subsequent rise in the yen.
Investors tend to buy Japan's currency as a safe bet in times of turmoil or uncertainty. But it makes its exporters less competitive overseas and hits profits at Japan Inc.
Mr Abe's plan - a mix of massive monetary easing, government spending and red-tape slashing - initially brought the yen down from record highs and set off a stock market rally.
But promises to cut through red tape have been slower, and Mr Abe's plan to buoy Japan's once-booming economy have looked increasingly unrealistic.
The central bank is nowhere near a two-percent inflation target seen as critical to saving Japan's economy.