The Bank of Japan is expected to hold policy steady when its two-day meeting ends on Wednesday, but what it has to say about the country's slide into recession may unsettle markets already digesting the government's decision to call a snap election.
Prime Minister Shinzo Abe said on Tuesday he was postponing next year's sale tax hike and calling an early poll to get a fresh mandate for his reflationary economic policies that have so far struggled to show lasting results.
The delay in raising the sales tax stokes worries that the BOJ's monetary stance is bankrolling an alarmingly high public debt, already the highest among major economies.
Having stunned markets with a surprise monetary easing on Oct. 31, the BOJ now buys up almost the same amount of government bonds issued each month, a move critics describe as tantamount to debt monetization.
In deploying the stimulus, BOJ Governor Haruhiko Kuroda stayed upbeat about the economy, saying the move was aimed at preempting risks of a slowdown in inflation.
After Monday's data showed the world's third-largest economy entered recession in the June-September quarter, BOJ board members will likely debate whether they can stick to their view that the economy "continues to recover moderately as a trend".
