FXStreet (Mumbai) - The Bank of Japan can be expected to keep its monetary policy unchanged when it meets tomorrow as policy makers believe that underlying inflation is improving. Thus no addition easing is likely to be seen tomorrow even though fall oil price and lower level of consumption continues to push inflation away from the central bank’s 2 per cent target. Four of the nine board members are against further expanding an already massive asset-buying program. The central bank’s QQE programme has done little in boosting inflation outlook. Policy makers are against immediate easing as they feel that companies have begun raising prices and the economy is progressing albeit slowly on the recovery path. They want to wait and watch the existing easing measures play out their impact. Also, policy makers believe that the current weakening of the economy is on account of several external factors as well such as China’s economic slowdown and volatile market condition which is beyond the control of the BOJ. Governor Haruhiko Kuroda is optimistic of achieving the 2 per cent inflation target, leading analysts to forecast that the central bank will stay pat tomorrow and continue to pledge to expand base money at an annual pace of 80 trillion yen ($677 billion). However, Kuroda can be expected to signal the need for more stimulus thereby raising market expectation for more easing in the near term. Yujiro Goto and Yunosuke Ikeda, Strategists at Nomura, expect the BOJ’s decision tomorrow to be a “close call”. Deteriorating inflation and concerns over a weak JPY raises a probability of easing. The policy makers cannot completely discount the volatility seen in markets in recent times. The BOJ, according to Nomura thus stands ‘at crucial point for maintaining its credibility.’ According to Nomura, BOJ’s credibility with respect to its commitment to reach inflation target will be questioned ‘if the market remains volatile and the BOJ still leaves its policy unchanged’. BOJ may ease if… The chances of BOJ easing will increase if the market rout becomes more pronounced and if further volatility is triggered by the US Fed’s stance on future rate hikes. Reuters quoted a source who stated "I can see the BOJ come up with a good justification both to ease or to not ease". While another of Reuters’ sources stressed "Risks to the outlook are on the rise. Whether they have heightened enough to warrant immediate action is an open question. Speculations that the BOJ may ease are also quite strong among some segments. Some market participants opined that oil slump will further push back the time for achieving the central bank’s price target. Inflation has stagnated and firms have shown reluctance in raising wages. The firms are further discouraged from hiking capital expenditure by the constant fall in Tokyo stocks. These factors are posing serious threat to the growth that the BOJ wishes to bring about with its QQE programme. Though the current economic conditions warrant easing, the BOJ might wait till April before actually initiating further changes to its monetary policy. It is being assumed that demand for easing will be heightened ahead of nationwide elections in July. BOJ’s decision will depend on whether Karuda thinks expanding stimulus now will have the maximum market impact. Hideo Kumano, chief economist at Dai-ichi Life Research Institute is of the opinion that "The BOJ could ease this week but it won't have much effect in reversing the market tide," said. For more information, read our latest forex news.