(MENAFN- AFP) All eyes were on the Bank of Japan (BoJ) Friday as more tepid data heaped pressure on policymakers to deliver a one-two punch for the sluggish economy, after Tokyo unveiled a huge growth-boosting package this week.
Central bank policymakers wrap up a meeting later in the day as speculation runs high that it will make a move, after a senior government official called on the BoJ this week to join forces with the government.
Japanese officials are under intense pressure to deliver as economists increasingly write off Prime Minister Shinzo Abe's faltering bid to fire up the world's number three economy, dubbed Abenomics.
The 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 Abe's war on deflation.
While the labour market remained tight and industrial production rebounded, rising 1.9 percent, 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.
- 'Helicopter money' -
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 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 -- possibly including into people's bank accounts -- rather than through the financial system by means of more traditional bond-buying and asset purchases.
BoJ governor Haruhiko Kuroda has denied such plans.
The expected decision comes two days after Japan's government announced a whopping 28 trillion yen ($266 billion) package aimed at kickstarting growth.
Tokyo released few details about its plans, and analysts questioned how much of it was immediate fresh spending.
Economy minister Nobuteru Ishihara hinted that the central bank should take notice of Tokyo's move.
"I think Kuroda understands that the world is watching," Ishihara said after the package was announced Wednesday.
"The government and the Bank of Japan are one. We need a sense of unity."
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 the 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.
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 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.
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