The Bank of Japan is likely to hold an emergency meeting on Monday to ease monetary policy after Governor Masaaki Shirakawa returned to Tokyo from a trip to the United States earlier than expected.
Sources had told Reuters that the BoJ was expected to hold an extra meeting early in the week to loosen policy as the strong yen threatens Japan's fragile economic recovery, and Shirakawa's early return has increased the chance of a Monday gathering.
The central bank's most likely option is to expand a fund supply programme put in place in December, through which it offers up to 20 trillion yen ($234 billion) in three-month loans to banks at the policy rate of 0.1 percent, said sources familiar with the BoJ's thinking.
But there is a slim possibility the BoJ will opt for more aggressive measures, such as increasing its government bond purchases or cutting its overnight call rate target, as some government officials are already complaining that minor tweaks to the fund supply scheme would not be enough.
The BoJ said Shirakawa arrived back in Tokyo from the United States on Sunday afternoon, earlier than planned, but did not comment on whether it would hold an emergency meeting on Monday.
"The governor's schedule at the conference (in Jackson Hole) was flexible in the first place. We understand that the governor himself made the decision to change his schedule," Satoshi Yamaguchi, head of the BoJ's media relations division, told Reuters.