There is no consensus within the BOJ yet on the preferred move at the July 29-30 rate review, as much will depend on the European Central Bank's policy decision on Thursday and the market response, say sources familiar with the BOJ's thinking.

With robust domestic demand making up for weak Japanese exports, many BOJ officials see no imminent need to ramp up monetary support, and prefer to save its limited ammunition for when the economy faces bigger problems, the sources say.

But some officials worry that by standing pat at a time U.S. and European counterparts are seen cutting interest rates or signal doing so, the BOJ risks appearing less dovish and sparking a yen spike that would hurt Japan's exports, they say.

Many analysts predict the BOJ will settle for a modest tweak to its forward guidance - a pledge central banks make on future monetary policy moves - and commit to keeping rates ultra-low over a longer-term horizon.

The idea is among options debated internally within the BOJ and will be on the table next week, if the board sees the need to forestall risks to Japan's economy, the sources say.

But it is hardly a done deal as some in the BOJ worry that seeking to appease markets with a tinkering of wording could backfire and push up the yen, if it is seen as a sign of its desperation, they say.

"Pledging to keep rates low longer won't be that effective when markets already expect the BOJ to keep ultra-low rates for years," one source said. "Markets may interpret it as a sign the BOJ is running out of ammunition, which is not good."