UPDATE 2-BOJ pondering options but in no mood to ease now

(For more stories on the Japanese economy, click [ID:nECONJP])

* BOJ to hold fire at least until Sept rate review - sources

* Most likely option is to expand fund-supply tool

* Sankei paper says BOJ started considering easing steps (Recasts with changes in lead, adds details)

TOKYO, Aug 19 (Reuters) - The Bank of Japan is lining up its options in case it needs to ease monetary policy next month but is in no mood to act now, sources said, despite speculation the strong yen may nudge it to act before its September rate review.

Rumours that the BOJ would hold an emergency meeting on Thursday pushed the dollar higher against the yen and sent bond yields lower, but the moves later reversed after sources said the central bank was highly unlikely to meet so soon. [ID:nTKZ006494]

Markets are rife with speculation that the BOJ, in an attempt to pre-empt government pressure for action, may loosen its already-easy monetary policy at an emergency meeting before or shortly after a meeting expected on Monday between Governor Masaaki and Prime Minister Naoto Kan.

But the central bank is unlikely to act at least until its next regular policy meeting on Sept. 6-7, unless the yen heads towards its all-time high beyond 80 to the dollar at a pace of 2 to 3 yen in a single day, sources said. [ID:nTOE67I027]

"Markets seem to believe the BOJ may ease policy before Shirakawa meets Kan, or that Shirakawa will promise to ease policy when the two meet. I think that's unlikely," said Yasuhide Yajima, senior economist at NLI Research Institute.

"If the yen shoots up again and stock prices fall, the BOJ may ease policy as early as in September, more likely in October. If so, it would need to come up with something aggressive enough to convince markets that it's determined to fight deflation."

The government is considering a package of stimulus measures to support the economy, which may include extending the deadline for subsidies for energy-efficient consumer electronics, according to Japanese media.

But with the outline of the government measures sketchy, the BOJ is not buckling to pressure at least for now, analysts say.

If the BOJ were to ease policy in September, the most likely option would be to offer more cash to the market by expanding a fixed-rate, cheap loan scheme for banks put in place in December, they say.

The Sankei newspaper said on Thursday the BOJ has started considering additional monetary easing steps in line with government efforts to support the economy. The paper did not cite sources and did not specify when the BOJ would actually move.

The dollar rose to 85.80 yen on the rumours of an emergency BOJ meeting but trimmed gains to around 85.60 yen JPY= after sources said such a meeting looked unlikely.

The benchmark 10-year government bond yield fell to 0.905 percent JP10YTN=JBTC on the rumour, near a seven-year trough of 0.900 percent hit on Wednesday, before pulling back to 0.920 percent.

(Editing by Charlotte Cooper)