* Decision expected around 0330-0530 GMT
* No easing eyed after Sept action
* BOJ seen under pressure to ease at Oct. 30 meeting
* Economics minister piling pressure for stimulus
* Comments from governor's briefing seen after 0715 GMT
By Leika Kihara
TOKYO, Oct 5 The Bank of Japan is expected to
keep monetary policy unchanged on Friday despite growing signs
that sagging exports to China and Europe may tip the economy
into recession, preferring to hold fire for now as it reviews
the effect of stimulus announced last month.
But the central bank is likely to warn of heightening risks
to the economic outlook at the end of a two-day meeting, keeping
alive expectations of further policy loosening at a more
important rate review on Oct. 30.
It is also expected to cut its long-term growth forecasts at
the Oct. 30 review, and admit that Japan remains years away from
achieving the central bank's 1 percent inflation target.
Mounting political pressure is keeping the BOJ on edge.
New Economics Minister Seiji Maehara, a vocal advocate of
more aggressive monetary easing who assumed the post in this
week, is expected to attend the meeting on Friday and call for
bolder action to beat deflation.
"Recent economic indicators have been weak, but not weak
enough for the BOJ to ease again now. Maehara's presence at the
meeting also won't nudge it into immediate action," said Izuru
Kato, chief economist at Totan Research in Tokyo.
"But politically, the central bank is in a tight spot. It
may loosen policy on Oct. 30 to show its determination to
achieve its 1 percent inflation target," he said.
The nine-member board is seen debating risks to the outlook
this week, such as how anti-Japan protests in China over a
territorial row could affect trade between the nations and
corporate business plans.
But it is expected to hold off on easing policy through an
increase in its asset buying and loan programme, after having
expanded stimulus just last month on fears that weak exports and
output are diminishing prospects of a near-term recovery.
Japan's economy has so far outperformed most of its peers in
the Group of Seven on spending for rebuilding from last year's
earthquake and tsunami. But with that effect fading, domestic
demand may not make up for falling exports for too long.
Data released since September's meeting has continued to
disappoint. Output fell to a 15-month low in August on sagging
sales to top export market China and business sentiment soured
in the three months to September, fuelling concerns that the
world's third-largest economy has stalled and may slip into
BOJ officials have signalled their readiness to act again
should the economy underperform despite September's easing, or
if risks heighten enough to threaten Japan's recovery.
Governor Masaaki Shirakawa may reinforce that message in his
post-meeting news conference and warn of risks to growth that
may delay a clear end to deflation.
The BOJ is set to cut its economic and price forecasts, and
signal a delay in achieving its 1 percent inflation target in a
twice-yearly report to be issued on Oct. 30, sources familiar
with its thinking say. That will keep it vulnerable to calls for
further stimulus from government officials like Maehara.
Two government representatives, one from the finance
ministry and another from the Cabinet Office, which Maehara
heads, can attend the BOJ's policy meetings. They cannot vote
but may express views and propose a request in vote on policy.
It is rare for cabinet ministers to attend the meetings
themselves instead of sending their subordinates.