TOKYO, Jan 22 (Reuters) - The Nikkei share average is likely to trade in a narrow range before the end of a Bank of Japan policy meeting on Tuesday at which the central bank is largely expected to set a 2 percent inflation target and introduce more aggressive easing steps. Market players said the Nikkei was likely to trade between 10,650 yen and 10,850 yen on Tuesday, with most of the movement coming after the BOJ's announcement due around midday. "Everyone expects the 2 percent inflation target but that won't suffice," said Hisao Matsuura, an equity strategist at Nomura Securities. "I think the market will drop no matter what they say, but expectations are very mixed. It really depends what (the BOJ) decides to do." The central bank's current inflation target is 1 percent. The BOJ might also scrap the interest it pays on banks' reserves, according to sources, as well as boost its asset purchases budget to as much as 20 trillion yen ($223 billion), in response to relentless pressure from Prime Minister Shinzo Abe to haul Japan out of deflation. The Nikkei has sprinted up around 26 percent in the last two months since Abe first began calling for aggressive easing from the BOJ, even before he came into office, which sparked weakness in the yen and drove up shares of exporters. The benchmark slipped 1.5 percent on Monday to 10,747.74 as investors locked in profits after the index hit a 32-month high last week and logged its 10th straight week of gains, its longest such winning streak since 1987. U.S. markets were closed on Monday for Martin Luther King day. > Europe shares flirt with 2-yr highs in light trade > Yen firm as bets on losses trimmed before BOJ decision > Bond prices climb as buyers emerge after sell-off > Gold firms as U.S. budget talks lift European stocks > Oil edges lower on oversupply concern STOCKS TO WATCH -SONY CORP Sony's Sony Mobile Communications Inc division said it will sell a new version of its Xperia tablet in Japan this spring, according to the Nikkei business daily. Sony halted sales of the Xperia in October due to faults that made it vulnerable to water damage. -TOSHIBA CORP Toshiba is considering bidding for nuclear fuel producer Urenco, competing with France's Areva, as Britain and German utilities are keen to sell their respective 33 percent stakes, but Dutch authorities disagree over what to do with the firm, according to sources. -NIPPON PAINT CO LTD Hong Kong paint maker Wuthelam Group plans to launch an open bid for a controlling 45 percent stake in Japan's Nippon Paint Co for about 70 billion yen ($780 million) to expand market share overseas, public broadcaster NHK said on Monday. -ORIENTAL LAND The operator of Tokyo Disneyland is likely to post a 30 percent year-on-year increase in operating profit to 72 billion yen ($802 million) for the April-December period, the Nikkei business daily said, due to more seasonal events than usual at the theme park resort.