The Bank of Japan (BOJ) is set for a policy meeting this week, and analysts are predicting a cautious approach. While a rate hike might seem like the next logical step after the BOJ's first increase in 17 years back in March, the recent lack of inflationary pressure suggests they might hold off for now.

Here's what to watch:

• Tapering on the Horizon? The most likely outcome is a reduction in the BOJ's bond-buying program. This would signal a move towards normalization of monetary policy, but at a gradual pace.
• Rates on Hold: Analysts predict the BOJ will keep its benchmark interest rate at 0.1%. Inflation in Japan hasn't taken off as much as expected, making the BOJ wary of raising rates too quickly and hindering economic growth.
• A Balancing Act: The BOJ is navigating a tricky path. They want to combat inflation without derailing the economic recovery. Trimming bond purchases allows them to inch towards tighter monetary policy while keeping rates low to support the economy.

Diverging Paths: This cautious approach by the BOJ stands in contrast to central banks in other parts of the world, like the US Federal Reserve, which are raising rates more aggressively to tame inflation.

What to Look For: Keep an eye out for the BOJ's official announcement after their meeting. It will reveal their decision on bond purchases and any commentary on future policy direction. This will be crucial for understanding the path forward for Japanese monetary policy.