For more than two years, a majority of economists in a Reuters poll have said the Bank of Japan's next move would be to tighten the easy money taps with an eye to "normalizing" its policy.
But now, with the U.S.-China trade war hurting global growth, the yen gaining and the U.S. Federal Reserve likely to cut interest rates, half the analysts polled June 5-17 said the BOJ's next step would be to ease even further.
Should the Fed lower rates in coming months, that would likely boost the yen against the dollar, which hurts Japan's export-reliant economy.
"The BOJ is closely watching Fed policy and how that might impact the yen. If the yen jumps, the BOJ will have to take action," said Hiroaki Mutou, chief economist at Tokai Tokyo Research Institute.
Asked what the BOJ's next move would be, 20 of 39 economists polled said it would adopt more stimulus steps, while 19 said it would tighten.
It's the first time analysts have been split on the question since the February 2017 poll.
Among those predicting further easing, three each said it could happen in July, September or December, and four said in October. The rest said it would come in 2020 or beyond.
Asked about the BOJ's likely easing steps - and allowing for multiple answers in the survey - 17 economists said the BOJ would tweak its forward guidance wording, which says it will maintain its current extremely low level of interest rates "at least through around the spring of 2020."
Seven economists predicted the BOJ would increase buying exchange-traded funds, or ETFs, and Japan real estate investment trusts, or J-REITs, and a few said the bank would lower negative interest rates even further.
Currently, the BOJ allows its 10-year bond yield to fluctuate between plus 0.2% and minus 0.2%. That could widen to 0.4% above and below zero as early as September, said Izuru Kato, chief economist at Totan Research.
At its meeting this week, the BOJ is expected to maintain its stimulus programme and signal its readiness to boost monetary support if growing risks such as the escalating U.S.-China trade war threatens the economy's modest expansion.
The Fed, facing demands by President Donald Trump to cut interest rates, is expected to leave borrowing costs unchanged at its policy meeting this week and possibly lay the groundwork for a rate cut later this year.
Asked what dollar/yen rate would trigger further BOJ easing, 28 of 36 economists selected "beyond 100 yen," four chose "beyond 103 yen," three said "beyond 105 yen".
The dollar stood around 108.60 yen on Wednesday.
"If the yen strengthens to the psychologically important level of 100 (to the dollar), it could trigger the BOJ's additional easing," said Yusuke Kaniwa, an economist at Hamagin Research Institute.
Japan's economy as a whole will grow 0.6% in the current fiscal year to March 2020, although it is expected to shrink an annualised 1.9% in the fourth quarter due to a planned sales tax hike in October, the poll found.
Next fiscal year, the economy is forecast to expand 0.5%.
The nation's core consumer price index, which includes oil products but not fresh foods, will grow 0.7% this fiscal year and next, the poll predicted.
(Polling and reporting by Kaori Kaneko; Additional polling by Khushboo Mittal; Editing by Malcolm Foster & Shri Navaratnam)
By Kaori Kaneko