Prime Minister Shinzo Abe sent a "powerful message" by announcing a 28 trillion yen ($267 billion) stimulus package on Wednesday, Economy Minister Nobuteru Ishihara was quoted as saying by Japanese media hours after the announcement.
The figure was larger than markets had expected.
"I think people at the BOJ will take that into account and make an appropriate decision. I think (BOJ Governor Haruhiko) Kuroda understands that the world is watching," he said in a television appearance on Wednesday evening, the Kyodo news agency reported.
"Abe's announcement is a squeeze play on the BOJ. The BOJ has to move now. It is unavoidable," said Hiroaki Muto, an economist at Tokai Tokyo Research Center.
"There is a growing sense that the BOJ cannot move the market on its own, which is part of the reason why the government wants to combine fiscal and monetary policy."
Japan government plans direct spending of about 7 trillion yen in stimulus package: sources
The Japanese government is planning direct fiscal spending of around 7 trillion yen ($67 billion) to help fund an economic stimulus package totaling more than 28 trillion yen, two people briefed on the matter told Reuters on Thursday.
That amount - at just a quarter of the total package - could disappoint some market players bracing for bigger outlays given the massive headline figure, equal to more than 5 percent of gross domestic product.
The total package, to be approved by Prime Minister Shinzo Abe's cabinet next Tuesday, also includes 6 trillion yen for a fiscal loan and investment program aimed at spurring private-sector spending such as for construction of a "maglev" train line, the sources said. They spoke on condition of anonymity because the plan has not been finalised.
The remaining 15 trillion yen will come from quasi-government financial institutions that provide loans, loan guarantees and subsidies to private-sector firms, they said.
"The actual impact on economic growth is bound to be smaller, with the kick from extra spending likely to be weaker and spread out over several years," Frederic Neumann, Co-head of Asian Economics Research at HSBC, said in his report.
"At the margin, of course, the surprise fiscal announcement will put a bit of extra pressure on the Bank of Japan to deliver tomorrow."
Oil prices came off early gains
Oil prices came off early gains on Thursday and were close to April lows touched in the previous session as crude producers and fuel refiners continued to pump out more than the market can consume and economic growth prospects darkened.
Brent crude futures LCOc1 hit a high of $43.72 a barrel on Thursday but then fell to $43.47 at 0707 GMT, flat from their previous close. U.S. West Texas Intermediate (WTI) crude CLc1 was at $41.94, still up 2 cents from its last close but down from a high of $42.18 earlier in the day.
Reference: Reuters
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