OREANDA-NEWS. March 13, 2015. Bank of Japan policymakers are expected to maintain their aggressive asset buying campaign at their policy meeting next week while scouring a mixed batch of data which has raised questions about the pace of the economy's recovery.

While consumer confidence has gradually improved, the BOJ remains concerned about the challenges of eliminating the "deflationary mindset" deeply entrenched in the public.

In a reminder of the hurdles the central bank is facing in rekindling inflation, supermarket chain Seiyu has launched a new campaign in March promising to maintain discounts on 200 items ranging from rice to detergent for six months, even if there are potential pressures on prices to rise.

The "price lock" campaign, put in place after a wave of price hikes of food and daily necessities cooled consumption, is symbolic of the sticky deflationary mindset the BOJ is battling. Some central bankers call it their "nemesis."

Broader economic surveys offer a mixed picture. Business confidence worsened in the first quarter as a weak yen ramped up the cost of raw materials, while falling fuel costs helped lift consumer sentiment for the third straight month in February.

BOJ policymakers will scrutinise such data and retail campaigns when they meet for a two-day rate review on Tuesday. The central bank is likely to maintain its pledge to increase base money by an annual pace of 80 trillion yen (\\$661 billion) via aggressive asset purchases.

It is also seen maintaining its view that continued improvements in the economy will nudge companies into raising wages and capital expenditure, helping Japan hit its 2 percent inflation target in the year beginning in April.

"We already know that oil price falls will keep inflation stuck around zero until around August, and that the BOJ will look through such effects from oil moves," said Mari Iwashita, chief market economist at SMBC Friend Securities.

"If so, the BOJ will probably hold off on easing again at least until October," she said.

The BOJ is caught in a dilemma. Yen declines spurred by its monetary easing accelerated inflation last year, but hurt private consumption as wage rises failed to catch up with the rising cost of living.

Household spending remains soft but the lower cost of oil, coupled with expected wage increases, will help boost consumption and underpin a solid economic recovery, BOJ officials say.

If low oil costs keep inflation subdued for too long, however, households may start to feel that Japan will never see inflation hit 2 percent. This is something the BOJ will want to avoid, even if it means topping up an already massive asset buying programme, they say.

BOJ Governor Haruhiko Kuroda is likely to make that point clear at his post-meeting briefing on Tuesday, analysts say.