TOKYO (Reuters) -The Bank of Japan is expected to maintain its massive stimulus and may extend a deadline for its pandemic-relief programme on Friday, in a sign that a fragile economy and tepid inflation will keep any exit from its ultra-easy policy a long way off.

The decision would come in the wake of hawkish signals from the U.S. Federal Reserve on Wednesday that heightened prospects of an earlier-than-expected interest rate hike.

But with Japanese inflation well below his 2% target and the economy struggling for traction, Governor Haruhiko Kuroda will likely stress the BOJ’s resolve to keep policy ultra-loose even as some central banks dial back stimulus.

“The BOJ will have to stick to the current framework for the remainder of Kuroda’s term (until 2023), as Japan’s economy won’t recover that quickly,” former BOJ board member Makoto Sakurai told Reuters.

In a two-day meeting ending on Friday, the BOJ is set to keep its yield curve control target at -0.1% for short-term rates and 0% for 10-year bond yields.

The central bank may also decide to extend the September deadline for an asset-buying and loan programmes introduced last year to channel funds to pandemic-hit firms, sources have told Reuters.

Markets are focusing on Kuroda’s post-meeting briefing (0630 GMT) for his views on how the Fed’s latest rate hike signal could affect markets and the BOJ’s policy outlook.

Japan’s economy shrank an annualised 3.9% in the first quarter and is seen making only a modest rebound, if any, in the current quarter as anti-virus measures weigh on consumption.

Core consumer prices in May rose 0.1% from a year earlier, marking the first year-on-year increase since March 2020 but remaining far distant from the BOJ’s 2% goal.

A recent pick-up in the pace of COVID-19 vaccine inoculations has heightened hopes among policymakers that a rebound in consumption, combined with already robust exports, may accelerate the economic recovery in the latter half of this year.

In an analysis released in April, the BOJ said the nation’s vaccination programme could spur an economic boost from households keen to spend $183 billion in “forced savings” accumulated last year due to stay-at-home policies to prevent the spread of the virus.

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