TOKYO — The Bank of Japan (BoJ) is expected to keep monetary policy steady next week and nudge up its economic growth forecast, as the US-China trade deal and de-escalation in Middle East tensions take some pressure off the central bank for more stimulus.

But BoJ Governor Haruhiko Kuroda will likely voice his resolve to keep monetary policy ultra-loose as the economy continues to feel the strain from the trade war and October’s sales tax hike.

At the two-day rate review that ends on Tuesday, the BoJ is set to keep its short-term interest rate target at -0.1% and a pledge to guide 10-year government bond yields around 0%.

It is also seen maintaining a guidance that commits to keeping rates at current low levels, or even to cut them, until risks keeping it from achieving its 2% inflation goal subside.

“What the BoJ describes as the economy’s momentum for hitting its inflation target appears to be sustained,” said Mari Iwashita, chief market economist at Daiwa Securities.

“The BoJ will kick off 2020 by maintaining its current policy stance with a careful eye on developments.”

In a quarterly review of its forecasts, the BoJ is seen slightly revising up its growth projection for the fiscal year starting in April, helped by a boost from the government’s stimulus package, sources have told Reuters.

Under current projections made in October, the BoJ expects the economy to expand 0.7% in fiscal 2020 and 1.0% the following year.

Japan’s economy ground to a near halt in July-September and is likely to have contracted in the final quarter of last year as the US-China trade war knocked exports.

BoJ officials hope the government’s $122-billion fiscal package and robust capital expenditure will offset the hit from soft global demand and supply chain disruptions from last year’s typhoons that continue to weigh on factory output.

Policy makers are also more optimistic than late last year as technology firms clear inventory and Washington and Beijing have signed a first phase trade deal.

But pessimists in the BoJ fret that weak global auto demand and the drag on consumption from October’s sales tax hike to 10% from 8% may mean only a modest rebound in January-March growth.

The BoJ on Wednesday revised down its economic assessment of the Tokai central Japan region — home to auto giant Toyota Motor Corp. — as some manufacturers were forced to cut output on weak demand.

Markets are watching how Mr. Kuroda would assess such risks in his post-meeting briefing, for clues on the policy outlook.

The BoJ now estimates core consumer inflation to hit 1.1% in fiscal 2020 and 1.5% the following year. — Reuters