The Bank of Japan will this week forecast that prices are set to rise less than one percent next fiscal year, a report said, boosting the chances of fresh easing measures to stimulate the economy.
The bank is likely to predict inflation will be lower than the 1.0 percent target for the fiscal year starting in April 2013 in its twice-yearly report on Friday, public broadcaster NHK said.
With Japan still mired in deflation, the BoJ would discuss whether additional monetary easing was necessary, NHK said on Sunday, without citing sources.
Stubborn deflation has haunted Japan for years, as falling prices cut into corporate profits, leading firms to slash jobs and put off capital investment that generates growth, while also encouraging consumers to delay purchases.
In February, the BoJ for the first time set a target level for inflation, saying that it had a price stability "goal" of 2.0 percent in the medium to long-term and 1.0 percent in the short term.
Last month, the bank boosted a loan programme by 2.0 trillion yen ($24.5 billion) to 5.0 trillion yen amid reconstruction efforts seen as crucial to reviving the economy, which was hammered by last year's quake-tsunami disaster and flooding in Thailand.
The central bank's ability to free up money has been limited since interest rates were cut to between zero and 0.1 percent at the end of 2008 during the global financial crisis.
