BOJ to focus on Japan's progress in hitting price goal

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BOJ concludes 2-day meeting, decision expected 0130-0500 GMT

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Economists unanimous in projecting no policy change

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Governor Ueda expected to brief media on decision 0630 GMT

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Focus on whether Ueda signals near-term end to negative rate

By Leika Kihara

TOKYO, Dec 19 (Reuters) - The Bank of Japan concludes a policy meeting on Tuesday at which members are likely to debate whether economic conditions are falling into place for the bank to begin unwinding ultra-loose monetary settings.

None of the economists polled by Reuters expect the central bank to end its negative interest rate policy on Tuesday with most projecting such an action to happen next year.

However, with some traders projecting a policy shift in January, markets are instead focusing on any hints Governor Kazuo Ueda offers at his post-meeting briefing on how soon the BOJ takes short-term interest rates out of negative territory.

"The hurdle for beginning policy normalisation before waiting for the early outcome of (next year's) wage negotiations is quite high," said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.

At the two-day meeting concluding on Tuesday, the BOJ is widely expected to keep its short-term rate target at -0.1% and that for the 10-year government bond yield around 0%.

Even if the BOJ keeps policy steady, comments from Ueda reinforcing his conviction that inflation will sustainably achieve the bank's 2% target could heighten market expectations of an end to negative rates in January, some analysts say.

Japan has seen inflation hold above 2% for over a year and some firms have signalled their readiness to keep raising wages, increasing the chance of a near-term policy shift.

With consumption showing signs of weakness, however, many BOJ policymakers prefer to await more clues on whether wage gains will accelerate enough to keep inflation sustainably around their target, sources have told Reuters.

Still, markets remain jittery given the BOJ's history of surprises. In July, the central bank abruptly relaxed its grip on long-term borrowing costs by raising a cap set for the 10-year bond yield. The cap was watered down to a loose reference in October in a sign Ueda was moving steadily toward dismantling his predecessor's radical stimulus.

Analysts say the BOJ may find it easier to move in months like January and April, when it releases a quarterly outlook report with fresh growth and price projections.

But a sharply changing global monetary policy environment may complicate the BOJ's decision with U.S. and European central banks signalling that they are done hiking rates.

Raising rates at a time other central banks are cutting them could spark a spike in the yen that would hurt big manufacturers' profits and discourage them from hiking wages, analysts say.

Political factors also muddle the BOJ's policy path with persistent inflation blamed for pushing down Prime Minister Fumio Kishida's approval ratings to historical lows.

"While the BOJ persists in stably achieving its 2% inflation target, Kishida's administration is probably hoping for a more flexible monetary policy management," said Ryutaro Kono, chief Japan economist at BNP Paribas.

"There are not just economic but political factors that could push forward the timing of a BOJ policy shift," he said, adding there was a 50-50 chance of the BOJ tweaking its dovish policy guidance on Tuesday and ending negative rates in January.

(Reporting by Leika Kihara. Editing by Sam Holmes)