The Bank of Japan (BOJ) finishes its two-day meeting early tomorrow morning (EST), and after Prime Minister Shinzo Abe announced a 28 trillion yen ($265 billion) fiscal stimulus package earlier this week, there is pressure on the central bank to follow suit as Japan grapples with its flailing economy. (See also: Asian Development Bank Cuts Asian GDP Growth Forecast.)

Markets are on the fence as to whether or not the BoJ will alter its current monetary policy tonight, but Abe's announcement may have put pressure on the BoJ to act given the close relationship the central bank has with government. There are "political incentives to demonstrate a joint effort to stimulate the economy with fiscal stimulus," Nomura said in a note.

A decision to hold off will likely see the yen rally against the USD, pushing the currency pair back towards 100, a level that Prime Minister Abe and BoJ Governor Haruhiko Kuroda have been uncomfortable with. The recent jitters in financial markets stemming from Europe has already seen the yen – a safe haven currency – appreciate against other currencies. The yen began the year trading above 120 against the USD (USD/JPY) and has steadily declined towards 100. A move below 99 will be a level not seen since 2013.  

Kuroda has repeatedly said he will do "whatever it takes" to get the country's economy back to 2% inflation, a line ECB President Mario Draghi often uses when addressing monetary policy. The options for the BoJ are both additional stimulus and a further cuts in interest rates. 

Further stimulus would see the central bank purchase more government bonds and exchange-traded funds (ETF), and if it were to reduce interest rates, it is likely to cut the IOER (Interest Rate on Excess Reserves), which is currently -0.1%. The use of helicopter money was ruled out by officials last week. "I don't think at this stage we should abandon this institutional setting. No need and no possibility for helicopter money," Kuroda said. 

The argument for the BoJ to hold off until its next meeting is to give the economy a chance to digest the government's 28 trillion yen package, which is 5% of GDP, and see if that in itself can stimulate growth and reach the target inflation rate of 2%. 

Either way, expect some volatility in both the yen and the Nikkei in the early hours of Friday.