TOKYO: Japan's central bank began a two-day monetary policy meeting Tuesday amid speculation it may announce fresh emergency measures to spur an economic recovery hobbled by deflation and weak demand.

The Bank of Japan is widely expected to hold interest rates unchanged at 0.1 percent -- a rock-bottom rate it has kept since December 2008, during the worst of the global financial crisis -- to keep credit flowing in the economy.

The BoJ, faced with consumer prices that have been falling for nearly a year, is also mulling extending a lending facility it began last December to provide easy credit for companies and households.

Japanese media have reported that the bank is aiming to double an initial cash injection into financial markets to 20 trillion yen (222 billion dollars) and double the duration of short-term loans to six months.

The central bank had decided on December's lending scheme in the wake of the yen's sharp appreciation at the time to 14-year highs against the dollar.

Similarly, the yen's recent advances have renewed concerns over Japan's economic outlook, prompting Prime Minister Yukio Hatoyama to urge "firm steps" to stem the strength of the yen, which has hit exporters' earnings.

The BoJ meeting comes as the government increases pressure on the central bank to do more to beat deflation, which hurts corporate profits and depresses economic activity as consumers delay spending, hoping for further price drops.

In a fresh nudge to the bank, outspoken Finance Minister Naoto Kan told a parliamentary session on Tuesday that he hoped it would "make efforts to combat deflation", in comments cited by Dow Jones Newswires.

Kan earlier this month signalled that he wanted Asia's biggest economy to beat deflation by the end of the year, setting an earlier deadline than the central bank's own forecast of deflation lasting at least two years.

Japan plunged into a year-long recession in 2008 due to the global downturn but it returned to growth in the second quarter of last year.