Markets were little changed on Tuesday.
The S&P 500 was flat, the STOXX Europe 600 fell 0.1 percent and the Nikkei 225 fell 0.2 percent.
“No one is prepared to take on too much risk ahead of the Bank of Japan and the Fed Open Market Committee meetings,” said Chris Weston, chief market analyst in Melbourne at IG Ltd.
The BoJ's task looks particularly difficult after a report today showed that Japan's exports fell 9.6 percent in August, an 11th consecutive month of decline.
Indeed, Bruce Einhorn at Bloomberg suggested that the BoJ may be running out of options.
“Not even sub-zero interest rates have helped weaken the yen,” he wrote, noting that the yen is up 18 percent against the dollar since the start of the year despite negative interest rates.
Einhorn quoted Tom Murphy, managing partner of Family Office Research and Management in Sydney, as saying that Kuroda's quantitative easing “is losing its firepower”. Marcel Thieliant, Japan economist with Capital Economics in Singapore, said: “They are near the limits of what they can do.”
HSBC economists led by Frederic Neumann wrote: “Short of more radical options like helicopter money and foreign bond purchases, which both seem unlikely for now due to legal and political reasons, officials have few options left to ease policy meaningfully.”
A report last year by Jacob M Schlesinger had already warned as much. “Key policy makers argued Japan’s demography determined its economic destiny, that a contracting population inevitably dictated the country’s deflationary decline,” he wrote.
One of those policy makers was former BoJ governor Masaaki Shirakawa. In May 2012, Shirakawa delivered a speech where he cited global evidence that “the population growth rate and inflation correlate positively”, in “sharp contrast with the recently waning correlation between money growth and inflation.”