TOKYO (AFX-ASIA) - The dollar/yen eased ahead of the Bank of Japan's decision on interest rates and after the release yesterday of a government anti-deflation package seen mainly as a rehash of old measures, dealers said. The yen was supported by strong gains in the domestic equity market after package, though these are seen mainly due to new restrictions on short-selling, dealers said, with suspicions the government may also be buying stocks. The market has already discounted a nominal or technical change to the central bank's monetary policy following renewed political pressure on the bank to offer further impetus to the economy, they added. "Likely, they may do something on the rinban (outright government bond purchases) but it's already priced into the market," said Kenneth Landon, senior currency strategist at Deutsche Bank. The Nihon Keizai newspaper reported this morning, without citing sources, that the central bank is expected to ease further, responding to a government call for a coordinated effort with the government to fight deflation. The bank will likely discuss an increase in its outright purchase of long-term government bonds from the current 800 bln yen a month and a cut in the official discount rate from the current 0.1 pct, it said. The government said yesterday that it will act to secure the stability of the financial system, including the possibility of boosting capital in the sector, as part of its measures to counter deflation. It will also study measures taken in the US and UK to understand better the movement of prices, though it did not elaborate on the exact measures or whether this meant the creation of a price or inflation target. The Bank of Japan will be asked to take bold policy action and to provide necessary funds for financial institutions that face difficulties, it said. "It was as expected, nothing new," Landon said of the measures. However, some noted the positive reaction in the local stockmarket and hopes that the benchmark Nikkei 225 stock index may begin to find a bottom. "If you take a look at the equity markets, the Nikkei has gone up a couple of hundred yen," said Yasuji Yamanaka, foreign exchange manager for Nikko Trust and Banking. "It is trending toward 11,000. If it breaks 11,000 then we definitely can confirm that we hit the bottom on the Nikkei." Others were more sceptical. "There is some suspicion that the equity market is not operating freely at the moment," said ING Barings chief economist Richard Jerram. "The government announces the deflation package and the stockmarket goes up 3 pct, they are putting pressure on short selling and there are hints of PKO (price keeping operations)," he said. "If the government can't find anyone else to buy the market then it makes perfect sense to buy it themselves. It is very short sighted." Economists noted some hints in the government's package that could suggest the possible creation of a price target but added this is likely to remain a controversial and politically difficult move to enact. A price target "is a more drastic easing measure than inflation targeting, since ... prices should be hiked by 2.5 pct or more," UBS Warburg economist Ayako Mitsui said. "We believe it's still an unrealistic suggestion."