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The Bank of Japan (BOJ)'s announcement of monetary easing policy made late last week, which was more aggressive than expected, could create problems for its Asian neighbors in terms of trade and capital flow, research groups here said.

In order to reflate the languishing Japanese economy, the newly appointed BOJ Governor Haruhiko Kuroda unveiled a series of aggressive measures, including the open-ended asset purchase program, doubling Japanese government's bond purchases and its maturities, and increasing purchase of exchange-traded funds and Japan's real-estate investment trust.

In his maiden monetary policy decision statement, Kuroda vowed to achieve the inflation target of 2 percent "at the earliest possible time, with a time horizon of two years."

Research agencies were unanimous in forecasting further decline of Japanese yen ahead, although they were divided over the extent of the currency depreciation.

UOB Economic-Treasury Research said additional measures will be expected in the next Bank of Japan policy decision on April 26, which could add further pressure for the Japanese yen to head towards 100 against 1 U.S. dollar.

Schroder Investment Management predicted an even bigger fall for the Japanese yen. It said "whilst the fall in the yen has been significant, it will probably only be sufficient to end deflation rather than generate positive price rises. To achieve this, it probably has to fall another 10 percent and approach levels seen before the global financial crisis of 2007-08. Against the dollar this would imply somewhere in the 110 to 120 range."

With the expected further decline of the Japanese yen, market experts believed it is just a matter of time that the impact of yen depreciation will be felt across Asia.

Frederic Neumann, co-head of Asian economics at HSBC, said the BOJ's aggressive easing will lead to liquidity pouring into regional financial markets. While Thailand, Malaysia, and Indonesia are usually big recipients due to their traditionally close financial ties to Japan, Vietnam, the Philippines, and even India could see a lot more inflows too.

With the BOJ turning on the tap, Neumann raised the concerns about rising core prices in the region and more asset bubbles.

But Schroder Investment Management saw a weaker yen acting as deflationary force for the rest of Asia. The fund management house said Asian economies which compete against Japan will lose market share and experience deterioration in their net export position.

The most affected will be those that have been increasing its share of Japanese trade in recent years. China, for example, now receives 25 percent of Japanese exports compared with less than 10 percent in 2000. Overall, Asia accounts for more than half of Japan's exports.

Citing some Singapore-listed companies with heavy business exposure in China as potential losers from the BOJ's aggressive easing, Citigroup Equity Research agreed that yen weakness may spur pricing pressure upon these companies versus Japanese rivals.

However, the research house also pointed out that Chinese manufacturers in automobiles, electronics, and paper sectors will stand to gain from lower cost of procurement from Japanese parts and components suppliers. Endi

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