Momma's view runs counter to BOJ Governor Haruhiko Kuroda's comments in parliament that the scheme will not affect the bank's yield curve control (YCC) policy.

In a bid to bolster the health of ailing regional banks, the BOJ last week unveiled a scheme under which it will pay 0.1% interest on deposits held by lenders that consolidate.

It said the move is not tied to monetary policy and instead aimed at keeping Japan's banking system stable.

Momma, however, said the 0.1% interest offered to applicable lenders could affect the BOJ's control over short-term rates.

"If the BOJ pays interest on accounts parked with the BOJ, that will obviously have an impact on monetary policy," he told Reuters.

The BOJ must be ready to make "adjustments" to its policy framework if short-term rates deviate too much from its target due to the scheme's impact, said Momma, who retains close contact with incumbent policymakers.

"That's something the BOJ's board should and probably would discuss at upcoming rate-setting meetings."

Under YCC, the BOJ sets its short-term rate target at -0.1% and that for 10-year government bond yields at around 0%.

As part of efforts to cushion the blow from COVID-19, the BOJ also ramped up purchases of corporate debt and created a lending facility to pump money to firms hit by COVID-19.

Momma said the BOJ is likely to extend the March deadline for both programmes, probably for another six months, with a decision expected as early as next month.

"There's a resurgence in infections, so it makes sense to reach a decision in December," said Momma, currently an economist at private think tank Mizuho Research Institute.

(Reporting by Leika Kihara and Kentaro Sugiyama; Editing by Kim Coghill)

By Leika Kihara and Kentaro Sugiyama