The Bank of Japan will likely debate easing monetary policy further on Thursday given the yen's renewed spike to record highs and growing doubts that European leaders will calm markets with a clear plan to rein in the region's debt crisis.

If the central bank were to act, it would likely top up its 50 trillion yen ($660 billion) asset-buying program by around 5 trillion yen, sources familiar with the bank's thinking have said.

The decision, however, will be a close call. BOJ policymakers will scrutinize the outcome of Wednesday's European summit and its market fallout in deciding whether to act now rather than later, the sources said.

Many in the BOJ have been hoping to hold off for now on using its limited policy options to support the economy, with exports holding up and fiscal spending for reconstruction from the March earthquake seen supporting domestic demand.

But the yen's renewed rise to record highs -- once last week and again in New York on Tuesday -- and the diminishing chances that Wednesday's summit will come up with a concrete plan to fix Europe's debt crisis have put pressure on the central bank for an immediate policy response.

The BOJ shares our sense of crisis, so I'm sure they will take appropriate steps when necessary, Finance Minister Jun Azumi told reporters on Wednesday.

At Thursday's rate review, the BOJ will issue a twice yearly outlook report, where it is expected to cut its economic forecasts on slowing global growth and to project that core consumer inflation will be stuck near zero until early 2014.

While the central bank is expected to stick to its view that Japan's economy is headed toward a moderate recovery, it will stress heightening risks from abroad and from market moves -- notably the strong yen.

BOJ Governor Masaaki Shirakawa has held to the recovery view, saying last week that solid growth in emerging markets would continue to underpin Japan's economy.

But some on the board have been more pessimistic about the outlook, on growing signs that Europe's debt crisis is starting to hurt emerging Asia -- Japan's key export market.

The yen's renewed rises and heightening uncertainty over the euro zone debt crisis talks may tip the board more in favor of easing immediately.

Any such move would be an attempt to forestall damage from adverse market moves to Japan's economy as it emerges from the painful aftermath of the March quake.

The BOJ eased monetary policy in August via an increase in its asset buying program, under which it buys assets ranging from government bonds to private debt, to alleviate the impact of sharp yen rises and to head off risks from the global economic slowdown.

It has stood pat since then but has expressed its readiness to ease again if Japan's recovery prospects come under threat.

Any further increase in asset purchases will likely be predominantly in government bonds. Some market players have said the BOJ should buy government bonds with longer maturities but that is a less likely option, even if the bank were to ease on Thursday.

(Editing by Joseph Radford and Edmund Klamann)

Japan Bank of Japan Quantitative easing