* BOJ seen maintaining short-, long-term rate targets
* Board to raise price forecast, warn of global risks
* Decision, quarterly outlook report expected 0300-0500 GMT
* Gov Kuroda expected to brief media 0630 GMT
By Leika Kihara
TOKYO, July 21 (Reuters) - The Bank of Japan is set to raise its inflation forecast on Thursday but maintain ultra-low interest rates and warn of risks to a fragile economy, reinforcing its position as an outlier in a wave of global increases to borrowing costs.
The decision will come hours before that of the European Central Bank, which will consider a bigger-than-expected 50 basis point rate increase to tame soaring inflation.
While rising fuel and commodity costs have pushed Japan's inflation above its 2% target, the BOJ is in no rush to withdraw stimulus as slowing global growth cloud the outlook for an economy yet to fully recover from the COVID-19 pandemic's scars.
At a two-day policy meeting ending on Thursday, the BOJ is widely expected to maintain its -0.1% target for short-term rates and that of 10-year bond yields around 0%.
In fresh quarterly projections set for release after the meeting, the board is likely to project core consumer inflation exceeding 2% in the current fiscal year ending in March 2023, sources have told Reuters. That will be an upgrade from 1.9% projected in April.
But the BOJ will likely cut this year's growth forecast, and project inflation to slow back below 2% next year as the impact of rising commodity costs dissipate, they said.
At a post-meeting briefing, BOJ Governor Haruhiko Kuroda is expected to repeat his resolve to maintain ultra-low rates until the recent cost-push inflation is accompanied by stronger wage and demand growth.
Swimming against the global tide of monetary tightening, however, is not without cost. The policy divergence has pushed the Japanese yen to 24-year lows, hurting households and retailers by boosting already surging import costs.
Recent BOJ data showed the central bank was forced to gobble up a record 16 trillion yen ($116 billion) worth of Japanese government bonds (JGB) in June to defend its 0.25% cap for the 10-year yield.
The aggressive buying pushed the BOJ's ownership of the bond market past 50%, rolling back its efforts to gradually taper its huge balance sheet and causing strain in the futures market.
Markets are focusing on what Kuroda would say about the rising cost of prolonged easing, and any hints he could drop on the potential trigger of a policy tweak, analysts say.
($1 = 138.0000 yen) (Reporting by Leika Kihara Editing by Shri Navaratnam)