The Bank of Japan will release its decision about interest rate with and it is expected that there will be no changes about current policy stance. Except that, BoJ will provide the latest economic projections which may settle new movement on the Japanese currency.
Recent data have been stronger recently in Japan. Tankan index which measure short-term economic activity of Japanese companies have presented improvements in both manufacturing and non-manufacturing sectors. Additionami, the PMI index came out higher, touching 35-month high at 53.3 points in February. What is interesing, the IMF has raised its projections for growth prospects in their latest world economic outlook report. It corresponded with the BoJ’s guidance in January to raise growth forecasts. This should be postive for the Yen, but looking at inflation perspective, situation is rather blurred.
The latest data showed that headline CPI decreased to 0,3% y/y while CPI core which excludes fresh food came out at 0,2% y/y. However, the economic situation does not justify recent BoJ projection for this inflation at 1,5% in 2017 fiscal year. We can see that economic growth in Japan is mostly driven by exporters which have been supported by weaker yen. Still, we have not seen improvement from domestic demand. In that case, we expect that should not gain much during decision and press release from the Bank of Japan. Is is unlikely that there were discussions about tapering with subdued prices and in fact, Haruhiko Kuroda should talk down the yen given recent strenght due to geopolitical uncertainty.
USDJPY is testing imporant supply/demand zone which may be a excuse for a little corrention in recent upward move. Source: xStation5
Except imporant event from Japan, Australia will release data about import and export prices for the first quarter of this year. It is expected that export prices have increased by 8,0% y/y and import prices have decreased by 0,5% y/y.