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Later today the Bank of Japan (BOJ) will publish its monetary policy decision for the month of March. Are traders expecting bombshells from the central bank?

Here are points you need to know if you’re planning on trading the event:

What happened last time?

As expected, the BOJ kept its monetary policies steady for another month in February.

That is, its benchmark rates remain at -0.1%; it’s still purchasing ETFs (6T JPY) and J-REITs (90B JPY) at the same pace; and the target for 10-year Japanese government bond yields remains at “around zero percent.”

To help keep financial institutions from sitting on their moolah, BOJ members also unanimously decided to extend their lending program application deadlines by one year.

The juiciest announcements were found in the central bank’s quarterly outlook, which reflected downgraded estimates for both GDP and inflation:

Changes to BOJ's Outlook
Changes to BOJ’s Outlook

In a presser, BOJ Governor Kuroda shared that lower oil prices was the main reason for the CPI-related downgrades and hinted that the situation is only temporary.

Temporary or not, market players took the BOJ’s CPI downgrades to mean that the central bank might not be ready to normalize its easy policies as soon as they initially expected.

JPY's 1-Hour Forex Charts
JPY’s 1-Hour Forex Charts

Fortunately for yen bulls, traders were more concerned over global growth weakness and uncertainty of the U.S.-China trade negotiations at the time. The yen barely made a pip (pun intended) during the trading session!

What are traders expecting this time?

The combo of U.S.-China trade tensions, slowdown in global demand (which is bad for exporting economies like Japan), and dovish shifts of major central banks like the Fed and ECB have increased pressure on Kuroda and his team to maintain their massive stimulus program.

On the other hand, critics of the effectiveness of the BOJ’s easy policies are gaining voices. It doesn’t help that the central bank downgraded its inflation forecasts SIX YEARS after it published its two-year timeline of hitting 2.0% annual inflation.

This is why analysts are mostly expecting BOJ members to sit on their hands for another month.

They believe that Kuroda would maintain the central bank’s overall optimistic assessment but also warn that they would “carefully consider” adding more stimulus if a stronger yen threatens its inflation assessment.

Some also point out that the central bank isn’t likely to announce any significant policy changes until the members have studied the impact of the sales tax hike scheduled in October. If you recall, a tax hike in 2014 weighed on consumption and led to a recession.

For now, the only thing that market players are pretty sure of is that the BOJ would revise its stance on the economy’s exports and industrial production.

In its January meeting, the BOJ said that both were “on an increasing trend.” But with exports dropping the most since 2016 and industrial production shrinking for a third straight month in January, there’s little room for optimism for the BOJ.

How the yen might react

If Kuroda and his team stick to the script and only make a few tweaks to their export and industrial production outlook, then we’ll likely see limited reaction from the yen.

But if they start to hint at dropping more stimulus, then we might see the yen trade higher or lower against its counterparts.