The BOJ is up this week! What can we expect from Kuroda and his team? Here are points that might help.
BOJ’s policy decision (Jan. 23, Asian session)
The Bank of Japan (BOJ) didn’t make any policy changes in December. That is, interest rates are still at -0.1%; 10-year JGB yields targets remain “around zero percent,” and forward guidance is focused on maintaining “extremely low levels of short- and long-term interest rates for an extended period of time.”
The biggest headline-maker was the fact that it cited U.S. macroeconomic policies, emerging market developments, Brexit, and geopolitical updates as factors that can affect its optimistic outlook.
Well, we might see bigger moves from the yen this time. Kuroda and his team are still unlikely to announce monetary policy changes, but they will release a quarterly outlook report and a statement that includes their revised growth and inflation projections.
The considerably lower oil prices and global economic slowdown seen since October are expected to weigh on the central bank’s inflation prospects.
BOJ members are likely to keep their rosy growth prospects, however, as increased government spending and lower oil prices are expected to soften the impact of the sales tax increase scheduled in October.
On top of those projections, y’all might want to keep an eye out for what central bank members think about economic risks such as the U.S. China trade war (which Kuroda believes could be resolved this year), a strong yen, and the upcoming sales tax.
Overall risk sentiment
Another week, another chance to trade the yen as a safe haven?
The yen lost pips across the board last week when a bunch of market themes played out well for the risk-takers.
This week, all eyes will be on any trade-related updates ahead of the meeting between Chinese Vice Premier Liu He and U.S. trade representative Robert Lighthizer on January 30.
Brexit updates could also take center stage, especially if Theresa May gets support from her fresh attempts to ditch the Irish backstop.
In any case, keep your eyes peeled for any news that might affect market risk sentiment, aight?
Missed last week’s price action? Read JPY’s price recap for Jan. 14 – 18!