The Japanese yen will be in focus as the BOJ interest rate decision is released at 11am HKT.
After the USDJPY slumped with Japanese rate cut expectations, an unwinding of those bets saw the USDJPY bounce to 148. The latest BOJ decision could see a push to 152 or back to 142.
Analysts, including ING, believe the BOJ will keep its Yield Curve Control policy.
“The Bank of Japan is expected to maintain its YCC policy and negative short-term rate policy at its January meeting. Inflation will likely slow further in January, and the cautionary mood following the recent earthquake will prevail. “
“Tokyo CPI inflation is expected to decelerate to 2.2% year-on-year in January,” they added.
A weaker currency is helping the Nikkei index, which trades around 36,000, less than 15% below its all-time high during the 1980s when Japanese equities were among the hottest in the world.
Japanese exports reached a record $61 billion in September, thanks to the rise in vehicle shipments to the US and Europe.
Since 2016, the BOJ has maintained its short-term interest rate target at -0.1% and its 10-year bond yield target at 0%. Before any policy change, the BOJ could consider the annual wage increases in April.
“Consumption is holding up and there’s growing conviction that wage hikes will continue, and even broaden, this year,” Reuters said.