BOJ likely to hold policy today

Bank of Japan (BOJ) will announce its monetary policy decisions tomorrow sometime in early Asian hours. Speech by Governor Kuroda is scheduled at 3:00 GMT.

Current monetary policy -

• BOJ is holding policy rates near zero at 0.1% and pursuing monetary easing through asset purchase (Govt. Bonds, ETFs,REITs) since 2012 and has increased the pace of purchase to ¥ 80 trillion per annum in last October.

• This massive rate of purchase has pushed Central bank's balance sheet to record high which is a major concern in GOJ bond market.

Policy expectation -

• BOJ policymakers are most likely to hold policy steady, might provide crucial cues with their new for casting approach.

• BOJ Governor Kuroda's speech is of high importance, since it might provide further clues what BOJ might be thinking to counter headwinds from Greece and China.

Division among policymakers -

• BOJ board remains heavily divided. Last action came with 5 member voting in favor while 4 opposed further purchase increase in October 2014.

• BOJ policymakers Mr. Kiuchi has voted in favor of reducing purchase in March meeting and according to Mr. Ishida purchase pace stands at max.

Impact on Yen?

• Not much impact on Yen, as policy is already factored in price. However holding it steady might push Yen higher by few pips and sellers are expected to emerge there.

• Yen is most likely to continue its downward path against dollar. Yen is currently trading at 123.4 against dollar and most likely to lose further grounds. Yen might trade as low as 127 against dollar, if risk aversion subsides further.

• Focus will be on speech from Governor Kuroda at 3:00 GM if he provides any level on Yen. Governor Kuroda might try to curb recent volatility in Yen.