Back to data watching as we await the 30 October BoJ

The Bank of Japan (BoJ) kept its monetary policy unchanged last week despite some market speculations for a surprise early action. Their inaction and relatively optimistic statements resulted in a rather limited reaction in USDJPY as the market expectations for further easing at 30 October meeting, when it updates its Outlook Report, remain alive. Bloomberg's BoJ survey (prior to last week's meeting) showed that 5.6% expected an additional easing last week and 41.7% expected an additional easing at 30 October meeting. 

An expansion of QQE is expected at the end of this month given weak corporate inflation outlook and deterioration in Q3 data. Having said that, the focus now shifts to how the economic fundamentals evolve until the next BoJ meeting. This week, August Index of Tertiary Industry Activity (Thursday) and September Corporate Goods Price Index (Wednesday) will be watched.

"We expect the former to have stayed flat m/m (consensus: flat), versus +0.2% in July, and the latter to have dropped -3.6% y/y (consensus: -3.9%)", says Barclays.

Given a limited number of data releases in Japan this week, market focus will likely turn to overseas data and whether the latest rebound in risk sentiment continues.