Bank of Japan in focus

Some recovery in Nikkei and speculations for further BoJ easing lifted USDJPY last week. In particular, LDP legislator Kozo Yamamoto toldBloomberg on September 10 that the "Oct 30 BoJ meeting is a good opportunity to ease further" and that they should add at least JPY10trn to the purchase program.

This week, BoJ will hold its monetary policy meeting (Monday - Tuesday). While neither we nor the markets expect policy changes at this meeting, Governor Kuroda's press conference will be scrutinized. On August 27, BoJ Governor Kuroda reaffirmed his confidence that "the economy and prices are trending in line with our expectations.
"We are maintaining our view of no further easing until next April, but any changes in his assessment of the recent development or any hints on policy reactions will be watched closely, particularly as the yen strength and renewed drop in oil prices may weigh on the inflation outlook. In terms of economic assessment, we look for the BoJ to keep its overall assessment of the domestic economy largely unchanged, but their views on overseas economies and exports are likely to be downgraded given recent developments," noted Barclays.

It is also expected that the August trade balance (Thursday) to register a fifth consecutive month of deficit at JPY542.5bn (consensus: -JPY540.0bn).