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Bank of Japan has its MPC board meeting on December 17 and 18. Market participants widely expect the central bank to stand pat in its current monetary policy in this meeting.

Declining commodities prices have created some  risk aversion in certain sectors and countries. USD/JPY was trading at 121-123 level, with the trade weighted daily JPY nominal effective exchange rate was in the lower 90 range, Nekkei average being above 19000, suggesting financial conditions were not worsened considerably.

Economic data showed that consumption was slow, December Tankan Survey showed that business sentiment was steady, although at relatively high level, corporate profits seem to be boosting capex. Altogether the strong data has been mixed with weak.

"The Bank of Japan Monetary Policy Board (MPB) ...will probably vote to continue the current monetary policy during this meeting", says Bank of America in a research note.