The market will focus on the Bank of Japan (BoJ) monetary policy meeting on Wednesday. No changes in the policy is expected at this meeting, but expect them to expand the annual ETF purchase from JPY3trn to JPY5trn at the July meeting.
Kuroda's press conference will be closely followed for his views on decelerating core inflation as February Core CPI excluding VAT effect slowed to a mere 0% y/y. Core inflation is expected to turn negative around the summer. Furthermore, looking for their most recent economic and inflation outlook as the April BoJ Tankan Survey showed a mixed picture on the economy and no acceleration in corporate price outlook.
Barclays says in terms of economic data, they expect the February Current Account (Wednesday) to show another solid surplus of trn (consensus: JPY0.6trn), or the eighth consecutive months of surplus. Improvement in current account due to lower energy prices will likely weigh on the USDJPY, offsetting some of the upward pressure coming from strong USD and portfolio outflows from Japan.
"we expect countervailing factors will contain USDJPY volatility on both sides, keeping the pair in the recent range around 12", added Barclays.
