Japan: No reinforcement for the “Kuroda’s line”

BoJ Governor Kuroda last week did not reinforce the "Kuroda line" - the level when the governor commented that further JPY REER depreciation is unlikely on June 10. Comments at the press conference were neutral, with Kuroda declining to comment on the level, pace, and decline of the exchange rate. Instead, Kuroda merely acknowledged that there are both positive and negative effects of a weak yen. With few signs that BoJ is resolutely guarding the "Kuroda line," there could be some upside risk to USDJPY should more hawkish comments by Fed officials drive market to price in increased probability of a September hike by the FOMC. 

On data releases, this week's focus will be June machinery orders (Thursday). Domestic core private-sector orders (ie, excluding ships, electric power companies, and mobile phones) are expected to fall 6.5% m/m in June (last: 0.6%), the first decline in four months. This implies a slide in y/y growth to 16.4% from 19.3%. The June current account (Monday) is expected to show an unadjusted surplus of JPY774bn (consensus: JPY786bn; last: JPY1,881bn surplus), remaining in the black for a twelfth consecutive month. The index of tertiary industry activity (Wednesday) is expected to rise 0.6% m/m in June (consensus: 0.1%; last: -0.7%), amounting to a 1.8% y/y increase.