USD/JPY: no changes expected from BOJ
USD/JPY is trading a bit on the downside, in the 121.20 area. The Bank of Japan starts its 2-day meeting today. The regulator’s decision will be announced on Tuesday morning. After that Governor Kuroda will conduct a press conference.
No changes in policy are expected, although many specialists believe that the regulator will do more easing later this year. Japanese economic growth for Q4 was revised down from 2.2% to 1.5% and inflation is still far from the 2% target. Still, inflation expectations remain stable. The BOJ has improved its assessment of exports and industrial production. The Bank of Japan will likely wait to see if the negative effect of lower oil prices on consumer prices is temporary or not.
In addition, the annual wage negotiations between labor unions and Japan’s biggest companies will take place on March 18-20. If companies agree to pay workers more than expected, this will be good for Japanese economy. If they disappoint, further stimulus will be needed. The Bank of Japan will probably want to wait until the negotiations end.
USD/JPY is not expected to gain on the Bank of Japan’s meeting. More upside potential can be seen on Wednesday when the Federal Reserve will announce results of its meeting.