- Junko Nishioka, chief Japan economist at Royal Bank of Scotland
The greenback is still losing ground versus the Japanese Yen, which has already climbed 0.32%, while further appreciation can be a threat to the bullish trend carried from the previous year. Less dovish comments from the Bank of Japan this week can heighten the appeal of the Japanese currency, and the USD/JPY pair can fall further and refresh this year's low, which is currently located at 100.75. Technical indicators, however, are pointing at the movement to the north.
A couple of months ago analysts suspected fresh easing from the Bank of Japan, however, now that prospect looks less likely as the world's third largest economy is showing signs of holding up well. This week the Bank of Japan is likely to maintain the current pace of the monetary easing, under which it plans to increase the monetary base by 60-70 trillion yen per year via aggressive asset purchases. Despite less dovish stance, the central bank now has more room for maneuver due to stronger-than-expected data. A scaling back of expectations for additional stimulus can be explained by a pull-back in Japanese stocks. The benchmark Nikkei index, which rocketed around 57% during the last year, has plunged 14% so far this year. While everything speaks in favour of no action from Kuroda's team, some experts believe the BoJ will have to deliver two more stimulus packages before we start to see inflation climbing closer to the 2% level.
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