"The BOJ's growth forecast is originally set higher (than private economists), they won't raise their projection as much as the effects of the ¥5 trillion stimulus"
- Takahiro Sekido, Japan strategist at Bank of Tokyo-Mitsubishi UFJ
Amid signs of economic amelioration in the world's third largest economy and growing fiscal uncertainty in the United States, investors rushed to buy the Japanese Yen and sell the greenback. As a result, after touching 103.73 on May 22, the highest since 2008, the pair began a period of consolidation, easing back to 97. Moreover, the latest report from the Statistics Bureau showed inflation remained unchanged signalling success of Prime Minister Shinzo Abe's aggressive fiscal and monetary policy. In addition to that, all nine regions reported improving economic situation in the country. Even so, the Bank of Japan remains cautious about offering a more upbeat economic outlook, citing looming risks from overseas. During its Thursday policy meeting the BoJ is widely expected to keep the policy on hold, however, investors are focusing on the three-year price and growth forecasts. According to central bank's projections, the stimulus itself is likely to lift the growth by 0.7-0.8% over the next two years. Nonetheless, it may not be fully translated into a revision of growth forecast, the median estimate of the board's nine members. The main reason behind such a cautious behaviour is the fact overseas economies has been more sluggish than they were anticipated in April, when the BoJ last time released its outlook report on growth. They are publishing this report twice per year- in April and October. Earlier this month the International Monetary Fund slashed its forecast for the global economy for this year, saying it would expand just 2.9% from 3.2% in July.
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