As the US markets draw to a close on Monday and the Asian markets open, the Bank of Japan (BOJ) will report a host of key monetary policy releases. The Japanese economy, and its monetary policy in particular, has been subject to intense scrutiny as of late, with the so-called Abenomics dominating traders’ and investors’ Asian market outlook. What are the releases, and what effect might they have on the value of the Japanese Yen?
The first major release is the Japanese current account figure. Set to be revealed at 00:50 GMT on Tuesday, the current account figure represents the difference in value between imported and exported goods and services. In March, the BOJ reported a current account deficit of 0.59T Yen, the highest deficit since the country started reporting the data in 1985. Japanese Prime Minister Shinzo Abe has embarked on a Yen devaluation policy since his reappointment in December 2012, which theoretically should boost exports and narrow a trade deficit. This, however, has not materialized, and consensus forecasts an April release deficit of 0.04T Yen.
The next two events, the monetary policy statement and the BOJ press conference as not yet scheduled, but should take place during the Asian morning session on Tuesday. The two releases will offer considerable insight into the future of Japanese monetary policy, and are particularly relevant in the wake of the April sales tax increase. Economists suggest the sales tax, which will see an increase from 5% to 8%, could have a serious effect on the already waning Japanese economy. Any decline in consumption as a result of the tax will fuel fears of stagflation. The Japanese markets will be hoping for a dovish tone across both releases, with the general feeling being that more stimulus will be required to help avoid recession. However, such a tone could serve to weaken the Yen, so look for downside in the Yen crosses around the release if such a tone is struck.
To contact the reporter of this story; Samuel Rae at Samuel@forexminute.com