A look ahead from Reuters: Weak data to test BOJ’s rosy economic view, policy on hold

The Bank of Japan will maintain its existing stimulus policy and optimistic economic view on when it meets on Thursday, sources say, preferring to take more time to gauge whether a run of weak data is sufficient to threaten a fragile recovery.

But all is not well …:

  • signs of prolonged disruption from a sales tax hike in April are beginning to sap the conviction of many central bankers that the economy will rebound steadily
  • Pessimists on the BOJ board may propose offering a bleaker view on components such as factory output, say sources familiar with the bank’s thinking.
  • “It’s pretty clear from data out so far that the economy is undershooting the BOJ’s forecast,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute. “The rebound in July-September may prove to be much weaker than expected.”

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The BOJ meets on Wednesday and Thursday this week.

While it is still early in the week, USD/JPY is back around recent highs, just below 104.20 as I type.