Bank of Japan previews (announcement likely Tuesday from 0230 GMT)
National Australia Bank on the BOJ monetary policy meeting:
- As with the ECB, the market expects no change to the policy stance, particularly given that Japanese inflation remains below target.
- That said, markets will be looking for any clues on the BoJ's intention for QE over the next year, particularly given the BoJ's reduction in long-dated bond purchases last week.
- Speculation about policy tightening from the Bank of Japan has gained momentum; especially, since it reduced its purchases earlier this month.
- However, we think that cutback was merely a reaction to the recent flattening of the super-long JGB yield curve. As such, we think the BoJ will keep its monetary policy unchanged at its next meeting and reiterate its commitment to the yield curve control.
- This could take pressure off USD/JPY.