BOJ to stand pat, FX now a policy factor?
April 25 (Reuters) -The Bank of Japan is likely tomaintain its accommodative stance on Friday, as Governor Kazuo Ueda and other Policy Board members have repeatedly emphasised nP8N3B406D, nL2N3GR037. Recent economic data does not argue for any change soon either, though the weak yenwill be discussed.
The BOJ will look closely at datafor the second quarter after a weak Q1. Japanese manufacturing was in the doldrums for most of Q1, and sentiment indicators have confirmed this nL2N3F50S8. Q2 growth looks to be stronger.
Japan's service sector has however been booming with the effects of COVID fading fast and tremendous growth in inbound tourism which has boosted business not only in the large metropolitan areas but also in other regions nL3N3G70T2, nL2N3GX01M.
Inflation appearsto be retreating towards the BOJ's 2% target despite the slight rise in corporate service prices. The BOJ's outlook so far has been for inflation to continue to slow. Hence, any change in its outlook could have significancefor future policy nL2N3GW04K, nL3N3GR4XZ.
The BOJ's thinking on the weak yen will be of interest too. The prolonged, recently more rapid yen weakness has upped the cost of raw materials and other imports, and is also working to keep inflation above the BOJ's target.
Japanese importers are up in arms over yen weakness with consumers too feeling the effects. The Nikkei reported Tuesday that the BOJ would discuss this topic, perhaps heatedly nFWN3GW1L2.
Such discussions on the currency are not surprising given its impact on the economy. However, changing policy based on FX developments would be another matter, and remains highly unlikely given history and the current BOJ stancenL2N3GE04H, nL2N3FZ04V and nL2N3GJ023.
Related comments on FX nL2N3GW029, nL2N3GL04J. For more click on FXBUZ
Doves and Hawks: https://reut.rs/4afXygm
BOJ exits ultra-loose monetary policy: https://reut.rs/4a4p6Ww
USD/JPY https://tmsnrt.rs/4aS8jX4
Haruya Ida is a Reuters market analyst. The views expressed are his own. Editing by Sonali Desai
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