Can the BoJ breath a little easier?

The BoJ is expected to keep its policy rate near zero and leave its asset buying program at Y55t at its two day meeting starting on Monday. Consensus has us believing that economic conditions from policy makers perspective has not changed. Unless something out of the ordinary happens this weekend in Europe, then we should be expecting the board members to maintain the existing framework.

As it seems to be the new norm for Central bankers, both the Euro and Iranian situation is expected to be discussed and debated. Can we anticipate the same message as before, that their economy is slowly returning to a moderate economic recovery path?

Below are some other highlights of the week:


  • JPY: BoJ Governor Shirakawa started the week off by stating that the yen level is “severe.” Japan’s Ministry of Finance says it will release its daily FX intervention operations between October-December 2011 later in the week.
  • AUD: Aussie retail sales fell -0.1%, m/m, in December, much weaker than the consensus forecast for a +0.2% rise. The details were soft both for value and volumes traded. The report suggests that the economy could use another boost to maintain momentum.
  • INR: The RBI partially lifted curbs on selected banks’ foreign exchange transactions. Several banks and some public sector institutions have been allowed to run higher net overnight open positions in FX.
  • IDR: Indonesia GDP growth remained at a strong +6.5%, y/y, pace in Q4. Analysts do not believe the economy is showing any strong signs of overheating. The currency is expected to continue to underperform other regional peers.
  • AUD: RBA surprised the market by declining to cut rates (+4.25%), resulting in the Aussie temporarily surging to new highs for the year. The policy statement highlighted the improvement in funding markets, while policy makers expect inflation to remain in its +2-3% target range over the next 1-2 years. A hawkish statement that supports the currency.
  • JPY: Government data shows Japan carried out so-called “stealth intervention” to weaken the currency in November. More rhetoric from Japans Finance Minister Azumi stating that he will not rule out any options to curb the currency’s appreciation certainly has the dollar bears second guessing themselves. USD/JPY ends the week better bid.
  • NZD: New Zealand wage inflation accelerated for private sector workers, rising +0.7%, q/q, in Q4 after a +0.5% increase in Q3. Average hourly earnings were flat at +$24.6.
  • PHP: Philippine CPI inflation eased to +3.9%, y/y, in January from +4.2% in December. With inflation easing and growth sluggish, the futures market anticipates a-25bp cut by the BSP next month.
  • JPY: For the first three weeks of January Japanese customs recorded a deficit of Â¥1.6t (beating January 2009 record of Â¥1.0t). Exports fell -11.9%, y/y, while imports rose +12.6%, y/y.
  • AUD: Aussie Treasurer Swan said that a high AUD is causing “stresses and strains in the economy” as the currency gets closer to levels which could effect monetary policy (believed to be north of 1.10).
  • KRW/MYR: Bank of Korea and Malaysia have been directly active in the spot markets this week buying dollar KRW and MYR.
  • CNY: It seems that the PBoC is keeping the Yuan close to its highs ahead of Vice President Xi’s visit to the US on 14 February.
  • INR: India’s GDP growth slowed to +6.9%, y/y, in the Q1 advance print. Sluggish IP has filtered through to slower growth. Market expects the RBI to consider an easing cycle in Q2.
  • CNY: Chinese CPI inflation rose to +4.5%, y/y, last month, up from +4.1% in December. The market was expecting +4.0%. Analysts estimate that the Chinese New Year festivals resulted in a +4.2% jump in food prices. This would suggest that the dealers will now pare their expectations for cuts in the RRR over the coming months.
  • KRW: The BoK kept policy rates unchanged at +3.25%. BoK Governor Kim retains a hawkish monetary bias as inflationary pressures are still high. He indicated that exports in January were temporary and should improve this month. This should be positive for the KWR.
  • INR: BI cut policy rates-25bp to +5.75% against expectations as analysts believe the economy is showing some signs of overheating. GDP growth has been robust while inflation has likely bottomed.
  • NZD: Kiwi employment rose by a subdued +0.1%, q/q, or +3k in Q4, mostly driven by an increase in part-time employment, while full-time employment and hours worked fell. The unemployment rate fell to +6.3% from +6.6% on the back of a lower participation rate.
  • AUD: Aussie business confidence and conditions picked up in Q4 as the NAB business confidence index rose to +1 from a revised-3 in 3Q.
  • AUD: The RBA expects inflation to remain around the midpoint of its +2-3% target range for a couple of years. They have also revised lower near term growth forecasts by -0.5bp. This suggests that the RBA is likely to ease policy, but it “would require demand conditions to weaken materially”. Governor Stevens noted in a previous speech that the AUD was high at 1.10 and suggested the currency may again become a factor.
  • CNY: China’s trade numbers last month have been dragged back by seasonality. Exports contracted -0.5%, y/y, while imports fell -15.3%. If one stripped out seasonality, one can paint a different, but “positive” picture.
  • PHP: Export growth in the Philippines fell to -20.7%, y/y, in December from -19.4% in November.






  • JPY delivers prelim GDP and a rate announcement
  • GBP, USD and CAD present CPI and BoE its inflation report
  • Retail Sales come to us from NZD, USD and GBP
  • Claimant counts are announced in GBP, AUD and USD
  • Germany delivers the ZEW Economic sentiment
  • FOMC releases its minutes
  • USD has Philly Fed Manufacturing and PPI to deal with


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell