BoJ likely to keep policy stance intact in near-term

The Bank of Japan’s (BoJ) first two-day monetary policy meeting for 2017 will take place on January 30-31. We foresee that the central bank will remain committed to holding the 10-year JGB yields near zero, while keeping interest rate steady at -0.10 percent.

Also, a weaker yen (JPY) and higher energy prices are leading a turn in inflation, likely pushing it back above the waterline and in the general direction of, though still planetary distances away, from the BoJ's inflation target. That means Japan's central bank can stay on hold for a while, leaving its asset purchases fluctuate more and more in line with its yield target, said HSBC in its research note.

Additionally, a tumble in the U.S. yields that sends the yen rebounding would change things. But, for now, the BoJ enjoys a comfortable buffer, with even the return of gradual yen strength unlikely to prompt a change in policy, they added.

Moreover, the BoJ Governor Haruhiko Kuroda’s in his latest speech on Monday, which reinforced the central bank’s view to maintaining QQE with yield curve control for as long as needed to achieve 2 percent inflation in a stable manner.

Also, he said that the Japanese economy is seen to recover on a moderate trend while remaining optimistic about the near-term prospects as well. However, he reiterated that the country's inflation will hover around zero percent for the time being. Lastly, he said that the CB will continue the expansion of the monetary base until the inflation target is achieved.

Meanwhile, the benchmark Nikkei 225 ended 1.48 percent lower at 18,813, while at 8:00GMT, the FxWirePro's Hourly Yen Strength Index remained slightly bullish at 80.53 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex