JPY: BoJ in focus

The yen appreciated across the board on flight-to-quality bids amid deteriorating risk sentiment on concerns about Greece and China last week. Global risk sentiment should remain the main driver of the yen this week with weekend European negotiation outcomes and ongoing Chinese equity market volatility. 

Meanwhile, the Bank of Japan (BoJ) will hold its monetary policy meeting (Wednesday), during which it will also update its economic forecasts. Given the resilience of inflation expectations as well as a delay in the likely timing of achieving 2% inflation, the BoJ is expected to keep its monetary policy unchanged this week. Its updated GDP forecasts will be watched as the Nikkei newspaper (10 July) reported that BoJ's FY2015 GDP growth outlook could be revised down slightly from +2.0% in the April Outlook Report, mainly on weak exports and production driven by China's economic slowdown. 

"We think the BOJ's forecasts will likely retain the FY2015 core CPI outlook at around +0.8%, as in April", said Barclays in a report on Monday.