Yen to oscillate in Q2 on economic data release, set free derivative combinations

As per our recent updates, the Bank of Japan (BoJ) is scheduled to hold its second Monetary Policy Committee meeting for April on 30 April, at which it will conduct its semi-annual review of GDP and inflation forecasts. Other central bank meetings in Taiwan and New Zealand are also likely to be watched by investors in the region, as will Taiwan and the Philippines' first quarter gross domestic product (GDP) data. But the centre of attraction in Asia this week falls upon Japan, as how the world's third largest economy's performance is evaluated and in which direction is it moving towards by a series of data releases and a central bank's decision.

We are projecting to lower its inflation forecast for FY15 (starting in April 2015) due to the recent downtrend in inflation. We also think it will lower its FY15 GDP growth forecast given subdued economic momentum in Q1. The likely lower inflation forecast indicates a need for the BoJ to take measures to meet its inflation target. We expect it to increase its current asset purchase programme by at least JPY 10tn and extend the timeline for achieving its inflation target by a year. Japanese IP data for March will also to be released on 30 April. We expect IP to have increased 1.5% mom, in line with the pick-up in exports to the US and China.

Derivatives strategy:
Overview: Neutral
Strategy: Combinations (Buy a Straddle)

With an increased anticipated volatility on series of announcements of significant economic data we are advising to buy call and put options of same strike prices and same expiry considering this strategy if price breakout on either side. Best suitable on major news driven movement such as above economic data releases and earning seasons.