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USD/JPY flat following BOJ minutes

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USD/JPY flat following BOJ minutes

Thin trade kept the USDJPY flat Monday, as investors assessed the minutes of the latest Bank of Japan policy meetings ahead of an active week of trade dominated by US data.

The USDJPY pair was trading at 101.8550, declining 0.11 percent. The pair’s initial support is likely found at 101.7800 and resistance at 102.2100.

The minutes of the April 30 BOJ policy meetings revealed some dissention among officials concerning the economy’s growth and inflation outlook. Central bank board member Takehiro Sato suggested changing the BOJ’s assessment of prices, a sign of skepticism Japan would be able to decisively stave off deflation in the next 12 month period.

Sato’s view, which was rejected by an 8-to-1 vote, highlights the uncertainty surrounding Japan’s price target. Sato’s skepticism is shared by board members Sayuri Shirai and Takahide Kiuichi, who have repeatedly called for changes to the BOJ’s timeframe for achieving its inflation target.

The BOJ forecasts inflation to be 1.3 percent for the fiscal year ending March 2015, 1.9 percent for the following year and 2.1 percent for the fiscal year ending March 2017.

BOJ policymakers voted unanimously to keep the interest rate at 0.1 and the pace of monetary easing at 60-70 billion yen annually, the minutes also revealed.

Japan’s unprecedented stimulus program was designed to boost inflation to around 2 percent, ending a decades-long battle with deflationary pressures. However, analysts are concerned Japanese inflation will slow in the next year as the impact of yen depreciation falls.

Japan’s Statistics Bureau will report on national consumer inflation Thursday. National CPI excluding fresh food is forecast to have increased 3.1 percent in the 12 months through April, following an increase of 1.3 percent the prior month. CPI excluding fresh food in Tokyo is forecast to have increased 2.9 percent over the same period.

Japan will also report on industrial production and the unemployment rate Thursday. BOJ Governor Haruhiko Kuroda has expressed optimism in Japanese recovery, sentiment he shared with the public in a speech on May 21. Kuroda was optimistic Japan would reach its inflation target, but stressed government and business must work collectively to advance the country’s growth objective.

Kuroda’s comments eased expectations somewhat the BOJ is preparing to boost stimulus. However, three-quarters of economists surveyed by Bloomberg still believe the BOJ will add to its record stimulus by the end of the year.

The US calendar was quiet Monday, as investors paused for Memorial Day. Tuesday kicks off a busy and potentially volatile week for US dollar pairs, headlined by durable goods orders, revised GDP and consumer confidence reports.

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