Yen Slips With Kishida Policy Speech, BoJ MonPol Decision In Sight

Demand has emerged for USD/JPY in early Tokyo trade, with the pair last seen +14 pips at Y114.33. The coincidence of yen weakness and Nikkei 225 strength is evident, to some degree. From a technical point of view, a break above the 20-EMA at Y114.75 would expose Jan 11 high of Y115.68. On the downside, focus falls on the Jan 14 trough/76.4% retracement of the Nov 30 - Jan 4 rally at Y113.49/43. Below there opens Dec 17 low of Y113.14.

• Note that Japan's 150-day regular parliamentary session begins today, with PM Kishida due to deliver a customary policy speech. NHK reported that a draft of his speech includes a plan to contain the spread of the Omicron variant and bolster the country's healthcare system, as well as a pledge to raise the minimum hourly wage above Y1,000 as soon as possible. The upcoming parliamentary session marks an important period in Japan's political calendar, with the upper house election slated for later this year.
• The BoJ will deliver their monetary policy decision tomorrow, with several source reports flagging potential for a modest upgrade to the Bank's FY2022 inflation outlook. The latest source report circulated by BBG noted that the policymakers may discuss dropping their established view that risks to prices are skewed to the downside. Meanwhile, last week's RTRS piece suggested that they are looking to start a debate on when to begin messaging an eventual rate hike, even as it is unlikely to come anytime soon.
• Local data highlights this week include final industrial output (Tuesday), trade balance (Thursday) and national CPI (Friday). Inflation data will receive most scrutiny, as participants are looking to verify if consumer prices are indeed perking up.