Yen Higher After BOJ Stand Pat, Raised Forecasts

The yen was mildly higher in Friday's Asian session; as as widely expected, the BoJ left the monetary policies unchanged. The central bank also revised its growth and inflation forecast up. Thje GDP is projected to grow 2.9% in 2013/14 fiscal year, up from the prior forecast of 2.3%. Core CPI is expected to rise 0.7% versus the prior forecast of 0.4%. For the 2014/15 fiscal year, growth is expected to be at 1.4% versus prior projection of 0.8%. Core CPI is expected to rise 1.4% versus prior projection of 0.9%. Inflation is expected to be at 1.9% by the end of FY 2015/16, which is close to BoJ's 2% target. The national CPI core, released early Friday, dropped more than expected by -0.5% yoy in March but Tokyo core CPI dropped less than expected by -0.3% yoy in April.

Technically, yen crosses are still generally limited below recent resistance. The USD/JPY is staying below 99.94, the EUR/JPY below 131.12 and even the relatively stronger GBP/JPY is kept under 153.86. Recent consolidation in yen crosses are more likely to continue with one more fall before the larger up trend resumes.

The U.S. Q1 GDP, released Friday, was expected to grow 3.0% annualized. Price index was expected to rise 1.4%. The 3.0% growth was much stronger than Q4's 0.4%. There has been talk that the Fed would scale back the open ended QE3 by the end of the year, and a solid 3.0% growth in Q1 could affirm this expectation. We'd also like to point out that so far, economic data released in April has been weak, including job and ISMs. While today's GDP report might trigger some volatility, investors would likely stay cautious ahead of next week's key data release.

The New Zealand trade surplus widened to NZD 718m in March. Swiss KOF leading indicator rose to 1.02 in April. Eurozone M3 and U.S. U of Michigan confidence will be released later today.