Yen Mildly Higher After BoJ; BoE And FOMC Minutes Watched

The yen is mildly higher after BoJ left policies unchanged as widely expected. Interest rate is kept near zero and the target of monetary base expansion is held at JPY 60-70T a year. The central bank painted a positive picture in the statement and said that "capital expenditure has increased moderately as corporate profits have improved." The overall assessment on the economy is left unchanged at it "continues to recovery moderately as a trend." Overall, it sounded that the BoJ is still confident on meeting the 2% inflation target without additional stimulus despite the sales tax hike in April. And economists are expectation BoJ to stand pat for the rest of the year.

Philadelphia Fed Plosser offered some hawkish comments overnight. He warned that Fed is at risk of falling "behind" the curve on the inflation front and that could force rate hike "sooner rather than later". He noted that the economy is on the "firmest footing" since recovery and the underlying details are of the disappointing Q1 GDP report were indeed "encouraging". On the other hand, New York Fed Dudley said that the pace of tightening will "probably be relatively slow". Meanwhile, Dudley also noted that Fed could rely heavily on the reserve repo to control rates when tightening starts. More Fed officials will speak today, including Fed chair Yellen, Kocherlakota and Dudley again. Also, Fed will release FOMC meeting minutes.

In UK, BoE deputy governor Bean said BoE and Fed would "encounter a few potholes" as tightening starts, and the exit from "exceptionally stimulatory" monetary stance" won't be easy. He said that market interest rates would be "more volatile" along central banks' exit path no matter how well they communicate with the markets. But, he noted that banks are now more resilient to financial market stress.

On the data front, Japan trade deficit came in wider than expected at JPY -0.85T in April. Australia Westpac consumer confidence dropped -6.8% in May, wage cost index rose 0.7% qoq in Q1. Looking head, BoE minutes and UK retail sales are the main focus in European session. Fed will release FOMC minutes later in the day.