The BoJ will likely cut its long-term inflation projections
The BoJ will likely cut its long-term inflation projections, according to unnamed sources cited by Reuters, and will concede that CPI will likely remain below the 2% target for as long as three more years. The central bank will highlight structural factors capping inflationary price pressures. The BoJ meets on policy on July 30-31, when a quarterly revision of inflation and growth forecasts will also be published. This story partly explains the yen weakness today, reaffirming the underlying bullish credentials for USD-JPY, for instance, though the backdrop of risk-on sentiment in global asset markets has been the more dominant driver behind the decline in the Japanese currency over the last couple of sessions. Due to a net repatriation dynamic (and expectations for such among market participants) associated with Japan's massive current account surplus during pronounced risk-off phases in global markets, the yen acts as a low-beta safe-haven currency.