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In Japan, retail sales disappointed and so did industrial output. Inflation has gone in the same direction: down.

Will the Bank of Japan act? CIBC saves the date on the calendar:

Here is their view, courtesy of eFXnews:

Following the market’s fickle reaction to China’s currency depreciation, the yen stood out as the best performing major against the US dollar, notes CIBC World Markets.

“The currency gained more than four percent as investors substantially pared JPY shorts in an effort to reduce risk in the aftermath. However, that appreciation will not be a welcome development for BoJ Governor Kuroda and could be met with some verbal intervention in the coming weeks,” CIBC adds.

“For now, though, the domestic trade cycle continues to benefit from the lagged effects of the yen’s depreciation which began in 2014. But, mounting concerns about China’s economy could become a headwind for Japan’s export sector. The possibility of slower growth in China has come at an inopportune time for Japan as domestic inflation expectations remain lacklustre at best,” CIBC argues.

“Therefore, unless risk aversion remains elevated, the yen will come under increased pressure against the greenback, especially as the Fed gets closer to raising rates. That’s because, while the BoJ outwardly appears confident in meeting its inflation target, the recent strength of the currency combined with renewed global disinflationary pressures favour a bias towards another Halloween policy surprise from the BoJ,” CIBC projects.

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