Among all G10 currencies, the Japanese Yen has so far seen the best start to 2023 against the US dollar which has seen broad-based weakness so far this year.

And there could be another major move for USDJPY soon, depending on whether the highly-anticipated Bank of Japan policy meeting throws up yet another surprise mid-week:

Monday, January 16

• AUD: Australia's December inflation gauge
• World Economic Forum begins in Davos – attended by central bank heads, finance ministers, and global business leaders
• US markets closed

Tuesday, January 17

• AUD: Australia January consumer confidence
• CNH: China 4Q GDP; December industrial production, retail sales, the jobless rate
• EUR: Germany January ZEW survey
• GBP: UK November unemployment rate, December jobless claims
• CAD: Canada's December inflation
• USD: New York Fed President John Williams speech
• S&P 500: Q4 earnings by Goldman Sachs, Morgan Stanley, United Airlines

Wednesday, January 18

• JPY: Bank of Japan rate decision
• EUR: Eurozone December CPI (final)
• GBP: UK December CPI
• USD: US December retail sales, industrial production, Fed Beige Book
• USD: Fed Speak – speeches by Atlanta Fed President Raphael Bostic, Dallas Fed President Lorie Logan, Philadelphia Fed President Patrick Harker

Thursday, January 19

• JPY: Japan December external trade
• AUD: Australia January consumer inflation expectations; December unemployment
• NOK: Central Bank of Norway’s rate decision
• EUR: ECB publishes December meeting minutes; ECB President Christine Lagarde speaks at Davos
• USD: US weekly initial jobless claims; Fed Speak – speeches by Boston Fed President Susan Collins, New York Fed President John Williams

Friday, January 20

• JPY: Japan December CPI
• CNH: China loan prime rates
• EUR: Germany December PPI
• GBP: UK December retail sales

To be clear, the Bank of Japan is not expected to change its benchmark rate which currently stands at negative 0.1%.

However, this week’s policy meeting may disappoint if there are no new tweaks to its yield curve control policy.

Speculation is rife that policymakers may further increase its 10-year yields cap from the present 0.50%, which has only been in place since Dec 20^th when it was doubled from the previous cap of 0.25%.

Recall how last month’s shock widening of the band has since sent USDJPY tumbling into sub-130 levels not seen since last May:

USD/JPY is down over 3% already this year but may need more than the expected new higher inflation forecasts that will be released midweek.

Although Japan’s national CPI due Friday is expected to print at 4% - its highest since January 1991 – the central bank still appears hesitant about tightening its policies.

This is because BOJ Governor Haruhiko Kuroda’s inflation outlook involves looking past the cost-push gains in consumer prices, and is willing to wait until he sees sustainable wage growth.

Still, markets are already casting their sights beyond the Kuroda era, who’s due to step down as BoJ Governor in April.

The Yen’s surge in recent months are the work of traders pre-empting a more hawkish tilt from the incoming governor, which could move Japan out of its negative interest rates regime. The expectation is that the BoJ is long overdue to catch up with its major peers that have been aggressively hiking their own rates throughout last year.

However, should such hopes be dampened this week, that may result in a slight pullback for USDJPY towards the 129.40-129.50 region.

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