The Japanese Yen is rallying going into tonight?s interest rate decision and GDP release. The comments from the Japanese minister today about possible interest rate hikes come at a very peculiar time. Even though we do not expect a move from the central bank, tonight we could see a significant upgrade to their level of hawkishness.
The recent record current account surplus reported by Japan puts pressure on Japanese officials to do something about the currency?s weakness. USD/JPY is not trading far from the February levels, which was the last time the central bank raised interest rates. Weakness continues to be very pronounced against the other currencies with EUR/JPY hitting another record high before reversing intraday. We also expect Japanese GDP to surprise to the upside given the stimulative impact of yen weakness. This means that we could be at the cusp of a few hundred pip turn in the yen crosses.