ING Research discusses its expectations for tomorrow's BoJ policy decision.

"The Bank of Japan will announce monetary policy tomorrow, for the first time under new Governor Kazuo Ueda. In line with the consensus call, we expect no changes to the policy settings for interest rates and asset purchases. The release of the new outlook report and specifically inflation forecasts will drive a big part of the market reaction. However, there is a possibility that the BoJ will tweak forward guidance, in particular, the very last part of the statement which reads, “interest rates to remain at their present or lower levels". It could also possibly drop the “lower levels” bit, ultimately switching to a more flexible approach and laying the groundwork for a policy adjustment in the future," ING notes. 

"With not much priced in in terms of policy shift this summer by the BoJ and given the dollar’s weak momentum seen yesterday, USD/JPY looks vulnerable ahead of tomorrow’s risk event in Japan. We still target 128 for the end of the second quarter," ING adds.