The Japanese Yen rose sharply early last week on reports that the Bank of Japan could adjust its monetary policy to make the program more sustainable. According to Reuters, the BoJ was holding preliminary talks on making changes to its interest-rate targeting and stock-buying techniques. Any such shift would come years after BoJ Governor Haruhiko Kuroda started a massive bond buying initiative in 2013 to help eradicate deflationary pressures and buoy prices.

However, the central bank did try to make it clear that this wasn’t a tightening policy although the reaction in the markets suggested it was moving away from its easy money policy.

For the week, the USD/JPY settled at 111.016, down 0.446 or -0.40%.

After that initial reaction on Monday, the Dollar/Yen settled into a trading range as investors began to doubt that the BoJ will change its stimulus program when it meets next week. Helping to stabilize and consolidate the Forex pair was a sharp rise in U.S. Treasury yields.

The rest of the week, the USD/JPY treaded water in reaction to U.S. economic data and ahead of this week’s Bank of Japan Monetary Policy meeting.

In Japan, Flash Manufacturing PMI was lower than expected and the previous read at 51.6. Additionally, BOJ Core CPI came in at 0.4%, versus a 0.6% estimate and 0.5% previous read. Tokyo Core CPI was 0.8%, higher than the 0.7% forecast and previous read.

In the U.S. last week, Flash Manufacturing PMI came in better than expected along with the Richmond Manufacturing Index. Housing continued to disappoint with Existing Home Sales falling to 5.38 million units versus a 5.46 million unit forecast. New Home Sales also missed the mark with 631K units versus a 669K estimate.

The major reports included Durable Goods and Advance GDP. New orders for key U.S.-made capital goods increased more than expected in June and shipments surged, pointing to solid growth in business spending on equipment in the second quarter. Second-quarter GDP was the best in nearly 4 years, at 4.1 percent. The dollar weakened on Friday after the release of the GDP data as investors expressed doubt the growth would continue the rest of the year.

Forecast

The focus this week for investors will be on central bank monetary policy statements from the U.S. Federal Reserve and the Bank of Japan, and a slew of U.S. economic data.

The BOJ begins its policy meeting on Monday with its statement on monetary policy due on Tuesday. Investors expect the BOJ to make no policy change. However, there is increasing speculation the BOJ may tweak its yield curve control settings in part because of lower bank profitability and muted inflation in Japan.