The BoJ kicked off the central-bank meetings season by hosting its rate-setting gathering on January 18. It now has the luxury of sitting on the sidelines as the remaining key central banks meet next week. The BoJ will have the opportunity to assess the potential impact of the Fed decisions and possible actions, while facing a full agenda domestically. The "Shunto" spring wage negotiations will be held during February/March as there are reports for government pressure in favour of stronger pay rises, particularly for permanent salaries. A strong result from these negotiations would definitely help the new governor taking over in April. In the meantime, on February 10 the Japanese parliament will be informed of the nominated governor. It is worth noting that the two deputy governors will also be replaced as the government prefers to give its new BoJ man-in-charge carte-blanche on monetary policy.

Amidst this busy agenda, next week enjoys a full data-release calendar. Starting on Monday evening, the December unemployment, which is unlikely to surprise, and the preliminary figure of the December Industrial production will be released. Another negative year-on-year print in the latter should increase the concern about the Japanese economic outlook, particularly as energy costs have dropped recently. The first estimate of the fourth quarter GDP is expected on February 14 as the world tries to gauge the true impact of the Chinese reopening on demand and supply lines globally.

Next week we will also be enlightened on the important consumer side. And here we are faced with an interesting disparity. While the consumer confidence index has dropped to extremely low levels, retail sales growth appears vigorous. This gap is even more evident when analyzing the large-scale retail shops figures. Despite the apparent volatile nature of the sales dataset, recent history points to a possible correction in retail sales ahead, even if the consumer confidence manages to record a small comeback on Tuesday.

The yen has been in the spotlight lately due to its aggressive appreciation against the dollar since the October 21 multi-decade high of 151.94. Next week, the yen’s performance rests squarely on the hands of the Fed. A more dovish show at the February 1 gathering could open the door for further yen outperformance. From a technical perspective, the yen has been moving inside a textbook-like downward trend channel. It currently appears to have found a short-term balance around the 130 area. While the overall technical picture appears to be yen bullish, the stochastic oscillator is sending an opposing signal that could prove more significant if the April 28 high of 131.24 is broken to the upside.