BOJ AI

The decision on whether to hike rates will be a "close call" and a "hard one to make", according to one of the sources. Another said that it will be more of a "judgment call" in terms of whether to act this month or wait until later in the year. But one thing is for sure is that they will unveil plans of tapering bond purchases at a gradual pace, with the thinking to halve it in the coming years.

Going back to the rate decision, the sources say that while the BOJ board agrees on the need to raise interest rates in the short-term, there is no consensus on when that might take place.

The key uncertainty is that domestic consumption is in a relatively weak spot and the outlook is still shrouded with doubt at the moment. The sources note that as policymakers take that into consideration, they could lean towards the choice of not rushing into hiking rates for now.

The details are certainly not as hawkish as what the headline might suggest I would say.

But in any case, I want to point something out about the recent price action in the Japanese yen. The currency has been strengthening in the past few days and it looks to be some flows tied to anticipation ahead of the BOJ meeting next week.

In that lieu, we might end up with a sell the fact trade regardless of what the BOJ does at the end of the day.

If they don't hike, traders will take that as a more dovish decision. And if they do, overall policy is still very accommodative and they might not much scope to go with another one in September and/or October at least.