By Jamie McGeever

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.

Amidst a deluge of economic indicators across the continent and a screeching U.S. tech sector rally that’s lifting global stock markets, all eyes in Asia will be fixed on one event Friday: the Bank of Japan’s policy meeting.

Much has been written, discussed and speculated about Kazuo Ueda’s debut as new central bank chief, and the waiting is almost over.

The most likely scenario is that he keeps monetary settings ultra-loose and maintains a dovish stance, while facing a communications test by modifying the bank’s forward guidance. Tweaks or changes to the bank’s controversial “yield curve control” policy may have to wait.

Or, he could ignore any notion of gradualism and make an instant mark by calling time on YCC. True, this is highly unlikely, but he did say this month that he and his colleagues will “discuss all options at each of our policy meetings.”

Also, the BOJ is no stranger to the element of surprise – remember Dec. 20 last year? The BOJ stunned markets by raising the upper limit of its YCC band, triggering the yen’s biggest one-day rise in nearly quarter of a century.

The yen is likely to move quite a bit, whatever is said or signaled. Markets are braced for it – one-week implied volatility in dollar/yen jumped to a five-week high on Thursday and is notably higher than every other part of the curve.

If Ueda plays it as most observers expect, and chooses not to rock the boat, the yen could come under pressure in the short term. U.S. bond yields rose sharply and implied Fed rates ticked higher on Thursday, widening the dollar’s rate advantage.

Looking ahead, however, the yen will likely benefit when the BOJ does start phasing out YCC. All else being equal, tighter domestic monetary policy will encourage Japanese investors to repatriate money back home.

Being the world’s largest creditor with trillions of dollars invested overseas, inflows into the yen later this year could potentially be very powerful.

We won’t be seeing that on Friday though. Right?

Here are three key developments that could provide more direction to markets on Friday:

– Bank of Japan policy meeting

– Japan unemployment, retail sales (March)

– Euro zone GDP (Q1, advance)

(By Jamie McGeever)

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