Bank of Japan (BOJ) governor Haruhiko Kuroda said in a semi-annual report at the end of April that Japan’s gross domestic product (GDP) will expand 2% for the fiscal year ending in March 2016, while the inflation rate is seen at 0.8%. Japan's GDP, scheduled for release on May 20, was expected to post a second straight quarter of moderate growth in January-March. Economists are forecasting the GDP to expand 1.5% on an annualized basis, or a quarterly increase of 0.4 percent. 

The USD/JPY has been trading sideways during the past week, despite weak U.S. trade data and the U.S. non-farm payrolls report that was not anything to write home about. More investors now see the first Fed rate hike to be either in September 2015, or in 2016. 

As of May 8, there are 104,867 short positions of Japanese Yen (CME:6J), traded on the Chicago Mercantile Exchange (CME), by asset manager/institutional and leveraged funds. This is compared to about 52,235 long positions, according to the Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) each Friday. Short positions have increased about 16,212 contracts from last week where Japanese yen contracts are traded in units of 12,500,000 Japanese yen.

Technically, the USD/JPY has been trading in a bullish ascending triangle since November 2014, with the multiple head resistances between the 120.50, or ~ 61.8% Fibonacci retracement, and the 122 yen per dollar levels. In March, a symmetrical triangle emerged as the currency market couldn’t decide in which direction the Japanese yen would move next. In the event of an ascending triangle breakout, the USD/JPY could head towards the 124 and 127 yen per dollar level. 

For the Nikkei 225, “bad news” is still “good news” as the weak yen is helping to boost the earnings of the big Japanese exporters. The strong performance of the Nikkei 225 in the past few months could also be attributed to the BOJ’s 80 trillion yen asset purchase program and the Japan Government Pension Investment Fund’s (GPIF) asset reallocation from bonds to stocks. If the yen stays weak, the Nikkei 225 could head back to retest the recent high of 20,252.12, set on March 23, 2015.