BoJ tested, GDP rebounding

The outlines of the Bank of Japan’s new policy framework have become clearer during the week: a more flexible approach to intervention, a focus on preventing sharp moves, but also a tolerance of higher yields for the target 10-year JGB than before. In the week ahead, we’ll learn whether the contraction in Japan’s economy in Q1 marked the start of sustained weakness. We think not and in fact believe the GDP data will point to a strong rebound last quarter.