Bank of Japan in its latest economic review has suggested that economy has continued to recover moderately, taking cues from Japan's GDP number that surprised on the upside by growing at 2.4% y/y in the first quarter, beating an estimate of 1.5%.

Bank of Japan's (BOJ) Governor Haruhiko Kuroda even sounded very optimistic, according to whom Japan' economy will grow above its estimated potential pace.

Earlier this week deputy Governor Iwata foreseen a virtuous cycle from income to spending.

However series of economic releases from Japan this morning poured cold water over those optimism.

Consumers remain reluctant to spend. Household consumption, which was expected to rise by 3% actually dropped sharply by -1.3%, continuing its consecutive fall over more than a year. Similar picture was portrayed by retail sales released this week, which grew by meager 0.4% m/m well behind expected 1.1%.

With Japanese consumers refraining from spending, inflation remained at very low level as per April's data.

Core CPI grew by 0.3% from a year ago, compared to 0.2% expected in April. However it still remains very weak. Moreover May inflation in Tokyo was 0.2%, compared to 0.4% in April, suggesting that National CPI might fall in May.





Industrial production grew by 1% m/m in May according to preliminary reading even then it is lower by -0.1% compared to a year ago.





Housing starts grew by 0.4% in April compared to April, 2014, but overall construction orders dropped by -12.1% for the same period.

BOJ is now relying on Federal Reserve and European Central Bank (ECB) for further inspiration. While FED policy move is expected to push yen lower against dollar, ECB's purchase program is expected to help global growth.

Bank of japan (BOJ), which is keeping its policy move unchanged for now, expecting to benefit from that.

USD/JPY is currently trading at 123.7, is expected to take cues from dollar side of the leg.