(Bloomberg) -- Morgan Stanley MUFG Securities economists flagged a risk of Tokyo inflation data causing a “knee-jerk reaction” in foreign exchange markets Friday morning just hours ahead of the Bank of Japan’s policy decision. 

“We think there is risk of a substantial decline in April Tokyo CPI due to a special factor of the effective elimination of high school tuition in Tokyo, depending on the decision by the statistical bureau,” economists Takeshi Yamaguchi and Masayuki Inui wrote in a note. 

The Tokyo metropolitan government’s decision to make high school education free and other support measures took effect in April. But a lack of clarity on how the impact will be reflected in the capital’s consumer price index makes it hard for economists to make forecasts and leaves room for a surprise. 

Read more: Yen Inches Closer to Intervention Point as BOJ Meeting Starts

A sharp weakening in the figure due to a one-off factor in Tokyo alone is unlikely to change the BOJ’s policy view, but it could reinforce the view among traders that monetary easing will stay in place, adding to pressure on the yen. 

Japan’s currency weakened past the 155 mark against the dollar overnight for the first time since 1990, raising fears the Tokyo will intervene in markets in the coming days. Officials in Japan warned market players again on Thursday that they are watching movements closely.

Read more: Japan Keeps Traders on Intervention Alert After Yen Pierces 155

A ministry official in charge of the Tokyo inflation data told Bloomberg on Thursday that officials are still considering how to reflect the impact of free high school tuition in the data. Economists currently forecast inflation in the capital to slow to 2.2% in April from 2.4% the previous month. 

The education fee factor could slash as much as around 0.7 percentage point from the Tokyo core inflation figure, according to Yamaguchi and Inui, flagging the potential for a result that is well below 2%.   

“Since the data release comes in the morning of the second day of the BOJ’s monetary policy meeting, we would pay attention to risk of a possible knee-jerk reaction in the FX market,” according to the economists. 

The impact on the nationwide inflation data should be limited as this tuition measure only covers Tokyo, the report said. 

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