FXStreet (Barcelona) – Economists at Nomura, believe that Japanese inflation expectations are unlikely to decline substantially in 2015, and therefore think additional easing by the BOJ is unlikely this year.
Key Quotes
“We forecast that the core CPI will decline to -0.2% y-y in Jul-Sep 2015. Although a negative inflation rate would be unlikely to trigger additional easing by the Bank of Japan in 2015, we think the BOJ would have to consider further easing if inflation expectations were to recede substantially.”
“A look at the expected inflation rate based on past data for BOJ and other surveys and the correlation with CPI-related items shows that the expected inflation rate has a strong correlation with recent food prices and the core core inflation rate.”
“Food prices and the core core inflation rate are likely to continue rising for a while, and we see little risk of inflation expectations declining substantially before the end of the year. The retail sector is also expected to continue with its strategy of hiking merchandise price bands, and we think that microeconomic factors are also likely to put upward pressure on core core inflation.”
“Meanwhile, looking also from the perspective of expectations for future inflation in the narrow sense (“forward-looking expectations”), we think inflation expectations are unlikely to fall as the BOJ’s commitment to the 2% inflation target is unlikely to decline.”
“Taking these factors together, we think inflation expectations are unlikely to decline substantially in 2015, and therefore think additional easing by the BOJ is unlikely this year.”
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