FXStreet (Mumbai) – Analysts at Deutsche Bank made downward revisions to the Japanese economic outlook, citing weak external demand as the key reason.
Key Quotes:
“We have revised our economic forecast in light of the GDP data for 2Q (Apr-Jun) 2015. The main changes were a downward revision in both our outlook for external demand and our oil price assumptions.”
“Consequently, we have lowered our real GDP growth forecast for FY15 and FY16. We had expected real GDP to grow at an annualized 1.5-2.0% pace through 1Q 2017, up until the next consumption tax hike scheduled in April 2017.”
“We now believe that growth will be at the lower bound of this range for the remainder of 2015. We had imagined that Japanese exports would soon bounce back once the US economy recovered from its briefly sluggish state.”
“However, we now foresee a continued slump in exports in 3Q and beyond, due to the Chinese slowdown. Export volumes to China are not retreating notably at this stage, but we expect the trend to emerge with a lag.”
“Oil prices (Brent crude) have fallen from $65/barrel in June to around $50/barrel at present. We have accordingly lowered our inflation forecast from this oil price drop.”
‘Nevertheless, we believe inflation will bottom out in 3Q and rise gradually thereafter. We maintain our core inflation forecast of 1% at end-2016.”
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