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28 Jan 2015
BoJ: Low inflation puts pressure to ease further - Nomura
FXStreet (Bali) - According to Yujiro Goto, FX Strategist at Nomura, the slowdown in Japanese inflation may continue for the time being, putting pressure on the BOJ to ease further.
Key Quotes
"We expect the Japanese inflation slowdown to continue and our economists estimate core CPI inflation in December to record +0.5% when it is published on Friday. The possibility of deflation in Q2 cannot be ruled out if oil prices remain at their current level. Weaker actual inflation has a negative impact on inflation expectations. December household inflation expectations slowed for the first time in four months, albeit moderately. The slowdown may continue for the time being, putting pressure on the BOJ to ease."
"In the case of the October easing, BOJ Governor Kuroda remained optimistic on inflation and economic outlook until just before the meeting. Governor Kuroda may remain relatively optimistic for the next few meetings again."
"However, to avoid further deterioration in the Bank’s credibility on the inflation target, the BOJ will need to consider easing if the negative impact of the oil price fall on inflation expectations appears more clearly. We expect expectations for BOJ easing to increase further after the inflation data (30 January) and inflation expectations data (9 February), supporting USD/JPY."
Key Quotes
"We expect the Japanese inflation slowdown to continue and our economists estimate core CPI inflation in December to record +0.5% when it is published on Friday. The possibility of deflation in Q2 cannot be ruled out if oil prices remain at their current level. Weaker actual inflation has a negative impact on inflation expectations. December household inflation expectations slowed for the first time in four months, albeit moderately. The slowdown may continue for the time being, putting pressure on the BOJ to ease."
"In the case of the October easing, BOJ Governor Kuroda remained optimistic on inflation and economic outlook until just before the meeting. Governor Kuroda may remain relatively optimistic for the next few meetings again."
"However, to avoid further deterioration in the Bank’s credibility on the inflation target, the BOJ will need to consider easing if the negative impact of the oil price fall on inflation expectations appears more clearly. We expect expectations for BOJ easing to increase further after the inflation data (30 January) and inflation expectations data (9 February), supporting USD/JPY."