Monday, November 2, 2015

BoJ’s Kuroda optimistic about Japanese economy – Nomura

FXStreet (Delhi) - Yujiro Goto, Research Analyst at Nomura, notes that the recent BoJ’s Governor Kuroda’s press conference showed that he remains relatively optimistic on the economic outlook.

Key Quotes

“Governor Kuroda repeated that the Bank will check risks and adjust policy as needed, without hesitation, and he does not see any limits to any further action. The magnitude of the FY15 inflation downgrade (0.6pp) since July cannot be explained by lower oil prices (-0.1-0.2pp), and Governor Kuroda admitted some of the inflation weakness comes from weaker economic momentum, not from oil prices.”

“Nonetheless, he repeated that oil prices are the major factor behind the weaker inflation and that the underlying inflation trend is steadily improving. The new core CPI, which excludes both fresh foods and energy, and daily U-Tokyo inflation remain Governor Kuroda's favourite measures to keep his positive view on the inflation outlook, and the September new core CPI is estimated to have inched up further.”

“October Tokyo CPI data showed signs of weakness in inflation, and it would be more difficult for Governor Kuroda to keep his optimistic inflation outlook. Governor Kuroda also repeated the importance of wage increases to achieve higher inflation, and the next round of wage negotiations will be important.”

“Thus, the possibility of BOJ easing cannot be ruled out, as wage negotiations could disappoint again, while the new core CPI and U-Tokyo daily inflation could start slowing as the impact from JPY weakness disappears. Nonetheless, Governor Kuroda's comments still suggest a limited chance of imminent easing.”
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