Expect a weak Japan for longer - Scotiabank

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Mar 8, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    Analysts at Scotiabank explained that economic weakness remains firmly in place in Japan.

    Key Quotes:

    "The country’s real GDP growth returned to negative territory in the final quarter of 2015, as output declined by 0.4% q/q (+0.7% y/y) following a 0.3% (1.6% y/y) expansion in the prior three month period. The main factor behind the weak outcome was a struggling Japanese consumer.

    In 2015 as a whole, the economy grew by 0.5%. We have revised our real GDP growth forecasts for Japan downward and now expect the economy to expand by 0.7% in 2016 and 0.6% in 2017 (compared with the prior forecasts of 1.1% and 0.8%, respectively).

    The Bank of Japan will maintain an accommodative monetary policy in place for the foreseeable future and will likely consider additional stimulus measures to complement the existing policy program — Quantitative and Qualitative Monetary Easing with a Negative Interest Rate — which applies an interest rate of -0.1% to financial institutions’ deposits at the central bank.

    Persistent economic fragility will also put the implementation of the consumption tax rate hike (scheduled for April 2017) at risk. Headline inflation was 0% y/y in January, while core prices — excluding food and energy — increased by 0.7% y/y. We expect the headline rate to accelerate only slightly to 0.5% y/y by the end of this year."
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