Further easing in Japan to come? - Rabobank

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Nov 10, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Guatemala) - Analysts at rabobank noted that, last month, the BoJ pushed back its forecast for when its 2% inflation target will be hit to “around the second half of fiscal 2016” from the first half of FY2016.

    Key Quotes:

    "However, the commentary that has accompanied this change of view has not been particularly dovish."

    "According to Kuroda, Japan’s current virtuous economic cycle stems from a recovery in domestic demand. This, he argues, is in contrast with previous economic upturns in Japan which have been export oriented."

    "Although the slowdown in many emerging markets this year has weighed on Japan’s production and export sectors, Kuroda argues that the firmness in domestic demand has offered solid protection and allowed for corporate profits to continue increasing to record highs."

    "Increased pay has been the trigger for the improvement in domestic demand. In tune with this perceived upturn, Kuroda also reports that inflation expectations have also moved higher backed by the improvement in the underlying trend in inflation, excluding the effects of the decline of energy prices."

    "Strengthening inflation expectations are imperative if Japanese consumers and firms are to avoid falling back into the deflationary mindset."

    "Expectations of falling prices could result in consumers delaying purchases and could be a disincentive for firms to invest. The virtuous cycle that Kuroda describes has, he reports, led to a steady improvement in the underlying trend in inflation."
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