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15 May 2014
Expectations for a BOJ easing keep falling - Nomura
FXStreet (Bali) - Expectations by market participants for further BOJ easing continues to decline, notes Yujiro Goto, FX Strategist at Nomura.
Key Quotes
"Core inflation forecasts for FY2014 and FY2015 among private forecasters have inched higher, but they remain much lower than the BOJ's forecasts. The consensus' FY2014 core CPI inflation forecast increased to 0.99% after the tax hike impact and the FY2015 forecast is now 1.05%, slightly higher than a month ago (1.03%), according to JCER. The BOJ maintained its inflation forecasts at its last meeting on 30 April, but the BOJ's forecasts remain more optimistic than that of private forecasters."
"While the BOJ now expects core CPI inflation to stay at 2.1% in FY2016, private forecasters remain sceptical about the BOJ achieving its inflation target. Only two out of 42 researchers said the BOJ could achieve its 2% inflation by around March-April 2015, while 32 researchers replied that the Bank could not achieve the target by then."
"Our economists believe the latest corporate goods price index (CGPI) suggests core CPI inflation is still likely to slow as the impact of JPY weakness diminishes (see "CGPI suggests core inflation will slow", 14 May 2014)."
"The sceptical view on the sustainability of inflation acceleration has led to still high expectations of a BOJ easing this year. 79% of forecasters still expect the BOJ to ease further by end-December."
"However, expectations for a near-term easing are clearly lower now, as indicated by our client survey and other BOJ watcher surveys. No forecasters expect the BOJ to ease next week, while expectations for an easing by July also keep declining."
"On top of the lower expectations for a BOJ easing, April flow data confirmed that Japanese investors accelerated their foreign investment while JPY trades relatively strongly (see "Foreign investment accelerates in April", 12 May 2014). We judge downside risks of USDJPY remain limited."
Key Quotes
"Core inflation forecasts for FY2014 and FY2015 among private forecasters have inched higher, but they remain much lower than the BOJ's forecasts. The consensus' FY2014 core CPI inflation forecast increased to 0.99% after the tax hike impact and the FY2015 forecast is now 1.05%, slightly higher than a month ago (1.03%), according to JCER. The BOJ maintained its inflation forecasts at its last meeting on 30 April, but the BOJ's forecasts remain more optimistic than that of private forecasters."
"While the BOJ now expects core CPI inflation to stay at 2.1% in FY2016, private forecasters remain sceptical about the BOJ achieving its inflation target. Only two out of 42 researchers said the BOJ could achieve its 2% inflation by around March-April 2015, while 32 researchers replied that the Bank could not achieve the target by then."
"Our economists believe the latest corporate goods price index (CGPI) suggests core CPI inflation is still likely to slow as the impact of JPY weakness diminishes (see "CGPI suggests core inflation will slow", 14 May 2014)."
"The sceptical view on the sustainability of inflation acceleration has led to still high expectations of a BOJ easing this year. 79% of forecasters still expect the BOJ to ease further by end-December."
"However, expectations for a near-term easing are clearly lower now, as indicated by our client survey and other BOJ watcher surveys. No forecasters expect the BOJ to ease next week, while expectations for an easing by July also keep declining."
"On top of the lower expectations for a BOJ easing, April flow data confirmed that Japanese investors accelerated their foreign investment while JPY trades relatively strongly (see "Foreign investment accelerates in April", 12 May 2014). We judge downside risks of USDJPY remain limited."