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BoJ still facing no inflation pressure

The Omicron surge will cause a renewed fall in consumer spending this quarter. But we still expect GDP to return to its pre-virus path in the second half of the year. And while Omicron and any subsequent outbreaks may exacerbate supply shortages, inflation will remain well below 2%, allowing the Bank of Japan to keep policy very loose.   Drop-In: Neil Shearing will host an online panel of our senior economists to answer your questions and update on macro and markets this Thursday, 13th January (11:00 ET/16:00 GMT). Register for the latest on everything from Omicron to the Fed to our key calls for 2022. Registration here.
Marcel Thieliant Senior Japan, Australia & New Zealand Economist
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Japan Economics Weekly

Respite for BoJ doesn’t weaken case for a policy tweak

Pressure on the Bank of Japan’s Yield Curve Control framework eased this week. On the campaign trail for the Upper House election, where inflation has emerged as a key concern, Prime Minister Kishida said that monetary tightening would do more harm than good. Even more welcome for the BoJ, pressure emanating from the bond market has dropped back too. It had to buy less than a tenth as many JGBs this week as last. Some might feel that this reduces the need to shore up the policy framework. But a respite provides a window in which to make it more resilient.
Asia Drop-In (30th June, 09:00 BST/16:00 SGT): Are Asia’s central banks behind the curve? Can the Bank of Japan and People’s Bank of China continue to go against the grain? Find out in our special session on what global monetary tightening looks like in Asia. Register now.  

24 June 2022

Japan Data Response

Japan Consumer Prices (May 2022)

While inflation didn’t rise any further in May, it will remain above the BoJ’s 2% target until early-2023, while underlying inflation will approach 2%. However, the Bank won’t respond with tighter policy. Asia Drop-In (30th June, 09:00 BST/16:00 SGT): Are Asia’s central banks behind the curve? Can the Bank of Japan and People’s Bank of China continue to go against the grain? Find out in our special session on what global monetary tightening looks like in Asia. Register now.  

24 June 2022

Japan Data Response

Japan Flash PMIs (Jun. 2022)

The PMIs suggest that supply shortages are still holding back manufacturing output and adding to price pressures. On a more upbeat note, the surveys also point to a strong pick-up in consumption as the economy rebounds from the Omicron wave and international tourists return. Asia Drop-In (30th June, 09:00 BST/16:00 SGT): Are Asia’s central banks behind the curve? Can the Bank of Japan and People’s Bank of China continue to go against the grain? Find out in our special session on what global monetary tightening looks like in Asia. Register now.  

23 June 2022

More from Marcel Thieliant

Australia & New Zealand Economics Update

Our key calls for 2022

We think that GDP growth in Australia will surprise to the upside. But with wage growth only approaching the 3% watermark the RBA would like to see by year-end, we expect the Bank to keep rates on hold. By contrast, we expect the RBNZ to hike interest rates a bit faster than most expect. Our view that commodity prices will continue to fall means that the Aussie dollar will weaken further.

11 January 2022

Japan Economics Weekly

Recovery in industrial activity will run out of steam

Japan’s car industry has rebounded quickly from the disruptions caused by Delta waves across South-East Asia a few months ago. But amidst persistent supply shortages, output hasn’t quite returned to pre-pandemic levels yet. Omicron may create additional strains on supply chains and will also result in a renewed drop in consumer spending this quarter. The upshot is that following a strong post-vaccination bounce in Q4, GDP growth is set to slow sharply this quarter.

7 January 2022

Australia & New Zealand Economics Update

Australia - Omicron will add to upward pressure on inflation

The Omicron variant will probably result in a stagnation in consumption this quarter. However, by worsening supply shortages it will only add to the upward pressure on inflation. The upshot is that it won’t necessarily prevent the RBA from ending QE in February as we anticipate.

6 January 2022
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