Despite a huge pot of excess savings accumulated over the past couple of years, today’s 2.5% inflation print for April is likely to slow the post-Omicron recovery by spooking consumers not used to price hikes. Meanwhile, we doubt PM Kishida’s announcement yesterday that he will reopen the border to tourists in June will do much to repair Japan’s shrinking current account surplus given that Chinese tourists won’t be returning any time soon. As such, we still expect the yen to weaken further to 140 against the dollar by the end of this year.
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