The recent weakening of the yen will lift headline inflation by around 0.5 percentage points in coming months and further gains are likely if, as we have been forecasting for a while, the yen weakens towards 120 against the dollar by the end of next year. As such, we feel confident reiterating our inflation forecasts of 1.0% for 2017 and 1.3% for 2018. We don’t expect inflation to reach the Bank of Japan’s 2% target but, as it rises, we expect policymakers to refrain from further easing.
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