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Inventory build-up points to looming recession

Surges in manufacturing inventories in the BoJ’s Tankan have a strong record in providing early warnings of economic downturns. The strong rise in inventories over the last couple of quarters therefore supports our view that a recession is around the corner. Meanwhile, our lower forecast for crude oil prices suggests that inflation won't climb back above the BoJ's 2% target even once energy price caps expire next year.

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