2 Jul 2013
Flash: Japanese economy overcoming deflation? – RBS
FXstreet.com (New York) - According to Junko Nishioka, Chief Economist at RBS, “The Japanese economy is showing stronger signs of overcoming deflation.”
“While Japan is still far away from discussing normalization of monetary policy because of considerable distance to reaching 2% inflation, we think it has entered a phase in which visibility has improved for a beneficial cycle of reduction of the real interest rate stimulating capital demand and restoration of inflationary conditions encouraging rational consumption demand among the general populace that bolsters economic recovery momentum.” Nishioka adds.
In particular, Industrial production data for April and May, despite showing a mild expansion pace, increase the possibility of the Japanese economy sustaining a high growth rate in 2Q13, just as in 1Q13. Personal consumption results for May were uninspiring from the household survey and commercial sales data, but service consumption was generally upbeat. Employment-related data for May continued to report a slump in manufacturing labor demand. However, non-manufacturing industries with high job volume are maintaining robust growth rates for employees and effective openings. We thus think the major economic trend of service demand supporting domestic final demand remains intact, despite some risk of production and export downside.
“While Japan is still far away from discussing normalization of monetary policy because of considerable distance to reaching 2% inflation, we think it has entered a phase in which visibility has improved for a beneficial cycle of reduction of the real interest rate stimulating capital demand and restoration of inflationary conditions encouraging rational consumption demand among the general populace that bolsters economic recovery momentum.” Nishioka adds.
In particular, Industrial production data for April and May, despite showing a mild expansion pace, increase the possibility of the Japanese economy sustaining a high growth rate in 2Q13, just as in 1Q13. Personal consumption results for May were uninspiring from the household survey and commercial sales data, but service consumption was generally upbeat. Employment-related data for May continued to report a slump in manufacturing labor demand. However, non-manufacturing industries with high job volume are maintaining robust growth rates for employees and effective openings. We thus think the major economic trend of service demand supporting domestic final demand remains intact, despite some risk of production and export downside.