13 May 2014
BoJ will not stop easing anytime soon - Nomura
FXStreet (Bali) - The FX Strategy Team at Nomura believes that despite inflation momentum in Japan remains strong and the slowdown in the economy post the sales tax is fairly soft, the BOJ will not stop easing anytime soon, thus keeping the downside risk in USD/JPY limited.
Key Quotes
"The slowdown in the Japanese economy after the sales tax hike looks fairly shallow, as we expected. Our economists estimate all-Japan department store sales have declined by 7.2% y-y due to the sales tax hike, which is much milder than the April 1997 slowdown."
This has lowered the chance of a near-term BOJ easing and market expectations for the BOJ. At the same time, however, a more resilient economy should support risk appetite among investors, encouraging foreign investment."
"Even though inflation momentum remains strong and the economy is showing resilience, we do not believe the BOJ will stop easing anytime soon, thus helping to lower real interest rates in Japan."
"The combination of stronger risk appetite and gradually lower real yields will encourage domestic investors to diversify their portfolios from risk-free assets into risky assets including foreign assets, in our view. Resilience in economic momentum also suggests Japanese FDI outflows will remain strong, as Japanese firms will keep increasing investment both domestically and internationally."
Key Quotes
"The slowdown in the Japanese economy after the sales tax hike looks fairly shallow, as we expected. Our economists estimate all-Japan department store sales have declined by 7.2% y-y due to the sales tax hike, which is much milder than the April 1997 slowdown."
This has lowered the chance of a near-term BOJ easing and market expectations for the BOJ. At the same time, however, a more resilient economy should support risk appetite among investors, encouraging foreign investment."
"Even though inflation momentum remains strong and the economy is showing resilience, we do not believe the BOJ will stop easing anytime soon, thus helping to lower real interest rates in Japan."
"The combination of stronger risk appetite and gradually lower real yields will encourage domestic investors to diversify their portfolios from risk-free assets into risky assets including foreign assets, in our view. Resilience in economic momentum also suggests Japanese FDI outflows will remain strong, as Japanese firms will keep increasing investment both domestically and internationally."