17 Feb 2015
Japanese core inflation to fall well below the 2% target – Nomura
FXStreet (Barcelona) - With the fall in oil prices having a global impact, a price stability at current levels might lead to Japanese core inflation remaining well below BoJ’s 2% target, explains the Research Team at Nomura.
Key Quotes
“Japan benefits considerably from lower oil prices, as oil and gas imports amount to around 3% of GDP (2013 data). A 10% reduction in oil prices would boost real GDP growth by around 0.1pp primarily through positive impacts on private consumption.”
“With our baseline scenario of USD59/bbl oil prices for 2015, we expect core CPI inflation (excluding the impact of the consumption tax hike) to fall to 0.2% in 2015 despite our expectation of the yen weakening to JPY/USD 125 by end-2015.”
“We also expect the trade account to turn to a small surplus for the first time since 2010.”
“A decline in oil prices to USD30/bbl would benefit Japan’s economy further. There may be some negative impacts under this USD30 scenario: 1) Japan’s trading companies may incur losses as some of them invest heavily in commodity-related areas, and 2) plant engineering companies may face a decline in orders for petrochemical plants.”
“However, the negative non-linear effects should be fairly limited from a macroeconomic point of view.”
Key Quotes
“Japan benefits considerably from lower oil prices, as oil and gas imports amount to around 3% of GDP (2013 data). A 10% reduction in oil prices would boost real GDP growth by around 0.1pp primarily through positive impacts on private consumption.”
“With our baseline scenario of USD59/bbl oil prices for 2015, we expect core CPI inflation (excluding the impact of the consumption tax hike) to fall to 0.2% in 2015 despite our expectation of the yen weakening to JPY/USD 125 by end-2015.”
“We also expect the trade account to turn to a small surplus for the first time since 2010.”
“A decline in oil prices to USD30/bbl would benefit Japan’s economy further. There may be some negative impacts under this USD30 scenario: 1) Japan’s trading companies may incur losses as some of them invest heavily in commodity-related areas, and 2) plant engineering companies may face a decline in orders for petrochemical plants.”
“However, the negative non-linear effects should be fairly limited from a macroeconomic point of view.”