1 May 2015
Japan: Too early to conclude a bottom in inflation – BTMU
FXStreet (Barcelona) - Reviewing the Japanese CPI and labour market data releases, Lee Hardman, Currency Analyst at Bank of Tokyo-Mitsubishi UFJ, mentions that the weaker than expected Tokyo annual core inflation suggests it is too early to conclude that Japan inflation must have bottomed out.
Key Quotes
“The release of the latest economic reports from Japan overnight will have provided some reassurance for the BoJ. The latest CPI report revealed that the annual rate of core inflation after excluding the effect of the sales tax hike from last year unexpectedly accelerated to 0.2% in March from 0.0% in February.”
“However, it may still be too early to conclude that inflation has now bottomed. The more forward leading Tokyo CPI report revealed that the annual rate of core inflation came in weaker than expected at 0.4% in April.”
“The release of the latest labour market report was more encouraging revealing a further tightening of labour market conditions. The unemployment rate nudged lower by 0.1 percentage point to 3.4%. The tightening of labour market conditions will be important in encouraging stronger wage growth and higher inflation. Recent wage negotiations point towards a pick-up in wage growth in the year ahead.”
“That being said the latest cash earnings report released overnight revealed still subdued earnings growth after downward revisions expanding by annual rate of just 0.1% for the second consecutive month in March. Despite weak wage growth real household spending still accelerated strongly by 2.4% in March.”
Key Quotes
“The release of the latest economic reports from Japan overnight will have provided some reassurance for the BoJ. The latest CPI report revealed that the annual rate of core inflation after excluding the effect of the sales tax hike from last year unexpectedly accelerated to 0.2% in March from 0.0% in February.”
“However, it may still be too early to conclude that inflation has now bottomed. The more forward leading Tokyo CPI report revealed that the annual rate of core inflation came in weaker than expected at 0.4% in April.”
“The release of the latest labour market report was more encouraging revealing a further tightening of labour market conditions. The unemployment rate nudged lower by 0.1 percentage point to 3.4%. The tightening of labour market conditions will be important in encouraging stronger wage growth and higher inflation. Recent wage negotiations point towards a pick-up in wage growth in the year ahead.”
“That being said the latest cash earnings report released overnight revealed still subdued earnings growth after downward revisions expanding by annual rate of just 0.1% for the second consecutive month in March. Despite weak wage growth real household spending still accelerated strongly by 2.4% in March.”