18 Feb 2014
Flash: Despite disappointing GDP, BoJ to stay pat - Nomura
FXStreet (Bali) - Even if the latest Q4 preliminary Japanese GDP disappointed yesterday, Yujiro Goto, FX Strategist at Nomura, thinks the BoJ will not consider easing today.
Key Quotes
"The market Q4 GDP growth disappointed the market, as the growth rate decelerated to +1.0% (q-o-q, saar) from +1.1% the previous quarter (Figure 1). Growth was well below consensus expectations of +2.8%. Domestic demand actually accelerated from Q3, as household consumption (+0.5%), housing investment (+4.2%) and business investment (+1.3%) all rose at a higher pace than in Q3. Exports recovered as well (+0.4%) after declining in Q3 (-0.7%). Nonetheless, imports increased strongly by +3.5% and net exports reduced GDP growth by 0.5ppt, leading to a weaker headline GDP growth number."
"Although Q4 GDP was much weaker than expected, we do not believe the BOJ will consider easing at its meeting today. As inflation momentum remains strong, while domestic demand is healthy partly thanks to rushed demand ahead of the consumption tax hike, the BOJ is unlikely to consider additional easing for now."
"At the same time, Governor Kuroda's view on recent weak US and Japanese data at his press conference are now more important. Our economists have downgraded their US and Japanese economic forecasts after the weaker-than-expected data from both countries. Even though Governor Kuroda is still likely to show his confidence in achieving 2% inflation, any emphasis on downside risks after disappointing economic data could be more positive for USDJPY, as market expectations for an earlier easing are now declining."
"In fact, the latest Bloomberg survey showed the consensus on the timing of the next BOJ easing has shifted to Q3 from Q2, suggesting more BOJ watchers now expect a July easing rather than one in April. Rapidly shifting expectations for the BOJ suggest an inactive BOJ meeting will be less negative for USDJPY."
Key Quotes
"The market Q4 GDP growth disappointed the market, as the growth rate decelerated to +1.0% (q-o-q, saar) from +1.1% the previous quarter (Figure 1). Growth was well below consensus expectations of +2.8%. Domestic demand actually accelerated from Q3, as household consumption (+0.5%), housing investment (+4.2%) and business investment (+1.3%) all rose at a higher pace than in Q3. Exports recovered as well (+0.4%) after declining in Q3 (-0.7%). Nonetheless, imports increased strongly by +3.5% and net exports reduced GDP growth by 0.5ppt, leading to a weaker headline GDP growth number."
"Although Q4 GDP was much weaker than expected, we do not believe the BOJ will consider easing at its meeting today. As inflation momentum remains strong, while domestic demand is healthy partly thanks to rushed demand ahead of the consumption tax hike, the BOJ is unlikely to consider additional easing for now."
"At the same time, Governor Kuroda's view on recent weak US and Japanese data at his press conference are now more important. Our economists have downgraded their US and Japanese economic forecasts after the weaker-than-expected data from both countries. Even though Governor Kuroda is still likely to show his confidence in achieving 2% inflation, any emphasis on downside risks after disappointing economic data could be more positive for USDJPY, as market expectations for an earlier easing are now declining."
"In fact, the latest Bloomberg survey showed the consensus on the timing of the next BOJ easing has shifted to Q3 from Q2, suggesting more BOJ watchers now expect a July easing rather than one in April. Rapidly shifting expectations for the BOJ suggest an inactive BOJ meeting will be less negative for USDJPY."