Japan: Core inflation likely to remain weak – Nomura

In January 2018, the all-Japan core CPI (all items, excluding fresh food) rose 0.9% y-y, unchanged from December 2017 and the January all-Japan core CPI (all items, ex energy and food but including alcohol) rose by 0.1%, also unchanged from December as energy prices continue to weigh on core inflation, notes the research team at Nomura.

Key Quotes

“Forecasts for February Tokyo CPI

We forecast the February 2018 Tokyo core CPI will be up 0.7% y-y, the same inflation rate as in January. We forecast the core CPI reading for February will be up 0.3% y-y, the same as in January, and the BOJ version of the core CPI (all items, ex energy and fresh food) will be up 0.4%, also the same as in January. Since last year, we have expected to see a weakening of inflationary pressure, as the boost from rising energy prices, which have been the main driver of inflation, declines from its peak.”

“Our view of the JGBi market: weak auction on stock market drop, but correction might be temporary

The results of the 6 February JGBi auction were lackluster, but we attribute this to the auction being held on a day when share prices were falling sharply. Considering that European and North American BEIs have not fallen, we think Japan's BEI may have merely fallen temporarily, and we think it is likely to recover.”