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25 May 2015
Kuroda upbeat on Japanese economic assessment – Nomura
FXStreet (Barcelona) - Yujiro Goto, FX Strategists at Nomura, shares the key points from last week’s BoJ Governor Kuroda’s speech, and further believes that the decline in easing expectations in the near-term will keep JPY under pressure against the Dollar.
Key Quotes
“Governor Kuroda emphasised the recovery in household consumption, which has been depressed by the consumption tax hike last April. He also said he does not think there has been an unintended build-up in inventory and does not think the inventory rise will be detrimental to the economic recovery going forward. Governor Kuroda has stated that the narrowing of the output gap is supporting the underlying inflation trend. After stronger Q1 GDP, Governor Kuroda is likely to be more confident on the steady improvement in the output gap.”
“For another driver of the underlying inflation trend, inflation expectations, Governor Kuroda said inflation expectations have been maintained.”
“Governor Kuroda reiterated that the BOJ will not hesitate to adjust policy if needed as usual. However, as Governor Kuroda is likely to remain optimistic on the underlying inflation trend, based on his view of an improving output gap and resilient inflation expectations, we think the chances of a near-term BOJ easing are limited.”
“The gradual decline in expectations for a July easing is likely going forward, which could put slight pressure on USD/JPY. Nonetheless, JPY short positions held by speculators and Japanese margin traders are likely to be low, limiting downside risk on USD/JPY. Even though a BOJ easing is unlikely to be a near-term catalyst for JPY weakness, we expect USD/JPY to continue rising gradually.”
Key Quotes
“Governor Kuroda emphasised the recovery in household consumption, which has been depressed by the consumption tax hike last April. He also said he does not think there has been an unintended build-up in inventory and does not think the inventory rise will be detrimental to the economic recovery going forward. Governor Kuroda has stated that the narrowing of the output gap is supporting the underlying inflation trend. After stronger Q1 GDP, Governor Kuroda is likely to be more confident on the steady improvement in the output gap.”
“For another driver of the underlying inflation trend, inflation expectations, Governor Kuroda said inflation expectations have been maintained.”
“Governor Kuroda reiterated that the BOJ will not hesitate to adjust policy if needed as usual. However, as Governor Kuroda is likely to remain optimistic on the underlying inflation trend, based on his view of an improving output gap and resilient inflation expectations, we think the chances of a near-term BOJ easing are limited.”
“The gradual decline in expectations for a July easing is likely going forward, which could put slight pressure on USD/JPY. Nonetheless, JPY short positions held by speculators and Japanese margin traders are likely to be low, limiting downside risk on USD/JPY. Even though a BOJ easing is unlikely to be a near-term catalyst for JPY weakness, we expect USD/JPY to continue rising gradually.”