22 Jan 2015
Large downgrade to BOJ inflation forecast – Nomura
FXStreet (Barcelona) - The Research Team at Nomura shares that BOJ lowered its inflation forecasts significantly from 1.7% to 1.0% for FY15, assuming that a moderate rise in Crude oil price will lead to a 0.7%-0.8% drop in the core CPI of Japan.
Key Quotes
“The Bank lowered its FY15 inflation forecast significantly to +1.0% from +1.7%. The Bank assumes Dubai crude oil prices will rise moderately from $55 per barrel to $70 per barrel towards the end of the projection period, and estimates that this energy price path will lower core CPI by 0.7-0.8% in FY2015.”
“Current Dubai crude oil prices are around $44-45 per barrel so there is a downside risk for core CPI inflation if oil prices remain at their current level.”
“Even though the Bank kept its optimistic inflation forecast for FY16, Governor Kuroda admits that the timing for reaching 2% could change, depending on oil prices.“
“Even though the BOJ downgraded its FY15 inflation forecast significantly, Governor Kuroda stated that Japanese inflation expectations have been maintained and the deflationary mindset is changing. Breakeven inflation has been falling significantly owing to the lower oil price. Survey-based inflation expectations among bond investors also started declining.”
“However, Governor Kuroda said that medium-term inflation expectations among households and corporates were well anchored and that there was no need for extra action if inflation expectations are on track to reach the 2% target.”
Key Quotes
“The Bank lowered its FY15 inflation forecast significantly to +1.0% from +1.7%. The Bank assumes Dubai crude oil prices will rise moderately from $55 per barrel to $70 per barrel towards the end of the projection period, and estimates that this energy price path will lower core CPI by 0.7-0.8% in FY2015.”
“Current Dubai crude oil prices are around $44-45 per barrel so there is a downside risk for core CPI inflation if oil prices remain at their current level.”
“Even though the Bank kept its optimistic inflation forecast for FY16, Governor Kuroda admits that the timing for reaching 2% could change, depending on oil prices.“
“Even though the BOJ downgraded its FY15 inflation forecast significantly, Governor Kuroda stated that Japanese inflation expectations have been maintained and the deflationary mindset is changing. Breakeven inflation has been falling significantly owing to the lower oil price. Survey-based inflation expectations among bond investors also started declining.”
“However, Governor Kuroda said that medium-term inflation expectations among households and corporates were well anchored and that there was no need for extra action if inflation expectations are on track to reach the 2% target.”