Japan CPI: Recovery remains elusive – ANZ

According to analysts at ANZ, markets expect Japan’s July headline inflation to have risen 1% y/y with core CPI up 0.3% y/y (up from 0.1% in June).

Key Quotes         

“Conditions for higher inflation have been in place for some time now: the output gap is positive; the labour market is extremely tight with the unemployment rate at multi-decade lows (2.4%); wage growth is edging up, and, household inflation expectations are rising gradually. However, inflation has not recovered sustainably and the BoJ recently downgraded its inflation forecast.”

“As a result, the BoJ remains committed to its extraordinary monetary policy settings and recently introduced forward guidance to underpin expectations of its persistence.”

“Earlier this month, the BoJ (in its policy statement) noted that firms are moving to raise prices driven by improved market sentiments about future growth, but there has been very little evidence of that in the CPI data.”