27 Jun 2014
Weakness in Japanese economy should be temporary - BNP Paribas
FXStreet (Łódź) - Raymond Van Der Putten from BNP Paribas comments on the Japanese economic data released on Thursday, which showed a rise in inflation and a drop in consumer spending, saying that the weakness in the economy should be temporary.
Key quotes
"In May, consumer price inflation inched higher to 3.7% y/y, its highest fastest pace since 1982. The main reason for the acceleration between April and May was the increase in energy prices."
"Consumer spending, boosted by last-minute purchasesin Q1, slumped in April. However, there are signs that retail sales are reviving. The household activity related diffusion index of Economy Watchers Survey improved after having fallen sharply in April. In May, retail sales fell by 0.4% from a year earlier, which was actually much better than anticipated by the market."
"Households have been tightening the purse strings since April. That is not very surprising, as their income situation has sharply deteriorated. While inflation is currently above 3%, wages have hardly moved."
"Nevertheless, wages are likely to rise in the coming quarters as employment shortages have started to appear. Today’s employment report shows that the unemployment rate inched down to 3.5% in May."
"After the tax hike, job losses were reported in the retail sector, but many sectors, excluding the financial sector, are still recruiting. Overall, labour market conditions have remained relatively tight with many firms reporting hardly any overstaffing."
"The Bank of Japan already assumed that Q2 would be a very weak quarter following the consumption tax hike. However, this weakness should be temporary. This is also borne out by today’s releases. As long as inflation stays on course to hit the 2% target in early 2016, the BoJ will probably refrain from further easing."
Key quotes
"In May, consumer price inflation inched higher to 3.7% y/y, its highest fastest pace since 1982. The main reason for the acceleration between April and May was the increase in energy prices."
"Consumer spending, boosted by last-minute purchasesin Q1, slumped in April. However, there are signs that retail sales are reviving. The household activity related diffusion index of Economy Watchers Survey improved after having fallen sharply in April. In May, retail sales fell by 0.4% from a year earlier, which was actually much better than anticipated by the market."
"Households have been tightening the purse strings since April. That is not very surprising, as their income situation has sharply deteriorated. While inflation is currently above 3%, wages have hardly moved."
"Nevertheless, wages are likely to rise in the coming quarters as employment shortages have started to appear. Today’s employment report shows that the unemployment rate inched down to 3.5% in May."
"After the tax hike, job losses were reported in the retail sector, but many sectors, excluding the financial sector, are still recruiting. Overall, labour market conditions have remained relatively tight with many firms reporting hardly any overstaffing."
"The Bank of Japan already assumed that Q2 would be a very weak quarter following the consumption tax hike. However, this weakness should be temporary. This is also borne out by today’s releases. As long as inflation stays on course to hit the 2% target in early 2016, the BoJ will probably refrain from further easing."