Monday, January 30, 2017

Japan's Cheap Money Era May Be Coming To An End

If true this would upset more than a few apple carts.
From the Diplomat:

Japan’s Cheap Money Era May Be Ending
Japan is hopeful about the prospects of long-hoped-for inflation rates in the Year of the Rooster. 
The Bank of Japan’s (BOJ’s) war against deflation is far from over, but analysts are hopeful that 2017 may mark a turning point for the world’s third-largest economy.

Evidence that two decades of deflation have yet to be fully expunged came Friday, with core consumer prices excluding fresh food dropping by 0.2 percent in December for the 10th straight monthly decline. For 2016, core consumer prices dipped by 0.3 percent, the first annual fall under BOJ Governor Haruhiko Kuroda and despite massive monetary stimulus.
However, overall consumer prices rose by 0.3 percent in December, with analysts suggesting a weaker currency and rising oil prices could contribute to stronger inflation in 2017.

“Core CPI will likely return to gains as early as February, and may reach 1 percent around October,” Hiroaki Muto, chief economist at Tokai Tokyo Research Center, told Bloomberg News, adding, “It’s all about energy prices this year.”

Okasan Securities chief economist, Nobuyasu Atago, told the financial news service that “CPI [consumer price index] is at the turning point – it’s gradually gaining momentum,” although he warned about the need for stronger wages growth and consumer spending to ensure a sustainable upturn.

The BOJ’s latest forecasts suggest inflation will not reach its 2 percent target until fiscal 2018, despite having introduced the price stability target in January 2013. Along with zero interest rates, the central bank has conducted both quantitative and qualitative monetary easing (QQE) to reach its goal, including currently buying 80 trillion yen ($695 billion) worth of Japanese government bonds a year, along with exchange-traded funds and other assets.

Analysts suggest the BOJ will be in no hurry to change policy at its upcoming policy meeting later this month. Yet stronger recent economic data could prompt an upgrade to its forecasts, according to Japan’s Nikkei.

In December, the BOJ upgraded its outlook for the national economy for the first time in 19 months, while Kuroda suggested recently that gross domestic product (GDP) could expand by around 1.5 percent in fiscal 2016 and 2017, above previous forecasts....MUCH MORE