Japanese Inflation Not Taking Off

Overnight inflation rates for April were published – the data no longer reflects the majority of the VAT rise in April 2014. The important price level for the Bank of Japan (BoJ), i.e. excluding fresh food, is only 0.3% above the previous year’s level – so a long way off the 2% inflation target, notes Societe Generale. The BoJ continues to rely on an expansionary monetary policy and thus on implied JPY weakness. After all JPY is currently 18% weaker than a year ago. The BoJ will have to come up with some good ideas inorder to maintain its inflation target – and usually new BoJ ideas involve further JPY weakness, suggests Societe Generale. 

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