Japan: Half way there? – ING

By FXStreet FXStreet (Delhi) – James Smith, Economist at ING, notes that the BoJ Governor Kuroda reiterated this week that inflation is only half way to the 2% target, but their forecasts suggest that core inflation may be reaching its peak.

Key Quotes

“At present, the Bank of Japan (BoJ) is currently signalling that it expects inflation to reach 2% by the second half of fiscal 2016. Indeed, in a speech this week, Governor Kuroda reiterated the fact that inflation is “only half way” to the 2% target. At present, the headline rate is floating around zero and is only likely to pick up at a slow pace this year, although most are agreed that this is almost entirely an oil story. Hence, Kuroda will continue to draw market attention towards the BoJ’s preferred core CPI measure, which excludes the volatile fresh food and energy elements and currently stands at 1.2%.

However, we believe that core CPI (using the BoJ’s definition) has virtually reached its peak. At present, the lagged effects of the large JPY depreciation is pushing up the annual rate, largely through food prices. However, the last significant JPY depreciation came in the final quarter of 2014, shortly after the BoJ decided to …read more

Source:: FX Street