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1 Apr 2014
Inflation expectations in Japan rise further - Nomura
FXStreet (Bali) - Inflation expectations among Japanese bond investors rose in March, according to Nikkei Quick, notes Yujiro Goto, FX Strategist at Nomura.
Key Quotes
"1yr average expectations accelerated to 1.97% from 1.82% the
previous month, while 2yr average expectations rose to 1.81% from 1.72%. Both 1yr and 2yr inflation expectations are their highest level since mid-2004 when the data began. 10yr average inflation expectations also rose to 1.39% from 1.36%, but the level is still slightly lower than the recent peak of 1.45% in December 2013. As actual inflation remains strong, it is not surprising to have higher inflation expectations for near future."
"Our latest client survey also suggests that more investors believe 2% inflation is achievable by end-2015 (40%) than a year ago (29% see Downside risk of USDJPY remains small, 28 March 2014). A gradual increase in inflation expectations with stable JGB yields continues exerting downside pressure on real yields in Japan, which should encourage Japanese investors to diversify their portfolios from domestic risk-free assets into risky assets (Figure 2). The BOJ is scheduled to release inflation expectations among corporates on 2 April, based on the BOJ Tankan, for the first time, which will be also worth monitoring."
"The BOJ is still not likely to ease in the near future, while negative impacts on USDJPY will be small as market expectations are declining based on our client survey."
Key Quotes
"1yr average expectations accelerated to 1.97% from 1.82% the
previous month, while 2yr average expectations rose to 1.81% from 1.72%. Both 1yr and 2yr inflation expectations are their highest level since mid-2004 when the data began. 10yr average inflation expectations also rose to 1.39% from 1.36%, but the level is still slightly lower than the recent peak of 1.45% in December 2013. As actual inflation remains strong, it is not surprising to have higher inflation expectations for near future."
"Our latest client survey also suggests that more investors believe 2% inflation is achievable by end-2015 (40%) than a year ago (29% see Downside risk of USDJPY remains small, 28 March 2014). A gradual increase in inflation expectations with stable JGB yields continues exerting downside pressure on real yields in Japan, which should encourage Japanese investors to diversify their portfolios from domestic risk-free assets into risky assets (Figure 2). The BOJ is scheduled to release inflation expectations among corporates on 2 April, based on the BOJ Tankan, for the first time, which will be also worth monitoring."
"The BOJ is still not likely to ease in the near future, while negative impacts on USDJPY will be small as market expectations are declining based on our client survey."