EWJV - Escape Velocity: Japan's Drift Toward Sustained Inflation

2024-06-14 08:40:00 ET

Summary

• Japan has been struggling for some time to generate enough velocity in inflation to escape the gravitational pull of deflation.
• The story for the rest of 2024 and into 2025 is now centered on whether inflation will be sustained at the BOJ’s 2% target.
• Given that we have yet to see a rebound in real consumption, the BOJ is still likely to move gradually, which the market currently is predicting.

By Carol Lye

Japan has been struggling for some time to generate enough velocity in inflation to escape the gravitational pull of deflation. We had written last year that a liftoff from Japan’s negative interest rate policy (NIRP) would be a story for this year. That view was based off the belief that core inflation would meet the Bank of Japan’s (BOJ’s) target. As anticipated, NIRP was removed at the March BOJ meeting. So where does Japan go from here?...

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