Japan: Weak inflation, reversal rate still far off – Nomura

According to the Tankan survey released today there has been no improvement in Japan’s inflation expectations among corporates, explains Yujiro Goto, Research Analyst at Nomura.

Key Quotes

“Inflation expectations among corporates have slowed since oil prices started falling in late 2014. Even though oil prices has been recovering, inflation expectations have remained subdued. Tokyo March CPI data also showed a small slowdown in core inflation (excluding fresh food). Although the BOJ’s preferred measure (excluding fresh food and energy) stayed unchanged, inflation momentum is slowing after recovering steadily since mid-last year. The latest BOJ Tankan data also showed weaker sentiment among corporates, and fundamentally, it is still too early for the BOJ to consider tightening, as Governor Kuroda repeated today that the BOJ is still a long way from its price target.”

“The Tankan survey also showed that financial institutions’ business conditions stayed unchanged, in a positive territory (+15). The financial position DI for all enterprises also remained positive, (+17), which means financial conditions remain easy, while they also judge the lending attitude of financial institutions remains accommodative (+25). These suggest the BOJ’s accommodative policy has not negatively affected the economy via tighter financial conditions and lending attitudes, confirming that the reversal rate is still not close, as BOJ officials have stated.”