Japan: More Expanded QE to Come - NAB
John Sharma, CFA, Macro Economist – Sovereign Risk at National Bank of Australia argued that, overall, the picture is of a Japanese economy struggling to generate any momentum.
"Japanese GDP declined by -0.3% qoq in the December quarter 2015, although compared to the same quarter a year ago, growth was a more respectable 0.8% (s.a.)."
"Consumption has been weak given the strength in employment, generally solid consumer confidence and low inflation due to falling commodity prices. This suggests some upside ahead, but the fall in consumer confidence in February is a concern."
"Business investment continues to trend up, but exporters are struggling in the face of global economy weakness and, more recently, Yen appreciation."
"The main bright spot is the labour market. Labour market conditions remain tight, with the unemployment rate at a low 3.3%. Nominal cash earnings, though, have only increased modestly. "
"Progress towards the Bank of Japan’s (BOJ’s) inflation target has stalled, and inflation is unlikely to reach the BOJ’s 2% inflation target under current policy settings. Given this, the lack of economic momentum, recent Yen appreciation and falls in equity values since mid-2015, we expect the Bank of Japan to decide on a significant monetary easing at its April 2016 meeting.
This will likely include expanded QE, a further cut to deposit rates and something akin to the ECB’s financing programs for banks, which allows banks to access funding at a rate as low as the negative deposit rate."
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