The Bank of Japan’s monetary policy is expected to stay extremely accommodative through fiscal 2017, which would also underpin demand, both domestically and abroad, noted Danske Bank in a research report. The Japanese central bank has promised to hold measures in place until the 2 percent inflation target is reached. Inflation has been accelerating through 2017, but mostly due to rising energy prices.
Underlying price pressure in Japan continues to be very low and the Bank of Japan’s inflation target is at present not within reach. Nearly three decades of very low inflation signify that firms are not willing to hike prices and attempt to cut back on services and streamline their operations instead of raising wages, stated Danske Bank. Lo worker mobility and a preference for job security over wage rises are huge obstacles for wage inflation.
Meanwhile, public spending is also expected to stay supportive for the Japanese economy through the fiscal year 2017.
“We expect to see GDP-growth around 2 percent q/q annualised through the rest of fiscal 2017 and a significant slowdown in fiscal 2018 when stimulus starts to wear off”, added Danske Bank.
At 22:00 GMT the FxWirePro's Hourly Strength Index of Japanese Yen was highly bearish at -133.06, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 110.331. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex
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