BoJ likely to be more bearish on FY15 GDP

The economic outlook of Japan seems to be stable. In this week's Reuters Tankan, the DI of business sentiment in materials-related industries was forecast to fall to zero in January, the first such reading since May 2013, or immediately after the BoJ launched quantitative and qualitative monetary easing (QQE1) in April 2013. 

"When the BoJ launched QQE2 in October 2014, it forecast real GDP growth of 1.5% (and core CPI inflation of 1.7%) for FY15. As of July, it was forecasting 1.7% (0.7%). This is well above consensus (0.97%) GDP forecasts", notes Barclays.

Materialsrelated industries, which are heavily exposed to China and other EM, have been quickest to detect the risk in those economies - a worrying signal for manufacturers as a whole. 

Notably, August IP, which surprised to the downside with an initial -0.5% m/m reading, was actually revised down this week to -1.2% m/m. 

"We believe the BoJ will revise to below 1.5%, indicating weaker expectations than when it announced QQE2", says Barclays.