Inflation expectations falling in Japan

In Japan, inflation rate is expected to weaker in future; therefore, the BoJ is unlikely to lower its current inflation target of 2% for H2 FY 16 at its January review.

Household inflation rate is likely to post 2.5% in October, which was 2.7% in the previous month. The inflation expectation is wither in various sectors of the economy due to soften JPY and fall in food prices, says Barclays.

Governor Kuroda states that the BoJ will need to assess prices comprehensively. This indicates considering the wage growth and various other indicators, aside from output gap and inflation expectations. The inflation expectations will remain an important focus in the market. 

The rate hike assumption was extended to March 2016, as the volatility in financial markets is unlikely to stay for a long and the Fed may face difficulty to resolve its differences about the possibility of rate hikes before year-end, says Barclays.

The solid payroll report caused the analysts to change their rate hike to expectation from December 2015 to March 2016. 

"We now forecast a federal funds range of 25-50bp in December, up from the current 0-25bp range", states Barclays.