JPY: Expect bump in all-Japan core CPI again – Nomura

FXStreet (Delhi) – Research Team at Nomura, measures the benefits to households from lower energy prices and expects Japanese core CPI to rise again.

Key Quotes

“Recap of recent CPI trends: the all-Japan core CPI for November 2015 rose: In November the all-Japan core CPI (general index excluding fresh food) rose by 0.1% y-y, up from -0.1% in October. A breakdown reveals that a 0.9% increase in the all-Japan core core CPI, up from 0.7% in October, contributed to the rise in the core CPI.

Forecasts for CPI data to be released this month: CPI data to be released at 8:30am on 29 January: We expect both the all-Japan core CPI for December and the Tokyo ku-area core CPI for January to come in at +0.1% y-y. In both cases, this would be the same increase as for the previous month.

Special feature: Measuring the benefits to households from lower energy prices: The price of the energy used by households each month has declined by ¥3,776 since peaking in July 2014. A breakdown reveals a marked decline in gasoline prices.

Our view of the JGBi market: as the JGBi market had already corrected, the JGBi auction was uneventful; however, the decline in the price of crude oil continues to weigh heavily: Although the auction on 13 January was uneventful, the price of crude oil continues to weigh heavily. Unless the price stops declining, we expect the upside for inflation-indexed Japanese government bonds to be limited until the April auction. However, we consider current levels attractive for long-term investors.”