Watch the brief 2min summary of our latest thoughts on Japan in light of the disappointing BoJ statement today.
- Today in Japan, the lack of QQE expansion in spite of the BoJ lowering its forecasts for both growth (FY15: down -10bps to +2%) and inflation (FY15: down -20bps to +0.8%) resulted in the Nikkei 225 selling off -2.7%.
- In conjunction w/ Kuroda’s still-sanguine guidance and our positive outlook for Japanese GDP growth over the next two quarters, marginal easing has now been officially punted well into 2H15.
- Consensus expects a move in October and we currently have no reason to argue for one month sooner or later than that; we just know two catalysts need to materialize before the BoJ can justify expanding the pace of its asset purchases:
- The YoY RoC in the USD/JPY cross needs to converge towards zero.
- Survey based inflation measures (namely Tankan) need to trend lower – which they are likely to do if our forecast of continued and material disinflation in Japan proves prescient.
- All told, we remain bullish on Japanese equities and continue to expect foreign inflows to support the market in light of the “win-win-win” thesis we outlined in a presentation last week (CLICK HERE to access the video replay).
Feel free to ping us with any follow-up questions.