- Recent rises in Japan’s CPI are more more modest than in the US and Europe but stronger than previously expected
- While pass-through of import prices rise is broadening, new factors like labour shortages and strong domestic demand may also be playing a part
- Pass through of import price rise still dominant factor but BOJ must scrutinize contribution of newly emerging factors that are pushing up prices
- Not seeings signs of risk Japan would experience too-high inflation, must look at various factors
- Must be vigilant to signals coming out from markets, and impact of market moves on Japan’s economy
There’s plenty of ‘inflation is transitory’ thinking in Japan right now but there’s an extremely strong argument to ease out of YCC on a risk-management approach from where I stand. The July BOJ meeting will be interesting.
This article was written by Adam Button at www.forexlive.com. Source