HEARD IN ASIA: Japanese Rates Appear Steady As Consumer Prices Stay Weak [Wall Street Journal]
Summary: Japan's latest core consumer-price index for September came in lower-than-expected, with a 0.2% year-over-year increase, compared to a 0.3% rise in August. Core CPI readings include energy, but exclude fresh-food (see chart to the right). Economists had expected another 0.3% rise. Daisuke Yamazaki, a Goldman Sachs Tokyo economist, comments, "The growth in the core CPI remains weak, and if we exclude energy, prices are still declining. In this environment, it's obviously very hard for the BOJ to justify a rate increase." However, a Daiwa Research Institute economist says, "The BOJ feels the current rate of 0.25% is way too low given that the Japanese economy has the potential to grow at 3% [annually] or so." Daiwa expects a BoJ rate hike in December. The BoJ's semiannual Outlook for Economic Activity and Prices report will be released tomorrow and will be scrutinized for any rate direction hints. A core CPI forecast of +0.5% is considered hawkish. Also of importance is wording on the U.S. economy and tech-sector inventory levels.
Related links: Currency Overview: Expect a Big Week for the Greenback • BoJ Keeps Rate Unchanged; Producer Prices Up Sharply • N. Korea Threat Helps Japan's Exporter Stocks via Weaker Yen • Nikkei Quietly Rallying - Expect a Repeat of '05? • BoJ Deputy Governor Hints at Possible Rate Hike by Year's End • Significance of the Surprisingly Weak Yen
Potentially impacted stocks and ETFs: Mitsubishi UFJ Financial Group (NYSE:MTU), Nomura Holdings (NYSE:NMR), iShares MSCI Japan Index ETF (NYSEARCA:EWJ)
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