**As seen in Risk In The Week report 05/20/24, subscribe at cablefxm.co.uk/reports
Japan headline CPI eased in March to 2.7% Y/y from the prior 2.8%, this was below the consensus forecast of 2.8%. Core inflation missed expectations of 2.7% as it printed at 2.6%, the ex-fresh and energy component rose 2.9% Y/y. March food prices broke the trend as the metric had seen multi-month readings of softness, the figure came in at 4.8% Y/y, utilities deflated by 1.7%, and transportation prices eased to 2.4%. Fresh food CPI rose to 5.5% Y/y from the prior 2.5%, this was the fastest reading since December. While the headline recorded a downtick, this should not move the dial for the BoJ to keep its tightening bias. However, markets are likely to keep testing the central bank as the Fed is not expected to move until 2H.
Strategists at MUFG noted a slowdown in April in food and goods prices as factors behind the easing in the Tokyo inflation measures, they said this is likely to act as a major drag in the nationwide inflation figure. MUFG expects headline CPI at 2.2% Y/y and the ex-fresh food & energy reading at 2.4% Y/y. MUFG expects the BoJ to retain its tightening bias until 2026, they have revised their yield forecasts higher and noted that the 10-year JGB could break the 1.0% level to the upside.
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