Corporate Japan Not Optimistic About 2 Percent Inflation Goal

Japanese companies think the country will fall short of its 2% inflation goal, despite a flood of stimulus from the Bank of Japan.
The firms believe inflation will be 1.5% a year from now, before climbing to 1.7% in 2017 and 2019, according to a survey of more than 10,000 companies released Wednesday by the central bank.
The inflation survey is the first of its kind, which makes it difficult to draw any conclusions about the success of Abenomics —  the economics strategy championed by Prime Minister Shinzo Abe that hinges on rising prices.
The idea is that aggressive monetary easing, combined with more government spending, could push up prices and end years of deflation, leading to more robust growth for the world’s third largest economy.
Related: Japan debt tops 1 quadrillion yen
Masamichi Adachi, a JPMorgan economist, said the data could prove to be an important signpost for the BoJ as it tries to gauge inflation expectations. But the results are difficult to interpret with regard to Abenomics.
Idachi said that some will see the survey as evidence that the business sector does not believe the 2% goal is realistic. Others will argue that 1.7% is close to 2%, and expectations could rise further.
“At least,” he said, “the BoJ can argue that firms do not have a deflation mindset anymore, due to the Bank’s efforts.”
Should the central bank itself determine that Japan does not have enough momentum to meet its inflation goal, investors should be on lookout for more stimulus to enter the pipeline.

via CNN

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza