Skepticism Grows over Abenomics

Traders are growing more skeptical Prime Minister Shinzo Abe will achieve his 2 percent inflation target after a sales tax increase derailed growth.

The 10-year break-even rate, a gauge of expectations for consumer-price gains in inflation-linked bonds, dropped to 1.16 percent yesterday, the lowest close since March 17. It’s down from 1.4 percent in June, the highest since the government resumed sales of the securities in October. The equivalent gauge in the U.S. was at 2.19 percent.

Abe needs to push through structural reforms to spur the world’s third-largest economy, Fitch Ratings said in a report last week, after gross domestic product shrank the most in three years last quarter. Japan isn’t alone in facing reduced inflation expectations as stagnant wages in countries from the U.S. to Germany and Australia threaten to slow economic growth.


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