Japan – import prices up, but export prices too
The renewed rise in import prices is certainly inflationary, especially when the level of prices remains elevated after the hikes of 2021-22. However, this time export prices are rising too, and while that isn't enough to prevent the ToT from falling, it does limit the damage to the domestic economy
Japan – enough, if the BOJ decides it is
The narrowing budget deficit and widening BOP surplus likely won't move market opinion on either rates or fx. What is needed remains a more hawkish BOJ. Accelerating credit and wage growth push in that direction, though the wage data aren't great quality, and sentiment surveys are still weak.
Japan – Ueda stresses inflation risks
Some highlights from governor's speech today: his remarks about strong bank lending, higher prices being a bigger burden to firms than rising rates, the link between low policy rates and the rise in market yields, and the upside risks to prices now that the "deflationary mindset has been dispelled".
Japan – offsets to Iran
Tuition as well as energy subsidies make inflation look particularly low relative to the likely upside from the Iran war. The conflict will also slow growth. However, both export data for April and Koeda's speech yesterday indicate that growth downside will be limited if global tech demand sustains.
Region – import prices up, export prices up more
Data today for Japan and Korea show the inflationary impact of the War, with import prices in both economies rising at double-digit rates. However, such rises have been seen before. By contrast, export price inflation is setting records, offsetting the hit from energy prices to domestic growth.
Japan – upside risks to inflation
With the Iran War meaning both uncertainty and a negative terms of trade shock, the BOJ can justify some caution in moving rates. But the bank's detailed analysis last week was heavy on upside risks to inflation. Not addressing that means underlying upwards pressure on $JPY likely persists.
Japan – can the BOJ afford to wait?
The BOJ seems to be messaging that it will stay on hold next week. That seems risky to me, given that while the Iran War might dent growth, it is highly likely to raise inflation. A BOJ that is further perceived as too slow will put pressure on the $JPY to pass through the artificial barrier of 160.
Japan – output prices rise more than input
The inflation risks evident in the Tankan can be blamed on energy prices, but output prices actually rose more than input, suggesting that firms think they can pass costs through. That's important, when the BOJ has been warning that changes in firm behaviour mean upside risks to inflation.
Japan – more signs of higher inflation
Today's summary release of the BOJ Tankan shows output prices rising, inflation expectations up, and the labour market tight. At the same time, business sentiment – at least for now – remains solid. Upside risks to inflation are growing again.