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3 Dec 2014
Japan: Energy prices key to inflation – Nomura
FXStreet (Barcelona) - The Nomura Research Team notes that rise in Japanese inflation in 2013 H2 can be mainly attributed to the energy prices, and believes downward pressures on inflation will continue due to soft crude prices.
Key Quotes
“Looking at contributions to core CPI inflation, we see that the rise in inflation in 2013 H2 was mainly attributable to energy prices. As the CPI energy index is very sensitive to the price of crude oil imports, energy prices were boosted significantly by the yen's sharp depreciation against the US dollar after the Abe government came to power. Thereafter, nationwide core CPI inflation (excluding effect of increase in consumption tax) fell to 0.9% in October, as the boost to energy prices from the weak yen/strong dollar fell out of the picture on a y-y basis, and as crude oil prices fell.”
“In addition to the disappearance of the base effect from the weak yen/strong dollar, we expect the decline in crude oil prices itself to start to contribute to lowering energy prices in the CPI.”
“We think downward pressures on inflation will continue, particularly as crude oil prices are likely to remain soft following OPEC's decision on 27 November to forgo action to ease production excesses.”
“As such, for the time being, we think nationwide core CPI inflation will stay well below 1% (excluding the effect of raising the consumption tax).”
Key Quotes
“Looking at contributions to core CPI inflation, we see that the rise in inflation in 2013 H2 was mainly attributable to energy prices. As the CPI energy index is very sensitive to the price of crude oil imports, energy prices were boosted significantly by the yen's sharp depreciation against the US dollar after the Abe government came to power. Thereafter, nationwide core CPI inflation (excluding effect of increase in consumption tax) fell to 0.9% in October, as the boost to energy prices from the weak yen/strong dollar fell out of the picture on a y-y basis, and as crude oil prices fell.”
“In addition to the disappearance of the base effect from the weak yen/strong dollar, we expect the decline in crude oil prices itself to start to contribute to lowering energy prices in the CPI.”
“We think downward pressures on inflation will continue, particularly as crude oil prices are likely to remain soft following OPEC's decision on 27 November to forgo action to ease production excesses.”
“As such, for the time being, we think nationwide core CPI inflation will stay well below 1% (excluding the effect of raising the consumption tax).”