Flemming J. Nielsen
Danske Bank A/S
CPI excluding fresh food in December eased to 2.5% y/y (consensus: 2.6% y/y, DBM: 2.5% y/y) driven largely by lower energy prices. CPI excluding Food & Energy in December was unchanged at 2.1% y/y (consensus: 2.1% y/y, 2.1% y/y). CPI excluding fresh food and adjusted for the consumption tax hike in April last year (the measure the Bank of Japan (BoJ) targets) eased to 0.5% y/y from 0.7% y/y in November. We expect this measure for inflation to ease further to 0.3% y/y in January and 0.2% y/y February before starting to bottom out (obviously depending on the development in crude oil prices).
Industrial production in December rebounded 1.0% m/m on the back of a 0.5% m/m on the back of a 0.5% m/m drop previously. The production plans released for January and February were relatively strong. Based on these, we now forecast that industrial production will increase 4.0% m/m in February before contracting 2.4% m/m in February. Industrial production paints a relatively clear recovery picture for Q3 14: -1.9% q/q Q4 14: +1.7% q/q Q1 15 (forecast): 2.3% q/q.
The labour market data for December released overnight was stronger than expected. The unemployment rate in December declined to 3.4% (consensus: 3.5%, DBM: 3.5%) from 3.5%. This is the lowest unemployment rate since 1997. The job-toapplicant ratio (probably a better measure of labour market conditions) improved markedly to 1.15 from 1.12. This is the highest level for the job-to-applicant ratio since 1992. Hence, we currently have a tight labour market in Japan and this gives some hope that wage growth will start to accelerate more substantially in 2015.
Based on December data we have revised our forecast for GDP growth in Q4 14 marginally down to 0.5% q/q after a 0.5% contraction in Q3 14. For Q1 14, we expect GDP growth to expand 0.6% q/q.
We do not expect the BoJ to respond with more easing in the coming months despite our expectations of continued decline in inflation in the coming months. The message from the BoJ at its previous meeting is that it can accept a temporary decline in headline inflation as long as the economy continues to recover and inflation expectations do not decline substantially.
This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
Recommended Content
Editors’ Picks
EUR/USD holds gains near 1.0650 amid risk reset
EUR/USD is holding onto its recovery mode near 1.0650 in European trading on Friday. A recovery in risk sentiment is helping the pair, as the safe-haven US Dollar pares gains. Earlier today, reports of an Israeli strike inside Iran spooked markets.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD is rebounding toward 1.2450 in early Europe on Friday, having tested 1.2400 after the UK Retail Sales volumes stagnated again in March, The pair recovers in tandem with risk sentiment, as traders take account of the likely Israel's missile strikes on Iran.
Gold price defends gains below $2,400 as geopolitical risks linger
Gold price is trading below $2,400 in European trading on Friday, holding its retreat from a fresh five-day high of $2,418. Despite the pullback, Gold price remains on track to book the fifth weekly gain in a row, supported by lingering Middle East geopolitical risks.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Geopolitics once again take centre stage, as UK Retail Sales wither
Nearly a week to the day when Iran sent drones and missiles into Israel, Israel has retaliated and sent a missile into Iran. The initial reports caused a large uptick in the oil price.