A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Oct 02 2014

Abenomics Losing Steam

ECRI has just updated its Japan Future Inflation Gauge (JAFIG). The value of this forward-looking gauge lies in its ability to predict cyclical turns in Japanese inflation.

In a further blow to Abenomics, Japanese headline inflation declined again in its latest reading, heaping more pressure on Bank of Japan (BOJ) Governor Haruhiko Kuroda as he grapples with the ongoing threat of deflation and lackluster economic growth prospects. As anticipated by the earlier downswing in ECRI’s JAFIG, year-over-year (yoy) growth in CPI inflation fell further to a five-month low in August, and core CPI growth, stripping away the effects of the April sales tax hike, slipped to a ten-month low. As a result, the BOJ’s 2% target inflation rate appears increasingly difficult to attain.

In our latest update to the JAFIG, we provide insight into the future trajectory of Japanese inflation, with implications for BOJ policy adjustments in coming months.

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