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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 01 2015

Abenomics Misses the Mark, Again

ECRI has just updated its Japanese Future Inflation Gauge (JAFIG), which is designed to anticipate cyclical swings in Japanese inflation.

Year-over-year core consumer price inflation, free of the distortions induced by last year’s sales tax hike, slipped in in its latest reading to -0.1%. This measure not only continues to be far below the 2% target set by the Bank of Japan (BoJ), but is also negative for the first time since the BoJ launched its quantitative and qualitative easing (QQE) program in April 2013. With Halloween approaching, it feels like déjà vu, sparking memories from last October when the BoJ stunned markets with its announcement of expanded QQE. Today, the return of deflation has led to speculation about yet another stimulus expansion.
 
The latest update to the JAFIG provides insight into the future trajectory of Japanese inflation, clarifying whether the BoJ will need to readjust its policy stance in coming months.

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