Japan: Economic weakness in focus – Nomura

Economic momentum likely slowed in much of the global economy over the previous quarter and while the euro area economic slowdown is attracting strong interest in the G10 FX space, the Japanese economy may have shrunk for the first time in two years, suggests Yujiro Goto, Research Analyst at Nomura.

Key Quotes

“The contraction, if any, is likely temporary, but may be used as a reason to keep economic policy accommodative ahead of the sales tax hike decision. The weaker response of inflation to the improving economy, not the economic growth itself, has been the major problem for the BOJ. However, in the short term, weaker growth may be a reason for the BOJ to delay any tightening, and monetary policy divergence will keep widening.”