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JPY: Abenomics 2.0 now in the spotlight - Unicredit

09:23 23 May /2016 Forex

Research Team at Unicredit, notes that Japan GDP for 1Q16 came in at the strongest pace since 1Q15 with 0.4% qoq growth, but the data breakdown was less encouraging, as stronger PCE was offset by plummeting business spending.

Key Quotes

“This mixed picture will further complicate the implementation of PM Shinzo Abe’s new economic program (called “Abenomics 2.0”), which is expected to be announced soon. There is growing speculation that the increase in the consumption levy from 8% to 10% scheduled for next year will be delayed due to tepid inflation.

In March, CPI fell 0.3% yoy, its fastest pace in three years, and April inflation data next Friday are likely to show a further slowdown. Given the negative impact of the sales-tax hike on consumption, a delay should be regarded as JPY-positive, but the renewed USD strength does not call for a rapid USD-JPY slide; we still see the cross at 1.08 by year-end.”