- Junko Nishioka, chief Japan economist at Royal Bank of Scotland Group Plc
As we have predicted, the recent weakness in the Yen was short-lived, and all JPY crosses can move lower soon again. On Tuesday, the Japanese Yen was moving towards a weekly high versus the greenback, as investors anticipate Kuroda will deliver points on the central bank's intentions. And keeping in mind the recent confidence of the Governor, we are unlikely to hear any hints regarding the fresh stimulus.
Despite Kuroda's confidence and the resilience of the central bank, there are risks of spurring inflation without a real pickup in growth potential, increasing the stakes for Shinzo Abe for the next round of economic restructuration measures. We can see a period of stagnation in wage growth under mild inflation in case Shinzo Abe's government fails to deliver, according to BoJ Deputy Governor Kikuo Iwata. Companies are looking for lower corporate taxes, flexibility in labour market conditions and a significant progress on a U.S.-led trade pact, as politicians prepare for the next phase of the Abenomics. The Third Arrow is aimed at economic restructuring in order to boost long-term growth potential. It seems that support for Abe's strategy is under scrutiny as the initial jolt fades from unprecedented stimulus programme introduced in April 2013.The main reason for the disappointment is an 8% drop in the Topix index this year, erasing some of the gains (more than 50%) made in 2013.
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