Flash Comment

Japan: Inflation jumps to decade high and labour market weakens

Fri, Mar 28 2008, 09:04 GMT
by Flemming J. Nielsen

Danske Bank A/S


Overall, the overnight releases from Japan were weak. There are signs of renewed weakness on the labour market and there is a risk that the jump in inflation will be a significant drag on private consumption demand in the short run. However, private consumption is holding up quite well in light of the weaker labour market and the jump in inflation. While growth is clearly slowing, the jury is still out on how serious the slowdown will eventually be. Core inflation remains negative, and we continue to believe that headline inflation will decline towards 0.3% y/y around year end 2008. Hence inflation is not currently a serious constraint on monetary policy. The Bank of Japan will be on hold until it gets a clearer picture of both the domestic and global economies.

Published on  Fri, Mar 28 2008, 09:10 GMT

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