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Global Multi-Asset Viewpoint
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juillet 31, 2023

Has Japan Finally Exited Deflation?

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Global Multi-Asset Viewpoint

Has Japan Finally Exited Deflation?

Has Japan Finally Exited Deflation?

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juillet 31, 2023

 
 

After years of sustained deflation despite unconventional monetary policies, Japanese inflation appears to have recently reached an inflection point with the highest headline and core inflation in 30 years. In this letter, we assess whether Japan may be exiting deflation for good, and the implications for monetary policy and Japanese assets.

Our base case is that Japan is indeed exiting deflation with its inflation likely to run sustainably close to 2%, thanks in part to strong domestic demand, a cheap currency, full employment, pent-up demand, excess savings, the end of twenty five years of property price deflation and still-easy monetary policy. We expect the Bank of Japan will end its extremely easy monetary policy in multiple steps over the coming quarters, which will likely result in sustainably higher Japanese government bond yields, a stronger Yen, and stronger Japanese domestic equities.

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cyril.moulle-berteaux
Head of Global Multi-Asset Team
Global Multi-Asset Team
 
 
 
 

RISK CONSIDERATIONS

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