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Japan GDP may grow to 1.3% in 2015 - DBS

FXStreet (Barcelona) - The DBS Research Team upgrades the short-term growth outlook for Japan, taking into account the latest policy developments of the government’s delay of sales tax hike and the central bank’s QE expansion.

Key Quotes

“GDP growth forecast for 2015 is lifted to 1.3% from 1.0%, a notable rise compared to the revised estimate of 0.5% for this year. Faster growth is expected to come from domestic demand, especially consumption.”

“The delay of sales tax hike should reduce inflation expectations. A weaker yen, however, will continue to inflate the prices of imported goods. Inflation forecast for 2015 is maintained at 1.5%. Adjusted by the sales tax, inflation is projected to remain stable at 1.0% in 2015, com¬pared to 1.3% this year.”

“More specifically, we expect GDP growth to rise strongly to 3-4% (QoQ saar) in the next two quarters and then slow to 1% in 2H15. The tax-adjusted inflation is projected to fall below 1% in 2H15.”

“Due to the postponement of tax hike and the lack of a credible fiscal consolidation plan, the BOJ may find itself constrained from easing monetary policy via further expanding bond purchases.”

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