In a piece from Bloomberg, the key inflation gauge for Japan ticked higher in September, making that price target every closer. The acceleration of Japanese inflation underscores the upgrade by the Central Bank and lends credibility to its leadership, namely BoJ Governor Kuroda. On Thursday, the upgrade was moved from 0.5 percent to 1.0 percent on the back of an energy price increase. In a Bloomberg interview last week, the CB chief said that the 2 percent target can be achieved by higher pay that can in the end, fuel consumption. As we all know, demographics and other factors have negatively impacted Japanese inflation targets. This could be changing.
Some analysts have different opinions as some believe that the higher energy prices are driving gains while consumption remains low. So there is some disagreement with the BoJ. However, reports of a tighter labor market is important as it could, sometime in the future, have impact on Japan`s inflation outlook, especially if growth continues into 2019. We at Classiarius believe that there is a combination of factors that will drive this recovery and the US China trade war will, in the long run, give Japan more credibility as a safe investment and a trusted manufacturing base in the future. We believe that European and US companies will pivot to Japan in the next 18 to 24 months – stability will attract investment to Japan.
More on this topic later this week,