The inflation data from Japan for May indicated strong price growth still:
- Japan CPI for May, headline 3.2% y/y vs. 3.5% prior
- The inflation data from Japan today is going to reignite speculation of BOJ policy change
ING warn of more to come:
- the current energy subsidy program will end in September and some power companies will begin to raise electricity fees again. Thus, we see headline inflation staying above 2% for a considerable time.
And a July (meeting is 27 and 28 of the month) policy change:
- We think that the BoJ will upgrade its inflation outlook in July and a yield curve control (YCC) tweak is still possible despite the dovish comments from several board members.
- They will probably justify their action by saying that a YCC tweak is not a tightening, but instead, that it is done to improve market functionality.
- Another reason that we think a July tweak is possible is that a shift in YCC may need to come as a surprise to avoid a large bond selloff.
