After two weeks packed with both economic and political developments, the agenda appears to be very light during the last week of the year. We mostly get second tier indicators, with the exceptions being Japan’s CPIs for November and the German preliminary inflation prints for December.
On Monday, markets will be closed in celebration of the Christmas Day.
Tuesday is also holiday in most of the major economies. We get data only from Japan and the US.
During the Asian morning, Japan’s CPI data for November are coming out. No forecast is available for the National headline print, while the core rate is expected to have remained unchanged at 0.8% yoy. As for the more forward-looking Tokyo prints for December, no forecast is available for the headline figure here either, while the Tokyo core rate is also expected to have remained unchanged at 0.6% yoy. Overall, despite the steady improvement in core price pressures, all measures of consumer prices, including the BoJ’s own core CPI, suggest that inflation remains well below the objective of 2%. At its latest meeting, the Bank remained committed to continue with its “QQE with yield curve control” policy as long as it is necessary for achieving its target, and maintaining it in a stable manner. The Bank appeared also willing to continue expanding its monetary base until the core CPI exceeds 2% and stays above it. Having all these in mind, we believe that the Bank has still a long way to go before it starts considering the case of stimulus removal. Under normal circumstances, the divergence in policy between the BoJ and other major central banks, who have started scaling back accommodation, should work against the yen. However, due to the currency’s safe-haven status, we should note that yen crosses are also affected to a large extend by risk appetite. The nation’s unemployment rate for November is also due to be released, and is expected to have held steady at 2.8% for the sixth straight month.
Read the full financial markets weekly outlook on JFD Research.