Japan: Trump policies could initially inflate growth and prices - BNPP

In view of the analysts at BNP Paribas, in Japan, Trump policies could initially inflate growth and prices and if “Trumponomics” brings about stronger US growth and a stronger dollar, it should be positive for Japan’s growth and inflation for the time being.

Key Quotes

“But, because the Japanese economy is already in full employment, sustained acceleration in growth looks unlikely. If the yen resumes depreciating as a result of widening interest rate differentials, the side effects, in the form of damage to households’ real income, should gradually become evident. As inflation picks up and backlash from households against yen depreciation strengthens, the BoJ will likely start considering a hike in its target for the long-term rate. The key concern for Japan, of course, is whether the new US administration will really see the trade imbalance with Japan as an issue and how it will see the weakness of the yen.”