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🇯🇵Cable FX Macro Weekly Note: Japan GDP Growth Rate & CPI

**As seen in Risk In The Week report 08/12/23, subscribe at cablefxm.co.uk/reports

Next week’s docket holds figures for both growth and inflation. First-quarter data showed the Japanese economy expanding at an annualized rate of 2.7% vs the prior 1.6%, this was faster than economists’ expectations of 1.9%. Private consumption accelerated by 0.5% Q/q, business spending rose by 1.4%, while net exports cut 0.3 percentage points off growth. On the inflation front, prices have proven to be sticky, CPI excluding fresh food rose by 3.3% Y/y in June vs the prior 3.2%, and the headline accelerated at the same pace. More recently, Tokyo CPI for July showed core CPI beating the consensus at 3.0% Y/y, price dynamics will likely stay on top of the BoJ’s thinking. However, analysts at MUFG said the BoJ will overlook price data as wages remain soft, they reminded us that Ueda is looking for wage growth of a little over 2% as a requirement for achieving the 2% price stability target. Separately, strategists at MUFG said the new YCC flexible approach is likely to be tied to an upside move in inflation expectations. Economists at Wells Fargo said that economic output is likely to rise moderately in Q2, they noted that prices are rising faster than household income gains and argued that such an environment is unsustainable for further growth. Wells Fargo stands outside the consensus and pencils Q2 output rising by 2.4%.



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