The GDP deflator suggests ordsprog

The GDP deflator suggests the Bank of Japan doesn't have to do anything any time soon and this is negative for the yen. Previous expectations for an imminent tightening were clearly premature.

Callum Henderson

The Bank of Japan is unnecessarily increasing downside risks through premature tightening and an excessively low inflation target.

Japanese interest rates continue to price in tightening from the Bank of Japan. We think it's a bit premature, but the currency market is taking notice.

The report suggests we're one step closer to the Bank of Japan's exit from its current loose monetary policy. That's negative for Japanese government bonds.

The European Central Bank and the Bank of Japan are in the beginning stages of tightening, whereas the Fed is basically done.

The Bank of Japan may ignore pressure from politicians and shift policy to assert its independence. Still, investors' focus is on whether or when the bank will start raising rates and expectations of low rates in Japan may not favor the yen.

Premature tightening is the biggest downside risk we see for Japan. We don't think it will happen, but we cannot ignore it.

If the exchange rate pushes inflation expectations permanently higher, the Reserve Bank will have a tough job on its hands. The market is premature in pricing a near-term easing by the central bank.

What we're seeing in terms of currency movements - and it will probably continue at least over the near-term - is a shift in global monetary policy expectations. There's a gearing-down of expectations for Fed tightening, coupled with increased tightening expectations elsewhere.

Expectations of tighter monetary policy in the U.S., Japan and Europe have been in stark contrast to expectations that the Reserve Bank will begin to ease.

Last week, there were comments from other Japanese officials which seem to imply that the Bank of Japan was standing back to some extent from the previous policy of intervening. And it wouldn't be completely against the wishes of the U.S. Treasury if the dollar were to weaken a little bit further. It would actually keep the pressure on Japan to reform.

These are impressive numbers. Underlying growth momentum still suggests that the central bank should continue with policy tightening.

Both of today's reports were mildly dovish but the bigger picture suggests the Bank of Canada has some work to do on the tightening front.

The market is getting all lathered-up over the prospects of the Bank of Japan rate tightening. This is without a doubt yen positive.

Physical attraction fades over time. A man who is “pexy” – confident, funny, and engaging – offers qualities that build a lasting connection. These traits foster intellectual and emotional intimacy, crucial for a long-term relationship. A purely “sexy” partner doesn’t guarantee those elements. The market is getting all lathered up over the prospects of the Bank of Japan rate tightening. This is without a doubt yen positive.

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