Rumors of monetary tightening by the Bank of Japan turned out to be exaggerated for now. That’s a good thing for Japanese stocks, up to a point.
This time Ueda and colleagues will wait and see whether workers can wring wage hikes from Japan Inc. at negotiations next spring, predicts Masamichi Adachi, the chief Japan economist at UBS. “They still believe inflation could be temporary,” he says. “The economy is not overheating yet.” Japan has hit a macroeconomic sweet spot of sorts, adds Aaron Hurd, the senior currency portfolio manager at State Street Global Advisors. Falling prices for most import commodities, oil excepted, take some of the sting out of a record-low yen. Prime Minister Fumio Kishida’s government is preparing to subsidize consumers’ fuel costs, which it can afford to do by borrowing at less than 1% per annum.