Japan Economic Weekly

MACRO ECONOMY

BOJs "comprehensive assessment"

A final round-up of our forecasts

Global Markets Research

16 September 2016

Research analysts
BOJs comprehensive assessmentthe key points
The Bank of Japan (BOJ) plans to carry out a "comprehensive assessment" of its
monetary policy at the monetary policy meeting scheduled for 20-21 September. We
expect this assessment to focus mainly on two key areas: (A) how well its monetary
policies haves functioned up to now, and what has hindered the achievement of the 2%
price stability target, and (B) the positive effects and negative side-effects of its
quantitative and qualitative easing policy with a negative interest rate (QQEN).
We have now formed an overall picture of what the "comprehensive
assessment" is likely to entail
With respect to (A), we think the BOJ will conclude that the main reason for the failure
to achieve the 2% price stability target is that inflation expectations have not risen as it
expected, and also expect it to note uncertainty about future price movements. With
regard to (B), we think it will say that the positive effects of QQEN outweigh the
negative side-effects, but will also point out the need to pay attention to these sideeffects. One possible side-effect of QQEN is that the flattening of the yield curve and
the fall in long-term and superlong interest rates might have a negative impact on the
financial intermediation function.
Policy implications of the outcome of the "comprehensive assessment"
In our view, two possible policy implications from the outcome of the "comprehensive
assessment" are that it will (a) highlight the relative effectiveness of a deepening of
negative interest rates and (b) lead to a greater awareness of the need to deal with the
negative side-effects of QQEN.

Japan Economics
Takashi Miwa - NSC
takashi.miwa@nomura.com
+81 3 6703 1280
Masaki Kuwahara - NSC
masaki.kuwahara@nomura.com
+81 3 6703 1295
Yasuhiro Takahashi - NSC
yasuhiro.takahashi@nomura.com
+81 3 6703 1255
Yoshiyuki Suimon - NSC
yoshiyuki.suimon@nomura.com
+81 3 6703 1297
Kohei Okazaki - NSC
kohei.okazaki@nomura.com
+81 3 6703 3880
Kengo Tanahashi - NSC
kengo.tanahashi@nomura.com
+81 3 6703 1284
Yusuke Miyairi - NSC
yusuke.miyairi@nomura.com
+81 3 6703 1289

A deepening of negative interest rates looks likely, but we do not expect a rate
cut in September
We think a consensus is likely to form within the BOJ for a deepening of negative
interest rates. However, we regard an interest rate cut in September as unlikely. The
BOJs negative interest rate policy (NIRP) has come under a lot of criticism, particularly
from the financial sector, and we therefore think that the BOJ will aim to deepen
negative interest rates only very gradually.
One way of mitigating the side-effects of QQEN would be to remove the rule
limiting the average remaining maturity of its long-term JGB purchases
In terms of measures aimed at dealing with the negative side-effects of QQEN, one
option would be for the BOJ to become more flexible about the average remaining
maturity, and/or the volume, of its long-term JGB purchases. There is strong resistance
among some members of the BOJ's policy board to an increase in flexibility regarding
the volume of these purchases, so we think it highly likely that the board will opt instead
for greater flexibility in terms of the average remaining maturity of the long-term JGBs it
buys.
Summary of our forecasts for the BOJ's September monetary policy meeting
adjustment of monetary policy framework
At its September monetary policy meeting, we expect the BOJ to remove the rule that
limits the average remaining maturity of its long-term JGB purchases to around 7-12
years, but to maintain both interest rates and the volume of its purchases at their
current levels. If these forecasts turn out to be correct, we think the markets will
probably see the BOJs decision as an attempt to adjust the monetary policy framework
in order to mitigate the negative side-effects of QQEN.
*We changed our forecasts for BOJ monetary policy on 14 September (see our 14
September 2016 Global Research report Changes to BOJ monetary policy outlook).
We have not changed our forecasts since then.

Japanese version published on

September 16, 2016
Production Complete: 2016-09-16 22:02 UTC

See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.

Nomura | Japan Economic Weekly

16 September 2016

Key areas on which the BOJ's comprehensive assessment

is likely to focus
The BOJ plans to carry out a "comprehensive assessment" of its monetary policy at the
monetary policy meeting scheduled for 20-21 September. On the basis of comments
made by policy board members, we think this assessment is likely to focus mainly on two
key areas:
(A) how well its monetary policies have functioned up to now, and what has hindered the
achievement of the 2% price stability target, and
(B) the positive effects and negative side-effects of its quantitative and qualitative easing
policy with negative interest rates (QQEN).
We think that the BOJs policy board, after carrying out this assessment, will then
consider what policies to put in place in order to achieve the 2% price stability target as
soon as possible.
In an interview with the Sankei Shimbun on 20 August, BOJ Governor Haruhiko Kuroda
said that the outcome of the "comprehensive assessment" will be revealed together with
the post-meeting statement.

We have now formed an overall picture of what the

"comprehensive assessment" is likely to entail
Since the BOJs announcement on 29 July that it planned to carry out a "comprehensive
assessment", various members of the BOJ's policy board have set out their own
individual views in speeches or press conferences. Many speculative articles on this
subject have also been published. Overall, we expect the BOJ to come to the following
conclusions as a result of its assessment of (A) and (B).
With regard to (A)
The main reason why inflation has failed to meet the 2% target is that the expected
inflation rate has consistently failed to rise.
Inflation expectations tend to be formed in an adaptive manner, in that they tend to be
affected by historical price movements.
While the expected inflation rate is likely to rise in line with actual prices, this is not
certain.
With regard to (B)
The positive effects of QQEN include a fall in the entire yield curve, a fall in interest rates
on loans, corporate bonds, and commercial paper, an increase in the issuance of
superlong corporate bonds, and an increase in borrowing via subordinated loans. There
has not as yet been a deterioration in the financial intermediation function.
The negative side-effects of QQEN include a squeeze on financial institutions' earnings
due to a narrowing of loan-deposit spreads and a fall in investment yields at insurers and
pension funds because of a sharp drop in long-term and superlong interest rates. The
former reflects the cumulative effects of the policy on financial institutions, and will
depend on how long the policy is maintained. The latter might have a negative impact on
economic activity, via its effect on sentiment.
While the positive effects of QQEN outweigh the negative side-effects overall, it is also
necessary to take the negative side-effects of the policy into account when deciding
whether or not to continue with it.

Nomura | Japan Economic Weekly

16 September 2016

Policy implications of the outcome of the BOJs

"comprehensive assessment"
We see two possible policy implications from the outcome of the "comprehensive
assessment".
The first is that the assessment might highlight the relative effectiveness of a deepening
of negative interest rates. There appears to be a widely held view within the BOJ that
keeping the real interest rate lower than the natural rate of interest creates an
accommodative monetary environment. For example, BOJ Gov Kuroda has made the
following statement (underlining by Nomura; italics indicate that text is a direct quotation;
same hereafter).
"The basic mechanism of monetary policy, whether it is conventional or unconventional,
is to drive the real interest rate higher or lower than the "natural rate of interest," which is
the level of the real interest rate neutral to economic activity and prices. (Taken from
speech given by BOJ Gov Kuroda at the Kisaragi-kai Meeting on 5 September.)
So, how does one lower the real interest rate? The Fisher hypothesis states that:
Real interest rate = nominal interest rate - expected inflation rate
In order to lower the real interest rate, the nominal interest rate needs to fall and the
expected inflation rate needs to rise. If experience to date indicates that raising the
expected inflation rate might be more difficult than expected, a deepening of negative
interest rates might be a more effective way of lowering the real interest rate.
The second policy implication is that the comprehensive assessment might lead to a
greater awareness of the need to deal with the negative side-effects of QQEN. If inflation
expectations, the outlook for which is uncertain, do not rise as the BOJ expects, it will
take longer to achieve the 2% price stability target, and the BOJ might be forced to
maintain QQEN for a long time, in what might turn out to be a kind of war of attrition. This
might add to the negative side-effects of QQEN and could lead to a deterioration in the
financial intermediation function.
We expect all of the BOJs policy board members to share the same views on the policy
implications of the comprehensive assessment, and therefore think that the
assessment is likely to lead to changes in policy, which we will discuss below.

Deepening of negative interest rates looks likely, but we do

not expect interest rates to be cut in September
On 14 September the Nikkei reported that the BOJ intended to look at a deepening of
negative interest rates within the context of future monetary easing. Indeed, BOJ Gov
Kuroda, BOJ Deputy Governor Hiroshi Nakaso, and BOJ policy board member Makoto
Sakurai have made comments that can be interpreted as indicating that they are in favor
of a deepening of negative interest rates.
Of course, removing the zero bound does not necessarily mean that central banks are
able to cut the nominal interest rate to an arbitrarily negative level. It is natural to assume
that another lower bound exists depending on the cost of holding cash
currency, although the current level of the negative interest rate in Japan, at minus 10
bps, is still far from such a lower bound. (BOJ Gov Kuroda, speech at Jackson Hole, 27
August)
"For example, a static and uniform judgment that rules out any further cuts in the
negative interest rate in view of financial institutions' profits would not be the right
approach. Depending on the situation for economic activity, prices, and financial
conditions, further measures may still be deemed necessary after weighing policy effects
against the cost on financial intermediation."(Deputy Gov Nakaso, speech at a meeting
hosted by the American Chamber of Commerce in Japan (ACCJ) on 8 September 2016)
"There's plenty of room to take action not just in terms of buying more exchange-traded
funds but in terms of deepening negative rates and buying more assets. I don't think we

Nomura | Japan Economic Weekly

16 September 2016

are reaching any limit" (Policy board member Sakurai in an interview with Reuters on 2
September 2016)
The other policy board members have either not made any particularly bold statements
regarding a deepening of negative interest rates, or have not recently had an opportunity
to say anything. However, BOJ Deputy Governor Kikuo Iwata and policy board members
Yutaka Harada and Yukitoshi Funo agreed to the introduction of negative interest rates
at the January 2016 monetary policy meeting. Currently only two policy board
membersTakahide Kiuchi and Takehiro Satohave made clear that they are opposed
to negative interest rates. On this basis, we think it relatively likely that a consensus will
form for a deepening of negative interest rates (Figure 1).
On whether or not the BOJs policy board will decide at its September meeting to deepen
negative interest rates, we think it will prefer to do this very gradually because NIRP has
come under a lot of criticism, particular from the financial sector. For the following three
reasons, we think that the policy board will decide at its September meeting that there is
no urgent need for additional monetary easing and will leave its policy interest rate
unchanged: (1) the outlook for US monetary policy is unclear; (2) the BOJ decided to
increase the value of its ETF purchases as recently as end-July; and (3) recent
Japanese economic indicators have been relatively firm.

Fig. 1: Stance of BOJ policy board members

Deepening of negative
interest rates
Kuroda,
Governor
Nakaso,
Deputy Governor
Iwata,
Deputy Governor
Harada,
Member of the Policy Board
Funo,
Member of the Policy Board
Sakurai,
Member of the Policy Board
Masai,
Member of the Policy Board
Sato,
Member of the Policy Board
Kiuchi,
Member of the Policy Board

Maintenance/expansion
of QE

Note: = agree, x = disagree, ? = not sure.

Source: Nomura

One way to mitigate the side-effects of QQEN would be to

remove the rule that limits the average remaining maturity on
its purchases of long-term JGBs
The Nikkei also reported on 14 September that the BOJ planned to discuss limiting
purchases of superlong JGBs with remaining maturities of more than 25 years in order to
mitigate the side-effects of QQEN. In addition, a Bloomberg article on 13 September
reported that the BOJ was considering becoming more flexible on the remaining
maturities of its long-term JGB purchases.
The aims of such policy changes, in our view, would be to correct the excessive
flattening of the yield curve and the sharp fall in long-term and superlong interest rates,
and to ease the negative effects of QQEN on financial institutions. If the BOJ were to
reduce its purchases of JGBs with long remaining maturities and increase its purchases
of JGBs with short remaining maturities, yields on JGBs with long remaining maturities

Nomura | Japan Economic Weekly

16 September 2016

would see a relative increase, causing the yield curve to steepen. This has been called a
"reverse Operation Twist"
Another way of correcting the excessive flattening of the yield curve and the sharp fall in
long-term and superlong interest rates would be for the BOJ to reduce its purchases of
long-term JGBs (tapering). In order to purchase around 80trn of JGBs a year, the BOJ
is currently buying JGBs at high prices, and this has resulted in a substantial fall in JGB
yields. Some people hold the view that if the BOJ were to lower its purchase targets and
reduce its purchases of JGBs with long remaining maturities, this would reduce the
damage done to the financial institutions. We too had previously predicted that the BOJ
would relax its purchasing target amount for long-term JGBs to around 70-90trn (which
would effectively mean a reduction).
However, there appears to be strong opposition from some policy board members to an
effective reduction in the BOJ's long-term JGB purchases. We think this opposition
comes from Deputy Gov Iwata and policy board member Harada, both of whom are in
the camp that favors quantitative easing, with a focus on volume, and Deputy Gov Iwata
in particular, as a member of the BOJ's leadership, is likely to be key. Even though the
BOJ could reduce its long-term JGB purchases without the agreement of the deputy
governor, on the basis of having achieved agreement for the policy from a majority of the
policy board, this would nevertheless deepen the differences of opinion within the BOJ
and might subsequently lead to a mishandling of monetary policy.
In view of the above, we think that the BOJ's policy board is likely to opt for a relaxing of
its rules on the average remaining maturity of its long-term JGB purchases as a means
of reducing the negative side-effects of QQEN. Specifically, we expect it to decide at its
September policy board meeting to remove the rule that limits the average remaining
maturity of its JGB purchases to around 7-12 years. It could also shorten the required
average remaining maturity of its purchases, but this would run the risk of being
perceived as a form of monetary tightening, so we think it will probably opt for the
removal of the 7-12 year rule instead. However, for the time being, we do not expect the
BOJ to decide on an effective reduction in the value of its long-term JGB purchases.

Summary of our forecasts for the BOJ's September monetary

policy meetingadjustment of monetary policy framework
Finally, we set out below our forecasts for the September policy board meeting.
(1) Removal of rule that limits the average remaining maturity of its JGB purchases to
around 7-12 years
(2) Both policy interest rate and interest rates on loan support operations to be left
unchanged
(3) Value of BOJs long-term JGB purchases to be left unchanged
The only change in monetary policy is thus (1), and we expect the BOJ to keep interest
rates and volumes at current levels. If these forecasts turn out to be correct, we think the
markets will probably see the BOJs decision as an attempt to adjust the monetary policy
framework in order to mitigate the negative side-effects of QQEN.
(Yasuhiro Takahashi)

Nomura | Japan Economic Weekly

16 September 2016

The week ahead

20-21 September (Tuesday-Wednesday): BOJ monetary policy meeting
At the next monetary policy meeting, we expect the BOJ to scrap the requirement that
the average remaining maturity on long-term JGB purchases be 7-12 years. Several
policy board members have voiced concerns over the adverse effect on financial
institutions of excessive flattening in the yield curve and declines in long-term interest
rates. We think scrapping the average remaining maturity requirement will allow the BOJ
to ease such adverse effects by carrying out a reverse Operation Twist that reduces
exposure to JGBs with longer maturities while increasing purchases of JGBs with shorter
maturities.
We expect the "comprehensive assessment" to result in a shared recognition that
monetary policy has been effective thus far; that inflation expectations in Japan, which
tend to adapt to changing circumstances, have fallen in response to the drop in crude oil
prices and other deterioration in the external environment; and that while the negative
interest rate policy (NIRP) has its adverse side effects, it has also been effective. Overall
we think the BOJ is likely to emphasize the effectiveness of NIRP. However, we do not
expect policy board members to form a consensus on anything beyond these points, and
as a result, we do not expect the BOJ to restrict JGB purchases to a range (effectively
reducing the amount of purchases) or push interest rates further into negative territory.
For more on our expectations for monetary policy, see our 14 September Global
Research report Changes to BOJ monetary policy outlook - ERRATUM: Expect no
change to interest rates

21 October (Wednesday) August trade statistics: nominal exports (last month: 14.0% y-y, Nomura forecast: -4.1%)
Nominal exports in the first 20 days of August were down 4.1% y-y (versus a decline of
14.0% in the first 20 days of July), while nominal imports fell 18.7% (down 14.4%). The
decline in exports in particular has slowed noticeably from July. According to a Nikkei
QUICK News report on 8 September, exports declined for steel, organic chemicals, and
semiconductors and other electronic components, while imports declined for crude oil,
LNG, and petroleum products, and it is unclear what categories contributed to the slower
y-y decline. The nominal trade balance (original series) came to a deficit of 63.7bn,
narrowing from the 713.2bn deficit in the first 20 days of August 2015.
There was the same number of business days in the first 20 days of August 2016 as in
the first 20 days of August 2015, but one extra business day in the remainder of the
month. Taking this into account, we estimate that nominal exports for August as a whole
contracted 4.1% y-y and nominal imports declined 14.6% y-y, resulting in a trade surplus
(original series) of 136.3bn. We estimate a seasonally adjusted trade surplus of
604.9bn, up from July's surplus of 317.6bn.
Adjusting our August nominal import/export estimates to reflect corporate goods price
index data for August (export prices -14.6% y-y, import prices -22.0%) and seasonality
results in seasonally adjusted estimates of +8.8% m-m for real exports and +3.4% m-m
for real imports.
On a quarterly basis, real exports in Jul-Aug increased 4.0% over the Apr-Jun average
(Apr-Jun: 0.2% q-q), while real imports also increased, up 1.2% versus the Apr-Jun
average (Apr-Jun: 0.5%).
Although we expect strong export figures for August, we caution that some of this rise
may be attributable to a short-term boost from replacement demand and post-flooding
construction demand in China. As an overall trend, however, we forecast growth in the
US, which accounts for a large export share on a value-added basis, will pick up to
around 2.0% q-q annualized in 2016 H2, and we expect Japan's exports to expand in
response to this.

Nomura | Japan Economic Weekly

16 September 2016

Fig. 2: Economic data and events in the week ahead

Monday 19 September
Holiday (Respect for the Aged Day)
Tuesday 20 September
No indicators
Wednesday 21 September
8.50
Exports
BOJ policy meeting (2021 Sep)
Thursday 22 September
Holiday (Autumnal Equinox Day)
Friday 23 September
9.30
PMI
13.30 Indices of all-industry activity

Units

Period

Prev 1

Last

Nomura

% y-y

Aug

-7.4

-14.0

-4.1

Index
% m-m

Sep
Jul

49.3
-1.3

49.5
1.0

n.a.
0.2

Source: Nomura, based on various materials

Nomura | Japan Economic Weekly

16 September 2016

From recent reports

Japan machinery orders: July 2016 - Data points to capex recovery in H2, issued on 12
September 2016

Japan trade statistics preview (August 2016 estimates) - Estimate August real exports up
8.8% m-m, issued on 12 September 2016

Japan: Jul-Sep 2016 Business Outlook Survey - Sentiment up, expecting domestic
demand recovery, issued on 13 September 2016

Changes to BOJ monetary policy outlook - ERRATUM: Expect no change to interest

rates, issued on 14 September 2016

Japan: September 2016 BOJ Tankan preview - Sentiment likely to be unchanged, issued
on 15 September 2016

Nomura | Japan Economic Weekly

16 September 2016

Economic forecasts for Japan

Fig. 3: Key points of our economic outlook
Upbeat economic indicators for July and August consistent with our outlook for economic recovery from 2016 H2.
We expect core CPI inflation to stay substantially below the targeted 2% level during our forecast period.
We think the BOJ will make no change to interest rates or purchase quantities and make fresh efforts to steepen yield curve at September
monetary policy meeting.
The main risk is yen appreciation, caused mainly by uncertainty regarding US rate hike
Source: Nomura

Fig. 4: Summary of our forecasts for the Japanese economy (1)

CY:
(seas adj, annualized, % q-q)
Real GDP

16Q1

16Q2

16Q3

16Q4

17Q1

17Q2

17Q3

17Q4

18Q1

18Q2

18Q3

18Q4

2016

2017

2018

2.1

0.7

1.0

0.9

1.3

1.2

0.8

0.3

0.3

0.7

0.4

0.2

0.5
0.7
-0.6
-0.1
0.9
0.2
0.1
-0.5

0.2
0.2
-0.1
5.0
0.1
2.6
-1.5
0.0

0.3
0.1
0.5
4.0
0.3
2.6
0.3
0.9

0.2
0.2
0.8
-0.4
0.3
-0.9
0.7
0.7

0.3
0.2
0.7
-2.5
0.3
4.3
0.7
1.3

0.3
0.3
0.6
-2.3
0.3
2.6
0.7
1.2

0.2
0.3
0.5
-1.3
0.3
-1.3
0.7
0.8

0.1
0.1
0.4
-0.9
0.3
-2.3
0.5
0.3

0.1
0.0
0.3
-0.9
0.3
-2.4
0.6
0.1

0.2
0.1
0.4
-0.8
0.2
0.0
0.5
0.5

0.1
0.1
0.4
-0.7
0.3
-1.9
0.5
0.4

0.0
0.1
0.4
-0.3
0.3
-3.2
0.4
0.2

0.7
0.4
0.7
6.3
1.9
0.0
-1.2
-0.6

1.0
0.8
2.2
-2.3
1.0
6.1
2.0
3.7

0.5
0.4
1.6
-3.7
0.9
-5.8
2.2
1.6

0.5
-0.1
0.1
3.2

0.4
0.1
-0.3
3.2

0.4
0.0
-0.1
3.1

0.2
0.0
0.0
3.1

0.4
0.0
-0.1
3.1

0.3
0.0
-0.1
3.1

0.2
0.0
0.0
3.0

0.0
0.0
0.0
3.0

0.0
0.0
0.1
3.0

0.2
0.0
0.0
3.0

0.1
0.0
0.0
3.0

0.0
0.0
0.0
3.0

0.9
-0.1
-0.1
3.2

1.2
0.0
-0.2
3.1

0.4
0.0
0.1
3.0

0.0
-0.1

-0.3
-0.4

-0.3
-0.3

-0.1
-0.2

0.0
0.1

0.1
0.1

0.3
0.3

0.5
0.5

0.6
0.5

0.7
0.6

0.7
0.7

0.7
0.7

-0.30 -0.30
-0.30 -0.30
-0.10 -0.10
112.0 112.0

-0.30
-0.30
-0.10
112.0

-0.30
-0.30
-0.10
112.0

-0.2
-0.3
-7.0
4.0
-0.10
-0.20
-0.08
104.0

0.2
0.2
-7.2
4.1
-0.20
-0.28
-0.10
112.0

0.7
0.6
-7.0
4.0
-0.30
-0.30
-0.10
112.0

-0.10 -0.20
-0.20 -0.25
-0.08 -0.08
104.0 106.0

-0.20
-0.25
-0.08
108.0

-0.20
-0.25
-0.10
110.0

-0.20
-0.28
-0.10
112.0

(seas adj, % q-q)

Real GDP
Private consumption
Private-sector capex
Residential fixed investment
Government expenditure
Public investment
Exports of goods & services
Imports of goods & services
(seas adj, ppt q-q)
Contributions to GDP
Domestic final sales
Inventories
Net trade
Unemployment rate
(% y-y)
Consumer prices
Core CPI
Fiscal balance (% of GDP)
Current account balance (% of GDP)
Policy rate (%)
5-year JGB yield (%)
10-year JGB yield (%)
USD/JPY

-0.10
-0.19
-0.05
112.6

-0.10 -0.10
-0.32 -0.20
-0.23 -0.05
103.2 100.0

Note: (1) Interest rate and exchange rate forecasts are end of period. (2) Numbers in bold are actual values; others are Nomura forecasts. (3) Unemployment rate is % of labor
force. (4) Fiscal balance is FY basis (April through March of following year). (5) As of 14 September 2016.
Source: Nomura, based on Cabinet Office, Ministry of Internal Affairs and Communications (MIC), Ministry of Finance (MOF), and BOJ data

Nomura | Japan Economic Weekly

16 September 2016

Fig. 5: Summary of our forecasts for the Japanese economy (2)

(% y-y, except where noted)

As of 8 September 2016
FY16E

FY17E

FY18E

CY16E

CY17E

CY18E

0.9

0.9

0.4

0.7

1.0

0.5

1.1

1.0

0.3

0.8

1.2

0.4

0.6

0.7

0.4

0.4

0.8

0.4

0.5

0.3

-0.1

0.4

0.4

-0.1

-0.2

-0.1

0.1

-0.1

-0.2

0.1

Real GDP growth

Contribution of domestic demand (ppt)
Private-sector demand (ppt)
Public-sector demand (ppt)
Gross domestic product

Contribution of external demand (ppt)

Private-sector consumption

0.6

0.8

0.4

0.4

0.8

0.4

Private-sector housing investment

7.3

-4.9

-2.8

6.3

-2.3

-3.7

Private-sector capital expenditure

Private-sector inventories (contribution)

1.0

2.2

1.6

0.7

2.2

1.6

-0.1

0.0

0.0

-0.1

0.0

0.0

1.6

1.0

0.9

1.9

1.0

0.9

Government consumption
Public fixed capital formation

3.9

2.5

-7.2

0.0

6.1

-5.8

Goods/services exports

-0.6

2.7

2.0

-1.2

2.0

2.2

Goods/services imports

0.7

3.5

1.3

-0.6

3.7

1.6

1.2

1.0

0.8

1.2

1.1

0.9

Nominal GDP growth

External
balances

Production/
prices

GDP deflator

0.4

0.1

0.4

0.6

0.1

0.4

Industrial production

-0.7

1.0

0.8

-1.4

1.1

0.8

Corporate goods price index

-3.0

0.0

0.8

-3.5

-0.5

0.9

Consumer price index

-0.2

0.4

0.7

-0.2

0.2

0.7

-0.2

0.3

0.7

-0.3

0.2

0.6

Unemployment rate (%)

3.1

3.0

3.0

3.2

3.1

3.0

Trade balance (trn)

4.1

3.4

3.2

4.0

3.6

3.3

Trade/services balance (trn)

3.0

2.4

2.2

3.1

2.6

2.3

Current account balance (trn)

20.6

20.6

20.6

20.5

20.7

20.6

Excluding fresh foods

Note: Where value = -0.0, this is shown as 0.0.

Source: Nomura, based on Cabinet Office, MIC, METI, MOF, and BOJ data

Fig. 6: Assumptions on which our economic forecasts are based

FY16
$/ rate (FY-end)
Consumption tax rate (at FY-end, %)
Crude oil price (North Sea Brent, FY-end, $/bbl)

FY17

FY18

106.0

112.0

8.0

8.0

112.0
8.0

46.9

49.8

51.9

Source: Nomura

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Nomura | Japan Economic Weekly

16 September 2016

Appendix A-1
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