Our real GDP growth forecast of -.- for ----, compared with con- sensus expectations of -.- , reflects our bearish view on external demand amid a continued unravelling of the Chinese economy and renewed recession risks in the US, which look set to compound domestic structural economic woes. Lower energy prices pose upside risks to growth, should businesses use windfall profits to boost investment. ...Japan s external accounts have been a major beneficiary of the decline in global energy prices, with the trade account heading back to balance from a significant deficit and the current account surplus surging. However, this increased surplus partly reflects weakness in domestic investment as businesses have used the windfall of cheap energy to increase overseas assets rather than domestic investment, which will prevent a broad-based recovery in the domestic economy. The dollar appears to be forming a significant topping pattern against the yen, with potential for significant yen strength over the first few months of ----. ...As Japan s megabanks embark on aggressive sales of their cross- shareholdings in line with the government s aims of improving corpo- rate governance, this will provide the dual benefit of improved capital allocation and increased capital adequacy. Both of these factors suggest that banking equities will outperform the broader market over the medium term.
...The BoJ s latest monetary policy tweaks mark an incremental easing amid already extremely loose monetary policy in Japan. As debt con- tinues to be monetised, the money supply will rise, feeding through into higher consumer price inflation following years of stagnating prices. ...As debt con- tinues to be monetised, the money supply will rise, feeding through into higher consumer price inflation following years of stagnating prices. The decision by the Bank of Japan (BoJ) to set up a ----billion- yen fund to buy exchange-traded funds (ETFs) that specifically target firms actively spending on capital expenditure and wages represents slight monetary easing in our view. At the press con- ference, BoJ Governor Haruhiko Kuroda said the fine-tuning will allow the bank to sustain or even expand stimulus more easily in ----. ...Although the decision to increase purchases of ETFs is partly to offset the drawdown of the shares it had bought from financial institutions since the early ----s, it still marks marginal monetary easing.
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