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Extraction Summary
2
People
5
Organizations
4
Locations
1
Events
4
Relationships
5
Quotes
Document Information
Type:
Economic analysis brief
File Size:
Summary
This document provides an economic forecast for Japan in 2017, anticipating a recovery in domestic demand. It identifies US policy uncertainty, particularly from the Trump presidency, as the biggest risk factor, which could lead to protectionism and a stronger yen, potentially reducing Japan's growth. A chart compares Bank of America Merrill Lynch's more optimistic GDP and inflation forecasts against the consensus.
People (2)
| Name | Role | Context |
|---|---|---|
| Izumi Devalier | ||
| Trump |
Organizations (5)
| Name | Type | Context |
|---|---|---|
| BoJ | ||
| BofAML | ||
| BofA Merrill Lynch | ||
| Bloomberg | ||
| Merrill Lynch (Japan) |
Timeline (1 events)
Trump presidency
Relationships (4)
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→
→
policy influence
→
→
potential for deeper economic and trade linkages
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potential for deeper economic and trade linkages
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Key Quotes (5)
"2017 - a year of recovering domestic demand"Source
HOUSE_OVERSIGHT_014402.jpg
Quote #1
"We think the economy is heading towards a cyclical sweet spot and see a broad-based recovery in domestic demand."Source
HOUSE_OVERSIGHT_014402.jpg
Quote #2
"Biggest risk factor: US policy uncertainty"Source
HOUSE_OVERSIGHT_014402.jpg
Quote #3
"The downside scenario for Japan is a combination of rising US protectionism, sliding global trade, and a stronger yen, which could reduce 2017 growth to zero."Source
HOUSE_OVERSIGHT_014402.jpg
Quote #4
"We think consensus is underestimating the strength of medium-term GDP and inflation"Source
HOUSE_OVERSIGHT_014402.jpg
Quote #5
Full Extracted Text
Complete text extracted from the document (1,639 characters)
the BoJ's new interest-pegging regime ensures that financial conditions will become increasingly stimulatory
as inflation rises.
as inflation rises.
2017 - a year of recovering domestic demand
We think the economy is heading towards a cyclical sweet spot and see a broad-based recovery in domestic
demand. Specifically, 1) consumption is poised to rebound as the saving rate peaks; 2) capex should
accelerate in response to the improving demand outlook, deepening supply-side constraints, and "low-for-
longer" real rates; and 3) increased efforts by policymakers to accelerate income redistribution could push up
the velocity of money at the margin, helping to reflate the economy.
We think the economy is heading towards a cyclical sweet spot and see a broad-based recovery in domestic
demand. Specifically, 1) consumption is poised to rebound as the saving rate peaks; 2) capex should
accelerate in response to the improving demand outlook, deepening supply-side constraints, and "low-for-
longer" real rates; and 3) increased efforts by policymakers to accelerate income redistribution could push up
the velocity of money at the margin, helping to reflate the economy.
Biggest risk factor: US policy uncertainty
External developments pose the greatest risk to our forecasts, chief among them US policy uncertainty. The
downside scenario for Japan is a combination of rising US protectionism, sliding global trade, and a stronger
yen, which could reduce 2017 growth to zero. The Trump presidency may increase pressure on Japan to
achieve greater military self-reliance, boosting defense spending. There will also be greater incentives to
deepen economic and trade linkages with key regional players, such as China and Russia.
External developments pose the greatest risk to our forecasts, chief among them US policy uncertainty. The
downside scenario for Japan is a combination of rising US protectionism, sliding global trade, and a stronger
yen, which could reduce 2017 growth to zero. The Trump presidency may increase pressure on Japan to
achieve greater military self-reliance, boosting defense spending. There will also be greater incentives to
deepen economic and trade linkages with key regional players, such as China and Russia.
Chart 1: We think consensus is underestimating the strength of medium-term GDP and inflation
2.0
Real GDP %YoY
1.4
CPI ex fresh food %YoY
1.4
1.5
1.2
1.0
1.0
0.7
0.6
0.8
0.7
0.6
0.4
0.5
-0.3 -0.3
0.0
-0.5
CY16
CY17
CY18
CY16
CY17
CY18
Real GDP %YoY
1.4
CPI ex fresh food %YoY
1.4
1.5
1.2
1.0
1.0
0.7
0.6
0.8
0.7
0.6
0.4
0.5
-0.3 -0.3
0.0
-0.5
CY16
CY17
CY18
CY16
CY17
CY18
■ BofAML
■ Consensus (Bloomberg, as of 15 Nov 2016)
■ Consensus (Bloomberg, as of 15 Nov 2016)
Source: BofA Merrill Lynch forecasts, Bloomberg
Izumi Devalier ✉
Japan Economist
Merrill Lynch (Japan)
Japan Economist
Merrill Lynch (Japan)
HOUSE_OVERSIGHT_014402
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