Japan: Economy likely shrunk for the first time in two years - Nomura

Analysts at Nomura suggest that economic momentum likely slowed in much of the global economy over the previous quarter and while the euro area economic slowdown is attracting strong interest in the G10 FX space, the Japanese economy may have shrunk for the first time in two years.

Key Quotes

“The contraction, if any, is likely temporary, but may be used as a reason to keep economic policy accommodative ahead of the sales tax hike decision. The weaker response of inflation to the improving economy, not the economic growth itself, we believe, has been the major concern for the BOJ. However, in the short term, weaker growth could be a reason why the BOJ may delay any tightening, and monetary policy divergence will likely keep widening.”