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BoJ rate path faces pressure as Japan private demand disappoints

Societe Generale said weaker private demand could complicate any faster, higher Bank of Japan path even if a higher GDP deflator supports near term hike expectations.

Reported · Written up by our desk · Central Banks

Societe Generale economists Reo Sakida and Jin Kenzaki said Japan’s second quarter GDP came in weaker than expected, with consumption and capex both disappointing, according to an FXStreet analysis.

The bank noted that a higher GDP deflator could support near term Bank of Japan hike expectations, but it argued persistent weakness in private demand could challenge a faster and higher rate path.

Societe Generale added that if private demand remains weak while fiscal spending is front loaded relative to private investment, it could worsen Japan’s debt to GDP ratio.

In FX trading described alongside the call, the USD weakened as investors scaled back expectations for a September Fed rate hike after recent disappointing US macro data, helping GBP/USD hold bullish momentum near 1.3550.

Latest closeGBP/USD 1.354 ▲0.3%

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