Generali Investments: “More restrained growth in Japan”

The Bank of Japan (BoJ) announced that it will implement the Yield Curve Control (YCC) policy with “greater flexibility”. A “quick feedback per maturity” should be conducted to encourage the formation of a flat yield curve. Dr. Christoph Sippmann, chief economist at Generali Investments, is of the opinion that the Bank of Japan is in fact in the process of exiting the YCC policy, “which is likely to remain a long process.” Siepmann also rates the economy in Japan as follows:

We expect Q2 GDP growth to continue on the back of strong post-COVID consumption and the feedback effect on exports. However, global growth is expected to slow and there are growing signs that Japan will not get away with it. The manufacturing PMI moved deeper into contractionary territory (49.4). Services PMI is starting to slow down but remains at a comfortable level (53.9). The same can be said of the Economy Monitors survey in Japan, although consumer confidence is still improving. However, it seems that corporate investment has already entered a downward trend. We expect post-COVID consumer support to slow in the second half of the year, leaving Japan more vulnerable to global headwinds. We expect growth of 1% this year and 0.9% next year.

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