BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Draghi: Eurozone will decline without vital productivity growth

It’s productivity, stupid. European Central Bank president Mario Draghi has become the latest major policymaker to warn of the long-term economic damage posed by chronically low productivity growth, as he urged eurozone governments to take action to lift growth and stoke innovation. Speaking in Madrid on Wednesday, Mr Draghi noted that productivity rises in the […]

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Asia markets tentative ahead of Opec meeting

Wednesday 2.30am GMT Overview Markets across Asia were treading cautiously on Wednesday, following mild overnight gains for Wall Street, a weakening of the US dollar and as investors turned their attention to a meeting between Opec members later today. What to watch Oil prices are in focus ahead of Wednesday’s Opec meeting in Vienna. The […]

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Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

Royal Bank of Scotland has emerged as the biggest failure in the UK’s annual stress tests, forcing the state-controlled lender to present regulators with a new plan to bolster its capital position by at least £2bn. Barclays and Standard Chartered also failed to meet some of their minimum hurdles in the toughest stress scenario ever […]

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Barclays: life in the old dog yet

Barclays, a former basket case of British banking, is beginning to look inspiringly mediocre. The bank has failed Bank of England stress tests less resoundingly than Royal Bank of Scotland. Investors believe its assets are worth only 10 per cent less than their book value, judging from the share price. Although Barclays’s legal team have […]

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Categorized | Currencies

Japan shakes off headline deflation in October

Posted on November 25, 2016

Shhh, shhh! Do you hear that? Is that? Is that the sound of … corks … corks popping at the Bank of Japan?

Don’t count all your chickens just yet, but there is indeed some encouraging news for policymakers after the latest round of data showed headline consumer prices rose in Japan for the first time in eight months.

Moreover, October marks the first full month of data since the BoJ’s pledge at its September meeting to allow inflation to overshoot its target, which is 2 per cent core inflation, as part of an overhaul of its monetary policy actions.

The headline consumer price index rose 0.1 per cent year-on-year in October, the first positive reading since February. (March registered zero growth.) This was from a 0.5 per cent contraction in September, matching levels in May and August as the equal-weakest reading since April 2013, and better than economists’ expectations for zero.

Core inflation, which strips out fresh food and is what the BoJ is trying to push to its 2 per cent target, shrank 0.4 per cent year-on-year last month. This was in line with economists’ forecasts, but an improvement from the 0.5 per cent decline in September.

The core reading has now been negative for eight months in a row, the longest deflationary spell since the period from May 2009 to June 2011.

There was additional encouraging news with so-called core-core inflation, which strips out all food and energy prices. this came in at 0.2 per cent year-on-year in October, up from September’s three-year low of zero, and ahead of forecasts for 0.1 per cent growth.

Confused about all the different flavours of inflation in Japan? Robin Harding put together an explainer last month that is well worth a read.

There may be additional reason to expect inflation to keep ticking up in November as a weaker yen makes imports more expensive. The yen has depreciated 7.5 per cent against the US dollar month-to-date, making it the worst-performing Asian currency over the period as the greenback staged a remarkable recovery after markets surmised Donald Trump’s election as US president could reinvigorate inflation in the US and support the dollar.

In morning trade, the yen was flat at ¥‎113.33 per dollar, but had been as much as 0.1 per cent stronger before the release of today’s inflation data.

Following the release of the CPI figures, producer price index data for the services sector showed prices were up 0.5 per cent year-on-year in October, from a revised 0.2 per cent advance (from 0.3 per cent), and ahead of economists’ expectations for 0.3 per cent growth.