Notes from Standard Chartered research:
- We expect the Bank of Japan (BoJ) to stay put at its 17-18 February monetary policy meeting. However, we think the weaker-than-expected Q4 GDP reading highlights the need for further government and BoJ support.
- We also believe a significant change in its inflation outlook will indicate its next policy move.
- The rapid drop in domestic prices on lower global oil prices will be the central bank's biggest concern, in our view, although the longer-term impact of oil-price declines will likely be positive.
- The PPI inflation rate has dropped for three consecutive months since November 2014.
- We expect core inflation (which excludes fresh food) to fall back into negative territory in the coming months and reach 0-0.5% by end-FY15 (i.e., by March 2016).
