Economic Analysis - BMI Vs Consensus: Above Consensus For Japan, Vietnam, & India CPI - FEB 2018

Our above consensus inflation outlook for Japan and Vietnam is largely informed by domestic factors such as government policy and strong growth. On the other hand, we expect inflation in India to be driven mostly by higher commodity prices.

Japan ' s inflation has bottomed out: Our above consensus view for inflation to accelerate over the coming quarters is underpinned by the government's expansionary monetary and fiscal policies, leading to rising M2 money supply, which continues to outstrip real GDP growth. This, in addition to higher oil prices are likely to pose upside pressures to inflation and we believe that inflationary pressures have bottomed out both from a structural and cyclical perspective. We are therefore forecasting CPI to average 2.0% in 2018, which is well above Bloomberg consensus forecasts of just 0.8%.

Above consensus on Vietnam: We maintain our expectations for inflationary pressures in Vietnam to return to a gradual uptrend due to a combination of domestic policy and external factors. Private sector credit growth is likely to remain strong as the central bank maintains its loose monetary policy stance, placing upside pressure on inflation. In addition, the government's wide fiscal deficit and higher oil prices are likely to see headline inflation head higher over the coming months, informing our above consensus forecast for inflation to average 4.5% in 2018 (compared to consensus of 3.8%).

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