0921 GMT - The BOJ is increasingly likely to raise rates in line with underlying inflation and give less consideration to deflation risks, Goldman Sachs economists say. Such risk depends on how much inflation expectations are anchored to a target, the odds of economic downturn, and the degree of policy leeway available. "From this perspective, we believe that Japan's deflation risk is coming to an end for three reasons," GS's Akira Otani says. Firms seem more open to wage and price hikes, helping inflation expectations and anchoring. Stronger wages and corporate earnings are aiding a virtuous income-to-spending cycle, firming domestic demand, GS adds. Japan's lower rates versus global peers and high government debt-to-GDP ratio suggest limited policy leeway, but GS says there's more room to maneuver than before in the event of a downturn. (fabiana.negrinochoa@wsj.com)
(END) Dow Jones Newswires
October 29, 2024 05:21 ET (09:21 GMT)
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