Market Mover - BNP PARIBAS - Investment Services India

Key Data Preview3210-1-2-3Chart 1: Japanese Core CPI (% y/y)CPI excluding energy andfood, but not alcoholCore CPI05 06 07 08 09 10 11Sources: MIC, BNP paribas% y/y Sep (f) Aug Jul JunCore CPI 0.2 0.2 0.1 -0.2CPI 0.0 0.2 0.2 -0.4BNP Paribas Forecast: Slight Positive Price GrowthJapan: CPI (National, September)Release Date: Friday 28 OctoberBased on the Tokyo CPI numbers for September (whichprecede the national figures by a month), we expect thenational core CPI to rise 0.2% y/y in September, the samerate of increase as in August. If so, the index will register athird straight advance, due largely to surging energy prices –in August, energy prices rose 7.1% and elevated the coreCPI by 0.5pp. Were it not for energy prices, the core CPIwould still be falling, as evident from the US-style core-coreCPI (which excludes energy and food but not alcohol), inwhich prices fell 0.5% y/y in August, marking 32 straightmonths below zero. In any event, positive CPI growth is likelyto end in October, when two special factors that are elevatingthe core index by a combined 0.3pp – tobacco tax hike,higher non-life insurance premiums – will be stripped away,returning price growth to negative territory.Key Point:The national core CPI should remain slightly positive inSeptember, but prices are expected to turn negativeagain from October when special factors (tobacco taxhike, higher non-life insurance premiums) are strippedfrom the index.Chart 2: Japanese Unemployment Rate (% sa)6.05.55.04.54.03.500 01 02 03 04 05 06 07 08 09 10 11Sources: MIC, BNP parobas% sa Sep (f) Aug Jul JunUnemployment rate 4.4 4.3 4.7 4.6Key Point:We expect the jobless rate will deteriorate slightly to4.4% in September owing to fallout from the slowingglobal economy and a statistical reaction to August’sbig improvement.BNP Paribas Forecast: Higher Jobless RateJapan: Unemployment Rate (September)Release Date: Friday 28 OctoberWe expect the jobless rate will deteriorate slightly to 4.4% inSeptember. In August, the unemployment rate improved byits largest margin ever, falling 0.4pp to 4.3%. But with thejobless and employed totals both dropping sharply in August,the improvement in the jobless rate is said largely to reflect aplunge in the labour force itself: immigration statistics showforeign labourers (mostly second or third-generationJapanese from Latin America) have left Japan in droves afterlosing their jobs in the wake of the 11 March earthquake. It isnot enough to suggest the jobless rate reduced becauseemployment conditions improved, although the job offer ratiorose. In September, we expect the jobless rate will resume itsdeterioration because of fallout from the slowing globaleconomy and a statistical reaction to the big improvement inAugust. Even so, deterioration will be limited because theageing of society is still steadily reducing the labour force asretirees and those not looking for work enter the non-labourforce.Market Economics 27 October 2011Market Mover71www.GlobalMarkets.bnpparibas.com