The pros and cons of inflation in Japan

David Vickers on Japan

The market is underestimating the scale of change that will occur if inflation takes off in Japan, warns Russell Investment's David Vickers. However, there is a risk Abenomics is too successful, and a government bond rout could take place.

Japan's transformation Transformative change is taking place in Japan under prime minister Shinzo Abe. He has demonstrated a resolute determination to end deflation and to this end we think that further Bank Of Japan (BOJ) stimulus is likely. Abe’s majority enables him to do whatever it takes, which includes potentially linking wage increases to lower corporate tax as an antidote to the second arrow of fiscal reform. He could also ask the government pension scheme (the world’s largest) to restructure its asset allocation to provide price support for markets. Secular change On...