Japan April headline inflation is expected to slide on year, following the rapid appreciation in the yen against the dollar which has offset the inflationary impact on import prices. Also, oil prices remain lower this year compared to a year ago period, which has also contributed to a weak inflation outlook.

The core-core consumer price index-led inflation, excluding fresh food and energy is likely to drop to 1 pct in April 2016, marginally lower than last month’s 1.1 pct. Barring a sustainable rebound in oil prices, energy deflation y/y is expected to persist through H2 2016 and vanish only in Q1 2017.

The general weakness of consumption demand suggests that companies should be cautious about raising retail prices. Wage growth has also lost momentum amid the decline in inflation expectations, DBS reported.

Following the Golden Week holiday season that started from late April and lasted till early May, overseas tour packages and domestic accommodation shall contribute to a nominal price hike. However, other core fundamentals point towards a fall in the core-core CPI.

“Signals about monetary policy actions from the Fed and the BOJ will likely be a crucial factor that determines the USD/JPY rate in the near term,” DBS said in its report.

However, weak CPI numbers will continue to bolster market expectations for a BoJ easing at the June/July meeting. The USD/JPY is revisiting the level of 110 this week, also helped by the improving prospects for a June Fed rate hike.