Answering your questions on Japan macro developments

Investment Rating - The report maintains a positive outlook on Japan's equity market, suggesting that the recent correction has been overdone and expects a rebound in valuations [2][26]. Core Insights - The report indicates that Japan's reflation journey remains on track, with expectations for the Bank of Japan (BoJ) to raise rates at a measured pace [2][4]. - The recent appreciation of the yen is expected to have implications for Japan's inflation outlook, with forecasts suggesting a moderation in headline CPI [9][10]. - The report highlights that corporate wage growth is likely to be supported despite yen appreciation, as corporates have room to sustain wage increases [11][12]. - Consumption growth in Japan is anticipated to improve, driven by positive real wage trends and temporary income tax cuts [12]. - The sensitivity of yen movements to corporate profits is noted, with a weak yen supporting corporate profitability [13]. Summary by Sections Recent US Data - The report assesses that recent US economic data points to a slowing economy, but the base case remains that the US economy is resilient [3]. BoJ Policy Outlook - The BoJ's recent hawkish communication is viewed as potentially excessive, with expectations for a gradual rate hike rather than rapid increases [4][7]. FX Appreciation and Inflation - The report incorporates FX forecasts, suggesting that sustained yen appreciation could lead to a moderation in inflation forecasts, with headline CPI expected to reach 2% in Q4 2024 [9][10]. Corporate Sector and Wage Growth - Corporates are assuming an average USDJPY of 144.8 for FY2024, indicating sufficient room for wage growth despite potential risks from yen fluctuations [11]. Consumption Growth Outlook - Private consumption momentum is expected to improve, supported by rising nominal wage growth and tax cuts [12]. Sensitivity of Yen Movements - The report notes that a 1 JPY depreciation against the USD or EUR would boost operating profits across all industries by approximately 0.4% [13]. Equity Market Volatility - The report discusses the recent volatility in the equity market, indicating a record-fast bear market and high levels of margin-financed equity ownership [21][22]. Implications for Equity Market View - The report suggests that the recent correction in Japan's equity market is overdone, with expectations for a rebound in valuations driven by structural market drivers [26][27].