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Global Economic Outlook – September 2022 Given the lack of domestic inflationary pressures and the Chart 23: Total cash earnings, Japan subdued economic outlook, the Bank of Japan (BoJ) is continuing to signal its commitment to ultra-loose monetary 3% policy. Markets have repeatedly challenged the Bank’s yield curve control, but the BoJ has responded by lifting the pace 2% of asset purchases to record levels, to maintain the 10-year 1% bond yield close to 0%. This supports our view that the BoJ is unlikely to tighten policy settings any time soon. -on-y0% % y The BoJ’s determination to keep policy settings loose has -1% driven the yen to the weakest level since the 1990s, with the currency currently sitting around 140 yen per USD. -2% And looking ahead, continued policy tightening in other countries may force the yen lower in the months ahead. The -3% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 weak exchange rate is contributing to the recent strength in inflation; import prices are up by nearly 50% from a Source: KPMG Economics, Statistics Bureau of Japan Macrobond. year ago. As the yen continues its descent this trend will continue and will be a driver of further increases in headline inflation in the near term. Chart 24: Currencies vs US$ 130 Ben Udy 125 Economist & Senior Manager, KPMG in Australia 120 0 115 Dr. Sarah Hunter 0 Senior Economist & Partner, KPMG in Australia 110 an 2020 = 1105 Index, J100 95 90 85 Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 Euro Pound Yen Australian Dollar Source: KPMG Economics, Macrobond. © 2022 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. 25

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