The transmission mechanism by which increases in exports and production feed through into income and spending is likely to strengthen, and Japan’s economy is projected to grow at a pace above its potential in fiscal 2012 due in part to a rebound from the significant deceleration in fiscal 2011.
Their ongoing pass-through to the borrowing conditions for firms and households benefits credit creation and supports the steadily firming recovery of the euro area economy. Sentiment indicators suggest that the cyclical recovery may be gaining momentum. Headline inflation has again increased, largely on account of rising energy and food price inflation. However, underlying inflation pressures continue to remain subdued.