18 February 2014 - 11:31 am
The surprise in the Bank of Japan’s policy update today was the extent to which it will attempt to stimulate the economy with special lending facilities.
The BoJ said it will “double the scale” of two loan schemes that were set to expire. The facilities enable financial institutions to borrow funds at a fixed rate of just 0.1 per cent for four years.
Details below, but here’s the key quote on the intended impact:
The Bank expects that these enhancements will further promote financial institutions’ actions as well as stimulate firms’ and households’ demand for credit, with a view to encouraging banks’ lending and strengthening the foundations for economic growth.
The success of the loan schemes has been underwhelming so far. Even with real interest rates in negative territory because of the rise in inflation, demand for credit among companies and households is not responding as the BoJ had hoped.
But the significance might not be the details, but merely that the BoJ has just proven it’s willing to amend its policy to help the economy. >> Read More
12 February 2014 - 6:13 am
If you needed another reason to buy stocks, trust in the growth meme, and have your faith in Abenomics confirmed… look away. Japanese Machine orders for December just printed -15.7% in December – the biggest MoM plunge since 1992. This is the biggest miss to expectations since 2006 and what is considerably more problematic for Abe et al. is that YoY expectations of a core machine order rise of 17.4% was hopelessly missed with a small 6.7% gain (and this is data that excludes more volatile orders).
As Bloomberg notes, core machine orders are an indicator of future capital expenditure and it seems, just as in the US, that thanks to “stocks” now being considered central bank policy tools that capex no longer means productive capital use… it means buybacks, dividends, and shareholder recaps in any which way we can. How was the weather in Japan in December?
But while collapsing machine orders are “completely irrelevant”, even if a plunge of this magnitude usually portends a recession, what should be far more troubling to the Kool aid addicts is if the BOJ were to announce that just like the Fed, it too is tapering its Open-ended QE ambitions. Considering this is precisely what BOJ board member Kiuchi just did, that relentless USDJPY meltup overnight may not be such a slamdunk.
From Market News… >> Read More
19 September 2013 - 19:29 pm
Fitch Ratings says in its newly published Global Economic Outlook (GEO) that world economic growth will strengthen in H213 and 2014, driven by a cyclical pick up in major advanced economies (MAE), while growth stutters in emerging markets (EM). Its latest forecasts for world GDP growth are revised down to 2.3% in 2013 (from 2.4% in the June GEO), 2.9% in 2014% (from 3.1%) and 3.2% in 2015 (unchanged), weighted at market exchange rates.
“Forward guidance of major central banks reinforces Fitch’s view that the short-term policy rates of the US Fed, ECB, Bank of England and BoJ will remain low into 2015,” says Gergely Kiss, Director in Fitch’s Sovereign team. “However, the marked rise in long-term yields and risk premiums on some asset classes since May 2013 indicates that the exit from exceptionally loose monetary conditions is likely to generate bouts of volatility, despite enhanced central bank communication and an improving economic outlook. In particular, tighter global funding conditions will add to headwinds facing EMs, particularly those dependent on capital inflows,” he adds. >> Read More
10 September 2013 - 6:06 am
- Many members said they hope the government steadily promotes fiscal reform
- Credibility of fiscal management must be restored to keep intrest rates stable
- Many members said BOJ’s huge buying is keeping yields low even as economy recovers
- One member said bond yields may rise and erode the effect of BOJ easing if the government efforts on fiscal reform weaken
- Many said price rises being observed across large range of itmes
- A few projected Japan CPI to rise through summer then pause thereafter
Link to full text of the minutes:
Minutes of the
Monetary Policy Meeting
on August 7 and 8, 2013
September is upon us and the Federal Reserve’s decision to curtail its asset purchase programme may be informed by new data this week.
Here is what to watch:
The last reading of the US unemployment rate arrives this week before Federal Reserve officials decide if they should dial back stimulus measures.
Economists forecast 180,000 positions were created in August, a faster pace than in July. The unemployment rate is expected to remain unchanged at 7.4 per cent, while the average work week lengthens to 34.5 hours.
Leaders of the Group of 20 will meet on Thursday and Friday in Saint Petersburg, Russia, to discuss global monetary policy, the conflict in Syria and tax-evasion goals.
President Barack Obama is set to attend the summit, but the White House has not confirmed if he will hold an individual meeting with Russian President Vladimir Putin.
Economic data: >> Read More
29 August 2013 - 10:06 am
The global economy could be hurt if the withdrawal of funds from emerging markets picks up ahead of an expected reduction in the U.S. Federal Reserve’s monetary stimulus, a Bank of Japan board member said on Thursday.
Yoshihisa Morimoto also signalled that Japan’s government needed to proceed with a planned two-stage hike in the sales tax as part of efforts to fix its tattered finances, or face a severe market backlash.
The former utility executive stuck to the BOJ’s assessment that Japan’s economy was headed for a moderate recovery, but noted headwinds such as geo-political risks in the Middle East and market volatility caused by expectations the Fed could start tapering its bond-buying programme as soon as next month.
“Market participants are withdrawing funds from emerging and resource-rich nations on expectations (of Fed’s tapering) and may continue to do so,” Morimoto said in a speech to business leaders in Morioka, northeastern Japan.
“The global economic recovery remains fragile, so there’s huge uncertainty on how a sharp outflow of funds could affect financial markets and global growth,” he said, in the starkest warning to date by a BOJ official on the potential risk for a bigger capital withdrawal from emerging economies.
The Indian rupee and Turkish lira have both hit record lows against the dollar, the Indonesian rupiah has fallen to four-year lows, and other currencies have fallen sharply as investor sentiment has soured on emerging markets. >> Read More
14 August 2013 - 12:09 pm
Japanese government bonds fell Wednesday, sliding off a multi-month high marked a day before as brighter signs in the global economic outlook cooled demand.
Taking their lead from the U.S. Treasury market overnight, long-term JGB prices declined, with the benchmark 10-year yield up 0.2 basis point at 0.750% as of 0600 GMT. Yields on JGBs with different maturities also increased broadly. On Tuesday, the 10-year yield dropped to a three-month low of 0.730% after the strong result of a five-year JGB auction emboldened investors.
Lead JGB futures for September ended down 0.20 at 143.94 on Wednesday.
“What happened Tuesday put upward pressure on bond yields,” said Teruyoshi Sotome, a senior bond strategist at Mizuho Securities, referring to strong data on German economic sentiment and U.S. consumer spending. >> Read More
- BOJ members said CPI is likely to turn positive
- Expect Japan economy to recover moderately
- A few members continued to hold cautious views on prices
- A few BOJ members said CPI rise might come to a pause after summer
- Easing functioning to support companies, households
Here is the link to the full PDF:
Minutes of the Monetary Policy Meeting
on July 10 and 11, 2013
Bank of Japan Gov. Haruhiko Kuroda said Monday he sees the monetary stimulus that the central bank introduced April as having positive effects on financial markets, the economy, and expectations for price rises, but cautioned that the BOJ is still some ways off from achieving its 2% inflation goal.
“Not all of these favorable developments are attributable to (the April easing), nevertheless it most certainly is an important factor,” Mr. Kuroda said in a news conference.
In April, the BOJ’s took unprecedented easing measures, which have helped the core consumer price index increase for the first time in 14 months. Data released by the government Friday showed the index logged a 0.4% rise on year in June. >> Read More