As the BoJ continues to widen the gap between Japan’s haves and have-nots with its JGB monetization frenzy and multi-trillion yen foray into Japanese equity markets, and with the now unfabricated wage growth data from 2014 suggesting Abe’s “strategy” whereby wage growth begets economic growth which in turn begets confidence either isn’t working very well or never existed in the first place, the chairman of Nippon Life is joining a bevy of other folks in Japan who apparently still live in the real world and are skeptical of the sheer insanity that passes for monetary policy in Tokyo. As Reuters reports, Kunie Okamoto thinks further easing is foolhardy as the central bank already has a monopoly on the market:
It is… unwise to assume that Japanese yields will not spike simply because domestic investors hold more than 90 percent of government debt, Kunie Okamoto said in an interview with Reuters.
“Additional monetary easing is not desirable,” Okamoto said on Friday.
“The BOJ is already buying around 90 percent of bonds in the market. It is not good for this to be sustained.”
Nippon Life Insurance and other life insurers are major buyers of long-term government debt because they need a steady income stream to offset their liabilities, so their views on the bond market carry weight.
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We identify six key issues facing investors:
- US economy
- Brinkmanship in Athens
- Cyclical recovery in Europe
- BOJ policy response
- RBA meeting
- Oil prices
The March jobs data was a disappointment. The question is its significance. From a macro point of view, we would not place much emphasis on any one high frequency data point. From a technical point of view, it may encourage a continued consolidation/correction of the dollar’s Q1 gains, not only against the major currencies but also against many emerging market currencies.
The US dollar’s strength in Q1 was not matched be the economic performance. The weakness in Q1 already prompted the Federal Reserve to lower its growth projections, though Yellen has noted that even with the downgrade, it expects above trend growth for the year. The poor employment report is unlikely to change this assessment. The Fed’s Labor Market Conditions Index has already picked up a moderation in the labor market in Q1, where the monthly average has increased by 4.4 compared with 6.5 in Q4 14. The weekly initial jobless claims and continuing claims show underlying strength. The JOLTS report is expected to confirm this. Sectors like construction and leisure/hospitality, which are the most sensitive to weather were exceptionally weak in March.
We are reluctant to read too much into the weakness in Q1 economic activity. Over the last five years, there has been a clear pattern of weakness in the first part of the year. Consider than growth in Q1 has averaged 0.6% (quarterly annualized pace) compared with almost 2.9% for all the other quarters. In three of the five years, growth in Q1 was the slowest for the year (2010, 2011, 2014) and in one year it was the second weakest (2013).
Fed officials have argued that the headwinds in Q1 will prove transitory. This seems to be the most likely scenario. That said, the implications of the jobs report, especially the 0.1% fall in the average work week, suggests the quarter ended on a weak note. This would seem to have already been largely discounted by the market which means that March data may have less impact on prices. There will be headline risk from the minutes from last month’s FOMC meeting, but in terms of policy insight we would put more emphasis on the speeches by the Fed’s leadership in the coming days. NY Fed President Dudley speaks twice in the week ahead, after both Yellen and Fischer have given several speeches since the FOMC meeting.
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19 December 2014 - 9:46 am
The BOJ at the conclusion of their meeting.
- Keeps monetary policy steady, pledges to increase monetary base at annual pace of 80 trln yen
- Decision was made by 8-1 vote
- Kiuchi votes against keeping policy steady, saying that policy before the October 31 easing was appropriate … also proposed making 2 pct inflation target a medium- to long-term goal, which was turned down by 8-1 vote
- The BOJ raises its economic assessment
- Raises assessment on output
- Raises assessment on exports
- Says the Japanese economy continues to recover moderately as a trend with effect of sales tax hike waning as a whole
- Says that exports are showing signs of pickup, output seems to be bottoming out
- Business sentiment generally favourable although some cautiousness has been observed
- Capex has been on a moderate rising trend as corporate profits improve
- Private consumption remains resilient as a trend with effect of sales tax hike waning as a whole
Headlines via Reuters >> Read More
25 November 2014 - 6:00 am
The Minutes from the BOJ October 31 meeting:
- Many BOJ members said the BOJ to keep easing until inflation is stable
- BOJ will check risks, make adjustments as needed
- Japan economy continued to recover moderately
- Many members said if downward pressure on prices remained there was a risk that the shift in deflation mindset could be delayed
- Inflation to be around 1% for some time
- Kuroda proposed additional easing
- One member said if the BOJ had not expanded QE it could be seen as breaking its commitment to its price target
- One member said expanded QE is sufficient to meet 2% price target in second half of 2015 fiscal year
- One member said if price target in sight debate about exit strategy would be possible
- BOJ should explain that QQE is open-ended
- Some members said extra easing size should be as big as possible, need to avoid easing being seen as incremental
- Some said the effects of more easing not worth the costs, saw maintaining previous policy as appropriate, said virtuous cycle was being maintained
Full text is here
Link to full text of announcement – go on, click on it … easy reading LOL
The bank has updated its economic forecasts today-
- Keeps policy steady by unanimous vote-
So far, that’s all we’ve got our of the BOJ – the announcement is one line of text:
The Bank of Japan will conduct money market operations so that the monetary base will increase at an annual pace of about 60-70 trillion yen.
Yep, that’s it.- >> Read More
The BOJ do a Tankan survey every 3 months, while Reuters conducts one each month (a total of 253 firms responded to the poll of 400 big and medium-sized firms taken April 2-14).
- Japan manufacturers index +25 in April, up 7 points from the +18 in March (the highest since August 2007)
- Japan non-manufacturers index at record +35 in April, up 4 points from March
- Japan manufacturers July index seen at +17, non-manufacturers +21
-Confidence at Japanese manufacturers grew in April for the first time in three months
- A more moderate dip is seen over the next three months-
This augurs well, but it does dent hopes for more BOJ stimulus
Kozo Yamamoto … no reasoning cited. But we’ll see. Maybe he foresees an economic slump in the wake of the sales tx hike due April 1 and more BOJ easing? At least he’s given himself a 10 yen range to play around in
This week brings a slew of central bank meetings: At the forefront will be the BOJ meeting on Tuesday where no changes to monetary policy are expected. However, we will be watching the commentary closely for hints to further monetary easing in the coming months. Goldman, and others, still expect the BOJ to provide additional stimulus in the second quarter of this year as the impact of the consumption tax hike on the economy becomes visible – it is that expectation that sent the USDJPY above 100 in late 2013 and any disappointment by the BOJ will certainly have an adverse impact on the all important Yen carry pair.
In terms of the key data to watch this week, the themes of recent weeks remain the same: US activity data, with retail sales and the U. Michigan Consumer sentiment survey the main releases, European inflation trends (French and German HCPI data on Thursday and Friday, respectively), and finally external balances in EM. Within that group, the latest data points for trade and current account balances in India, Turkey and South Africa will receive the most attention.
Monday, March 10
- Japan Current Account Balance (Jan): Consensus -¥1411.8B, previous -¥638.6B
- Japan Economy Watcher Survey (Feb): Consensus 54.1, previous 54.7
- Israel MPC minutes
- Canada Housing Starts (Feb): Consensus 190k saar, previous 180.1k
- Also interesting: France/Italy/Turkey IP, Israel GDP, Norway CPI
Tuesday, March 11
- Japan BOJ meeting: We and consensus expect no change to current policy measures.
- US Wholesale Trade (Jan): Consensus +0.5%, previous +0.3%
- Italy GDP (Q4, Final): Consensus +0.1% qoq, previous +0.1%
- Israel Current Account Balance (4Q): Previous US$363mn
- Also Interesting: UK/Brazil IP, Ukraine GDP, Hungary Consumer Prices >> Read More