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
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
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.
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