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Fri, 26th May 2017

Anirudh Sethi Report

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Archives of “economy of japan” Tag

BOJ Minutes (January) – looks like more of the same …

Bank of Japan January meeting minutes

  • Most members agreed price momentum not firm yet
  • Some members noted speculation that BOJ might raise rates in response to rising treasury yields
  • These members said BOJ should focus solely on 2 pct price target
  • Members shared view that yield curve is formed in smooth manner under YCC
  • One member said shape of yield curve should be a little steeper … this member said BOJ should accommodate a rise in yields due to improvements in Japan’s economy
  • Most members said companies will likely raise prices as consumer spending increases moderately
  • Members shared view that risks to economy, prices are to the downside
  • One member said downward pressure on yields should increase, so BOJ should reduce JGB, T-bill purchases
main points summarised via Reuters        
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“Most members agreed price momentum not firm yet” … sounds like another way of saying not even close to the inflation target … the BOJ seems to have an endless well of creativity when it comes to describing missing their target. Arrgghhh …. but maybe I just got outta bed on the wrong side today.
This:
“Most members said companies will likely raise prices as consumer spending increases moderately”
at least sounds like they have some hope for seeing inflation move in the direction they want.

LDP passes rule change that could see Abe remain PM until 2021

The ruling Liberal Democratic Party decided Sunday to extend its term limit on party leaders, potentially allowing Prime Minister Shinzo Abe to remain in his role until September 2021.

Abe’s tenure as president of the LDP was set to run out in September next year before the rule change, which would have meant stepping down as prime minister even if the LDP was still in power.

 The party, holding its annual convention at a Tokyo hotel, approved extending the limit to three consecutive three-year terms from the previous two consecutive three-year terms.

This means Abe can stand for re-election in the next party leadership vote in the fall of next year.

Abe, 62, served as prime minister for around a year before resigning in September 2007. He became prime minister again when the LDP returned to power in December 2012 after a three-year period in opposition.

Tata Sons, Docomo to settle $1.17 bln legal dispute

India’s Tata Sons Ltd has agreed to pay Japan’s NTT Docomo about $1.17 billion in connection with the termination of a joint venture in the South Asian nation, the Nikkei daily reported, without citing its sources.

The deal could be announced as early as Tuesday, the Nikkei reported. Tata Sons and DoCoMo were not immediately available for comments. Tata Teleservices and DoCoMo have been locked in a long tussle over the Japanese company’s move to exit a partnership formed in 2009.

Under the terms of that deal, in the event of an exit, DoCoMo was guaranteed the higher of either half its original investment, or its fair value.

When DoCoMo decided to get out in 2014, Tata was unable to find a buyer for the Japanese firm’s stake and offered to buy the stake itself for half of DoCoMo’s $2.2 billion investment. India’s central bank blocked Tata’s offer, saying a rule change the previous year prevented foreign investors from selling stakes in Indian firms at a pre-determined price.

 Docomo proceeded to initiate arbitration in a London court, and won it. Tata was asked to pay a penalty of $1.17 billion, which it has deposited with the Delhi High Court.

BOJ Dec. meeting minutes published now – main points

Minutes from the Bank of Japan December 19 & 20 meeting

  • Most members shared view momentum for Japan’s inflation to reach 2 pct inflation was being maintained
  • Some members said factors that would support rise in prices going forward had been increasing
  • One member said recent yen depreciation might push up prices in short run but would not raise underlying trend in inflation
  • Many members said yield curve control had been functioning as intended, JGB yield curve had been formed smoothly despite global yield rises
  • Many members said BOJ must pursue powerful monetary easing as still long way to go to hit 2 pct inflation target
  • A few members pointed to market views that BOJ wants to guide 10-yr JGB yield at range of -0.1 to 0.1 pct, said it was inappropriate to set such “uniform standards”
  • One member said it was uncertain whether amount of JGB purchases would decrease going forward under yield curve control
  • One member said BOJ should set amount of its JGB purchases as operating target and make sure to reduce it incrementally
  • One member said BOJ should allow for natural rise in long-term rates if they reflect prospects for improvement in Japan’s economy, prices
Headlines via Reuters

Bank of Japan seen bullish on GDP after eventful 2016

The Bank of Japan is poised to upgrade its three-year economic growth outlook in the final days of January in light of strong recent indicators, though stronger inflation forecasts will be a harder sell.

The central bank will compile its quarterly outlook on economic activity and prices at a two-day policy meeting beginning Monday. The report will outline the BOJ’s forecast for each of the three years through fiscal 2018,

 The last report, released in November, pegged gross-domestic product growth at 1% for fiscal 2016, 1.3% for fiscal 2017 and a slim 0.9% for fiscal 2018. Discussions this time are expected to center on the first two years, with the fiscal 2017 growth forecast thought to be headed for the mid-1% range.

Signs for an upgrade are strong. The BOJ in December boosted its outlook for Japan’s economy as a whole for the first time in 19 months. Such goods as smartphone parts and automobiles are driving up exports and industrial production, while consumer spending on durable goods such as cars is on the rebound as well. Changes made late last year to the GDP calculation method will also give the figure a boost: companies’ research and development spending, which has shown consistent growth over the years, now counts as investment.

BOJ Gov. Haruhiko Kuroda said at a World Economic Forum panel discussion Jan. 20 that he expects Japan’s economy to grow by around 1.5% in fiscal 2016 and fiscal 2017, significantly exceeding the country’s potential growth rate.

How long will ‘strong-dollar breeze’ blow for BOJ?

With the world facing uncertainty over the new administration in Washington, the Japanese central bank is among the many keeping their eyes peeled.

The yen’s depreciation against the dollar since Donald Trump won the U.S. presidential election in November has given the Bank of Japan some much-needed breathing room, as a weaker home currency will likely buoy the economy and consumer prices here.

 BOJ Gov. Haruhiko Kuroda welcomed the prospect of the yen softening on the back of a robust American economy, saying Trump’s planned tax cuts and infrastructure spending would lift the economies of the U.S. and the world.

The BOJ could watch from the sidelines without having to roll out more monetary easing — a particularly helpful development for a central bank nearly out of easing options.

“The specifics of economic policy under the Trump administration have not become clear,” according to BOJ Deputy Gov. Hiroshi Nakaso. But the bank apparently expects lower taxes and other anticipated economic measures to boost the economy.

BOJ taking ‘a step forward,’ says Kuroda

The Bank of Japan revised its economic outlook for the first time in 19 months during the two-day policy meeting that ended Tuesday. But that is apparently the only step the central bank is taking at this time.

“The headwinds seen in the first half of this year have ceased,” BOJ Gov. Haruhiko Kuroda told reporters following the meeting. Markets were riled by heightened concerns directed at emerging economies at the beginning of 2016, only to be shocked in June by Britain’s referendum to exit the European Union. The BOJ was forced to loosen its policy in July, raising its target for exchange-traded fund purchases.

 During the second half of 2016, the economic landscape has slowly brightened, beginning with U.S. readings. The Japanese economy has followed suit with increased exports and production. Consumption also recovered from a slump caused by a soft stock market and inclement weather at the beginning of the year.

“Japan’s economy has continued its moderate recovery trend,” the BOJ said in a statement published after the meeting. The central bank had previously qualified that view by highlighting sluggish exports and production.

The BOJ is considering an upgrade of its economic outlook

The Bank of Japan may deliver a sunnier view of the country’s economy when its policy board meets next week, optimistic over steadying foreign economies boosting exports and production, as well as recovering consumption at home.

The central bank sees improvements in exports and production of automobiles and smartphone parts. It would mark the first upgrade in 19 months.

 Since its March report, the BOJ has asserted that “Japan’s economy has continued its moderate recovery trend, although exports and production have been sluggish due mainly to the effects of the slowdown in emerging economies.” This time, it may alter or strike the “exports and production have been sluggish” language. Some at the bank have suggested removing the “trend” in “moderate recovery trend” to emphasize that the economy’s recovery is ongoing.
 In addition to the bullish American economy, the deceleration in emerging economies has slowed since the summer. As the BOJ sees it, combined with the effect of the Trump rally in the stock market, the real economy is headed toward recovery. Exports to China such as smartphone components continue to grow, while at home, consumers are opening their wallets for fall-winter clothes. 

“Income is increasingly going toward consumption,” said a BOJ official.

Is the Bank of Japan TRYING to Crash the Markets?

Is the Bank of Japan is trying to crash the markets?

This is not conspiracy theory. In the last month the BoJ has devalued the Yen 14% against the $USD.

gpc12516

By any other measure this is a crash as far as currencies go. And it could lead to MAJOR issues for the financial system.

The last time the BoJ collapsed the Yen this aggressively the ENTIRE commodity markets imploded collapsing over 40%. Oil ended up collapsing from $60 to sub $48 in a matter of weeks.

Bank of Japan plays trump card early to shock markets straight

The Bank of Japan last week offered to buy bonds at a fixed yield to curb rising interest rates, playing what was seen as an ultimate trump card far earlier than many expected.

The BOJ announced its first-ever fixed-rate purchase operation on the morning of Nov. 17 to counter mounting fears of an upswing in interest rates. Yields on 10-year Japanese government bonds had climbed steadily since the U.S. presidential election, rising as high as 0.035% the day ahead of the move. The fixed-rated option was introduced only two months ago as part of a monetary policy overhaul in late September that set a target of around zero for long-term yields.

 A call went out for two- and five-year JGBs to address the rapid surge in short- and medium-term bond yields, according to the BOJ’s Financial Markets Department. There were no takers: The offered yields were higher than going market rates, meaning the offered prices were lower, sending wise traders elsewhere. But the conditions of the operation sent a strong signal as to how high the central bank will let rates go before stepping in. Yields slid across all maturities after the move was announced.
 Since then, “interest rates’ upward climb has been weakened somewhat,” Takako Masai, a member of the bank’s policy board, told reporters after a speech Monday. “I get the sense that the purpose of fixed-rate operations has been well conveyed to markets.”