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Tag: BOJ

  • Japan PM Takaichi fills panel posts with advocates of big spending

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    By Leika Kihara and Yoshifumi Takemoto

    TOKYO (Reuters) -Japan’s reflationist advocates of expansionary fiscal policy are making a comeback in economic decision-making with some hand-picked by Prime Minister Sanae ​Takaichi to fill posts in key government panels.

    The move heightens the chance proponents of former premier Shinzo Abe’‌s “Abenomics” stimulus will yield influence on the fiscal and monetary policies of Takaichi, who herself is known as an advocate of loose ‌fiscal and monetary policy.

    Among the reflationist academics, former Bank of Japan Deputy Governor Masazumi Wakatabe will join the Council of Economic and Fiscal Policy as one of the four private-sector members, the government said on Friday.

    As the government’s top economic panel, the council lays out Japan’s long-term fiscal blueprint and policy priorities. Key economic ministers and the BOJ ⁠governor participate in the discussions.

    Known as a ‌proponent of aggressive monetary and fiscal stimulus, Wakatabe served at the BOJ from 2018 to 2023 when it was sustaining a massive asset-buying programme deployed under then governor Haruhiko Kuroda.

    In an ‍interview with Reuters last month, Wakatabe said the BOJ can raise interest rates if prospects of durably hitting its 2% inflation target improve – but added that doing so could this year could be difficult.

    Toshihiro Nagahama, an economist at Dai-ichi Life ​Research Institute who has advocated steps to stimulate demand, was also appointed as a private-sector member of the ‌council.

    “Given how this council discusses key economic and fiscal policies, we appointed members who are suitable under the Takaichi administration after consulting with the prime minister,” Minoru Kiuchi, economic revitalisation minister who oversees the council, told a news conference on Friday.

    The appointments contrast with those under previous premier Shigeru Ishiba such as BNP Paribas economist Mana Nakazora, who had called for fiscal discipline and faster normalisation of the BOJ’s ultra-loose monetary policy.

    The Takaichi administration has ⁠already appointed Takuji Aida, an economist seen as close to the ​premier, to join her flagship panel tasked to lay out Japan’​s growth strategy.

    Aida has said Japan should pursue expansionary economic policies until the output gap, which is currently around zero, exceeds 2%. He also calls for a shift away from ‍what he saw as current policies ⁠that prioritise fiscal consolidation over steps to stimulate demand.

    Japanese stock prices have risen since Takaichi was elected Japan’s first female prime minister on October 21 on market expectations that she will deliver a big spending package backed ⁠by low interest rates to reflate the economy.

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  • Jackson Hole recap: Fed rate hikes likely on hold for ‘several meetings’

    Jackson Hole recap: Fed rate hikes likely on hold for ‘several meetings’

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    Federal Reserve Chair Jerome Powell set a high bar for additional interest-rate hikes, economists said Sunday in their commentary on all the talk at the U.S. central bank’s summer retreat in Jackson Hole, Wyo.

    Michael Feroli, chief U.S. economist for JPMorgan Chase, said that the Fed chair certainly did not give a clear signal that more tightening was coming soon. He noted that Powell stressed the Fed would “proceed carefully” and balance the risks of tightening too much or too little.

    “We remain comfortable in our view that the FOMC will stay on hold for the next several meetings,” Feroli said.

    Read: Powell unsure of need to raise interest rates further

    The caveat to this forecast is if inflation surprises to the upside or the labor market does not continue to soften.

    Ian Shepherdson, chief economist at Pantheon, said that Powell’s speech seemed hawkish to some, particularly because the Fed chair made threats to hike again.

    But Shepherdson said he thought the Fed “is likely done.”

    “Behind the caveats, Mr. Powell’s speech fundamentally was optimistic, though cautious,” Shepherdson said.

    Boston Fed President Susan Collins also emphasized patience in an interview with MarketWatch on the sidelines of the Jackson Hole summit.

    Read: Fed has earned the right to take its time, Collins says

    Other regional Fed officials who spoke “hinted that further action may be needed, but also observed that inflation is moving in the right direction and that the surge in yields would help cool down the economy,” said Krishna Guha, vice chairman of Evercore ISI, in a note to clients.

    Traders in derivative markets expect a rate hike in November, but it is a close call, with the odds just above 50%.

    The Monday following Jackson Hole has historically been an active one in the markets, across asset classes.

    The 10-year Treasury yield
    BX:TMUBMUSD10Y
    ended last week just above 4.2%.

    Read: Market Snapshot on Powell’s stance

    The first test of the careful and patient Fed will come this coming Friday, when the government will release the August employment report.

    Economists surveyed by the Wall Street Journal expect the U.S. economy added 165,000 jobs in the month. That would be the weakest job growth since December 2020.

    In his speech on Friday, Powell emphasized that evidence that the labor market was not softening could “call for a monetary policy response.”

    Economists at Deutsche Bank think an upside surprise in the employment data could provide enough discomfort for the Fed, and raise expectations for further tightening.

    Other top global central bankers spoke at Jackson Hole, including European Central Bank President Christine Lagarde, Bank of Japan Gov. Kazuo Ueda and Bank of England Deputy Governor Ben Broadbent.

    Guha of Evercore said he detected a careful effort by the officials not to surprise markets.

    The exception to this rule might have been Bundesbank President Joachim Nagel, who said in a television interview that it was too early for the ECB to think about a rate-hike pause.

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  • Consumer inflation in Japan’s capital rises at fastest pace in 40 years

    Consumer inflation in Japan’s capital rises at fastest pace in 40 years

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    • Tokyo Nov core CPI up 3.6% vs f’cast +3.5%
    • Tokyo CPI stays above BOJ’s 2% target for 6th straight month
    • Data underscores broadening inflationary pressure

    TOKYO, Nov 25 (Reuters) – Core consumer prices in Japan’s capital, a leading indicator of nationwide trends, rose at their fastest annual pace in 40 years in November and exceeded the central bank’s 2% target for a sixth straight month, signalling broadening inflationary pressure.

    The increase, driven mostly by food and fuel bills but spreading to a broader range of goods, cast doubt on the view of the Bank of Japan (BOJ) that recent cost-push inflation will prove transitory, some analysts said.

    The Tokyo core consumer price index (CPI), which excludes fresh food but includes fuel, was 3.6% higher in November than a year earlier, government data showed on Friday. The rise exceeded a median market forecast of 3.5% and the 3.4% increase seen in October

    The last time Tokyo inflation was faster was April 1982, when the core CPI was 4.2% higher than a year before.

    While the rise was driven mostly by electricity bills and food prices, companies were also charging more for durable goods as the weak yen pushed up the cost of imports, the data showed.

    “Price hikes are broadening and suggests the weak yen could keep inflation elevated well into next year,” said Mari Iwashita, chief market economist at Daiwa Securities.

    “Core consumer inflation may stay around the BOJ’s 2% target for much of next year, which would make it hard for the bank to keep arguing that the price rises are temporary.”

    The Tokyo core-core CPI index, which excludes fuel as well as fresh food, was 2.5% higher in November than a year earlier, picking up from the 2.2% annual gain seen in October.

    BOJ AN OUTLIER

    The BOJ has kept interest rates ultra-low on the view that inflation will slow back below its target next year when the boost from fuel price gains dissipate. The central bank has therefore remained an outlier from a wave monetary tightening around the world aimed at combating soaring inflation.

    Contrary to the experience of some western economies, where wages have surged with inflation, growth in wages and services prices remain muted in Japan.

    Of the components making up the Tokyo CPI data, services prices in November were up just 0.7% on a year earlier, after a 0.8% annual increase seen in October. That compared with a 7.7% spike in durable goods prices for November, which followed October’s 7.0% annual gain.

    Separate data released by the BOJ on Friday showed the corporate service price index, which measures prices that firms charge each other for services, had been 1.8% higher in October than a year earlier. That was slower than a 2.1% annual gain seen in September.

    BOJ Governor Haruhiko Kuroda has repeatedly said that, for inflation to sustainably hit his 2% inflation target, wages must rise enough to offset the rise in goods prices.

    Slow wage growth has been among factors delaying Japan’s recovery from the coronavirus pandemic. The world’s third-largest economy unexpectedly shrank an annualised 1.2% in the third quarter, partly because of soft consumption.

    The Tokyo CPI data heightens the chance of further rises in nationwide core consumer prices, which in October were 3.6% higher than a year earlier, also marking a 40-year high. The nationwide data for November is scheduled for release on Dec. 23.

    Reporting by Takahiko Wada and Leika Kihara; Editing by Sam Holmes and Bradley Perrett

    Our Standards: The Thomson Reuters Trust Principles.

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