https://mainichi.jp/english/articles/20201029/p2g/00m/0bu/070000c
Article:
TOKYO (Kyodo) -- Bank of Japan Governor Haruhiko Kuroda said Thursday that "great uncertainty" remains over the economic outlook after its growth and inflation forecasts were lowered for the current business year through March amid the coronavirus pandemic.
Following a two-day policy meeting in which the central bank maintained its ultra easy monetary policy as widely expected, Kuroda said the BOJ will decide, when necessary, to extend its emergency scheme to support corporate finance beyond the March deadline.
"There remains great uncertainty over the economic and financial outlook," Kuroda said at a press conference. "The BOJ will continue to carry out the existing monetary easing steps, and should it become necessary we will take additional steps without hesitation."
Ideas and Commentary:
Any time there is uncertainty in an economy and or business conditions are not good a central bank will either lower the key interest rate and or keep it low if its there already.
Central banks such as the Bank of Japan, lower or increase the key interest rate depending on current or continued economic conditions.
Lowering the interest rate allows for lower rates for business and families to borrow and use the money in the economy so that the economy can either sustain itself or begin to grow.
Increasing the rate is usually a strategy when an economy no longer needs helps and or raising it so that when the economy needs help again a central bank has room to decrease the rate.
In the case of the BOJ the rate is already at 0 percent or -1 percent, and the BOJ really doesn't have much room to lower the rate.
Other strategies a central bank may do is to put more money into a banking system to help banks and to get more money into the economy through loans and subsidies.
Article:
Asked about the potential impact of the Nov. 3 U.S. presidential election and some nervousness in financial markets ahead of the event, Kuroda said the BOJ will continue to closely watch developments surrounding it, adding, "Moves in the currency market have been relatively stable."
In its latest outlook report released Thursday, the central bank said it expects the Japanese economy to shrink 5.5 percent in fiscal 2020, against its earlier projection of a 4.7 percent contraction.
The consumer price index is expected to fall 0.6 percent, rather than the 0.5 percent drop forecast in July. The BOJ has failed to hit its 2 percent inflation goal for nearly eight years.
At the policy meeting, BOJ board members decided to keep short-term interest rates at minus 0.1 percent while guiding long-term rates at around zero percent.
Ideas and Commentary:
The Japanese economy doesn't look too good but at the same time, we have to be very careful as an economy is very complex, in that there are many parts of the economy.
Just because the overall economy might shrink 5.5 percent doesn't mean every sector every part of an economy is shrinking 5.5 percent. There are always positives and negatives in an economy. Of course in this situation minus 5.5 percent of course means maybe more negatives than positives. But that doesn't mean there are some positive in an economy.
Yes the consumer price index, a measurement of overall prices in an economy, might be decreasing as demand in the economy decreases due to less consumer spending.
The BOJ has been trying for eight years to reach its target rate of 2 percent for inflation.The 2 percent rate is a general target that many central banks try to reach as they feel it signals a balance in the economy of economic growth and overall prices, meaning demand and consumer spending is at a optimal level for the economy.
The inflation rate for Japan has been at best 1 percent and sometimes even deflation or overall decreasing prices.
Its interesting though. The Japanese economy has had low inflation and periods of deflation for the better part of 20+ years, yet the economy just keeps going. Its a very steady and stable economy despite the low inflation rates. At best we might say the Japanese economy is at it optimum balance but its stable and keep going.
Article:
The BOJ will continue unlimited buying of government bonds from financial institutions and exchange-traded funds at an annual pace of 12 trillion yen ($115 billion).
"Japan's economy has picked up with economic activity resuming, although it has remained in a severe situation due to the impact of COVID-19 at home and abroad," the BOJ said in the report.
With many countries still trying to curb coronavirus cases, especially in Europe and the United States, the BOJ said vigilance against the pandemic must continue.
In the previous policy meeting in September, the bank assessed that the economy "has started to pick up," though the economic situation remains severe.
Ideas and Commentary:
Yes the economy may be picking up but of course that doesn't mean it is anywhere near where it should be and as stated might see an overall drop of 5.5 percent for the year.
A 5.5 percent is not good, but to be a little positive here it could have been worst and again an economy is very complex as there are definite negatives but there are always some positives too.
The Bank of Japan, like any other central banks has a lot of tools and strategies that is uses such as bond buying to increase funds in banks and other places with the ideas of that being used in the economy to help sustain some kind of economic growth and or reduce the decrease in the economy.
Article:
The BOJ has support measures for financially struggling firms due to the virus outbreak. They include the provision of cheap funding to banks that extend interest-free loans to struggling companies and purchases of commercial paper and corporate bonds from lenders to ensure ample liquidity in the banking system.
Japanese banks and other financial institutions have increased lending. But small and midsize companies are still in urgent need of funds to keep their businesses afloat.
The export-reliant Japanese economy registered its worst contraction in the April-June quarter, hit hard by the pandemic. But economists expect a rebound in the following quarter through September. The government will release gross domestic product data for the period next month.
Ideas and Commentary:
Liquidity in the banking system is very important during the crisis or any crisis. That was one of the major areas of concern during the 2008 global financial crisis was the liquidity of US banks and also the US banks were afraid to do anything. So the US government and the US federal reserve had to provide banks with a lot of funds to that they felt good enough to begin to offer loans to those who needed them. Before that the banks were afraid to do anything.
Its kind like now and Japanese consumers and salary increases. The BOJ and the Japanese government has been trying to get large companies and others, who have large sums money just sitting and not being used to use that extra money they have to raise the salaries of their employees. When the employees see their salaries rise to a certain level then maybe they might feel good about the extra income and begin to spend some of it in the economy.
The BOJ even instituted an negative interest rate on large companies as a way to "use it or lose" incentive, meaning use the extra money you have sitting in the banks to raise salaries or you will lose the extra money over time.
Article:
Despite downgrading its GDP forecast for fiscal 2020, the BOJ revised upward its projection for the following year, starting next April.
The world's third-largest economy is expected to grow 3.6 percent in fiscal 2021, compared with the earlier projection of 3.3 percent growth. The BOJ forecast consumer prices will rise 0.4 percent the same year, revised from an increase of 0.3 percent.
Following years of aggressive monetary easing, the BOJ is widely seen as running out of effective policy tools to support the economy, a view dismissed by Kuroda.
Ideas and Commentary:
The idea that the Japanese economy might grow 3.6 percent maybe is a little too early to say, but almost every economic organization will have its own estimate, mostly to appease whomever who might want to know what is going to happen in 2021.
With the virus situation still in control in many countries, despite the news of vaccines, it remains to be seen just yet what is going to happen.
The idea of the BOJ running out of effective policy tools has been in the news it seems forever, yet they still come up with measures to try and help the economy improve.
Article:
Recent government data showed that Japan's core consumer price index dropped 0.3 percent in September from a year earlier, despite the BOJ's goal of raising it by 2 percent.
Kuroda said priority should be placed on the coronavirus response, but that the 2 percent target is "appropriate" because prices are expected to move toward it when economic activity returns to normal.
The result was largely due to the government's subsidiary program to boost travel demand hurt by the pandemic. The campaign lowers hotel and other accommodation fees.
Ideas and Commentary:
The Japanese CCP of reaching 2 percent is a worthy goal like 2 percent inflation rate as they go somewhat hand in hand but not exactly. But the idea of getting the CCP up to 2 percent again indicate a balance of demand and rising prices meaning increased economic activity in the economy.
And the travel program? The program was probably a needed goal, but as has been seen in recent weeks, and spike in virus cases and Tokyo and Osaka now wanting out of the campaign.
And again the idea of subsidies, somewhat positive and somewhat negative and somewhat uneven in its distribution both to businesses and consumers. It remains to be seen just how effective the campaign has been or will be.
