Bank Of Japan Meeting:

 https://mainichi.jp/english/articles/20210716/p2g/00m/0bu/036000c

Article:

TOKYO (Kyodo) -- The Bank of Japan said Friday it will offer zero-interest funds to help financial institutions with their own push to address climate change that could threaten economic growth and financial stability, joining other central banks increasingly committed to the global challenge.

The outline of the new funding program to be launched later this year was unveiled after a two-day policy meeting at which the BOJ, as widely expected, maintained its ultraeasy monetary policy to buttress a fragile economic recovery. It slightly trimmed its growth outlook for the Japanese economy to 3.8 percent from a 4.0 percent increase projected earlier.

The Japanese central bank stuck to its program to keep borrowing costs low for companies and households by setting short-term interest rates at minus 0.1 percent while guiding 10-year Japanese government bond yields around zero percent.

Ideas:

There are always positives and negatives related to any action the Bank of Japan takes, or any other activity in the economy. 

Climate change, as it looks now, with the present weather situation in Japan the past two weeks, is a definite clear and present danger to the Japanese economy.

Not just the past two weeks but all summer long, the affects of of the large amount of rain and of course the summer heat, has produced produced a lot of damage in Japan.

And how about the how both the heat and rain affecting the aquiculture sector in Japan?

And then add in all of the damage from the flood and mudslides you have major challenges in Japan.

But unfortunately, its somewhat like that every summer. And of course this past winter with the huge snowstorms around the west coast area and Nagano that stopped traffic on the major highways and the self defense forces had to be help all of the trucks and cars that were stuck on the highways.

Yes, the Bank of Japan should maintain it negative interest rate policy to help as many businesses and families as possible.

The pandemic, as it seems, is worse now than it was back in the spring of 2020.

If the Japanese economy does hit the projected growth of 3.8 percent, with the pandemic now out of control again, it would be good, but the pandemic might have something to say about that.

Article:

Under the new climate-related program, the BOJ will offer one-year, zero-interest funds to financial institutions for their loans and investments in such products as green bonds to tackle climate change. Rollovers will be allowed for an unlimited number of times under the scheme that will be effective until March 2031.

A growing number of central banks have become keenly aware of the need to address climate change but they differ on how far they want to get involved. The European Central Bank and the Bank of England are seeking to factor climate change considerations into policy but the U.S. Federal Reserve is perceived as having reservations, with Chair Jerome Powell saying climate policy is for elected officials.

In a calibrated move, the BOJ is underlining its commitment to addressing climate issues while seeking to remain neutral as a central bank by leaving it up to private-sector financial institutions to make decisions on climate-related loans and investments.

Ideas:

Yes, unfortunately, for some, or many, climate change is a political situation, and some think banks and related groups should not get involved.

Unfortunately with that outlook, these days, nothing might be done. Its good that the Bank of Japan has decided to try and do something.

Climate change funding is not easy as it requires many companies and industries to change how they do things. 

Just recently the EU also has come out with some new ideas related to car emissions. Of course many car companies are not happy with it because it means re-tooling their factories and or new parts in the cars which could makes the cars more expensive in the future.

So the idea is the Bank of Japan provides funding at  near zero interest rates to the banks which in turn will use the new financial resources to help companies and investors transition to new products and services that can help reduce climate change.

Article:

No specific incentives such as paying additional interest will be offered but private-sector banks will be given more exemptions from the negative interest rate applied to some of the funds they park at the BOJ.

The BOJ surprised analysts and financial markets last month when it announced a plan to launch the new fund-providing program. Riding the global momentum for decarbonization, Japan has pledged to attain carbon neutrality by 2050, with the government counting on green growth and Japanese megabanks halting financing for new coal-fired power plants.

In addition to the potential longer-term impact of climate change, the BOJ also assessed the near-term impact of the coronavirus pandemic as Tokyo, hit by resurging coronavirus cases, is under a fourth state of emergency, with further progress in COVID-19 vaccinations seen as the key to increased economic activity.

Ideas:

It looks like the Bank of Japan is following on the lead from the EU and the UK to try and get some momentum in addressing climate change challenges.

Just like what happened in the EU this summer with the major floods now no country can deny that the global climate is changing rapidly.

Japan has always been a country with major climate challenges and even more the past few winters and summers.

Of course to make changes it going to cost money for some companies or many. So the Bank of Japan realizes this so they are laying the foundation for banks to proved needed funds to help companies transition to a more carbon free environment and or any other green innovations that come along in the future that might Japan become an more green society and economy.

The elimination of coal-fired power plants will not be easy because Japan or society seems to not want nuclear powered plants. So what is the alternative. 

If the situation in 2011 had not happened perhaps Japan and the Japanese society would not have thought much about the use of nuclear power as a source of energy.

Yes, vaccinations are important, but at the same time, the virus situation is even worse than what it was in the spring of 2020. How much is the economy going to be affected is a challenge. 

Article:

The growth outlook for the Japanese economy was cut for fiscal 2021 through next March but gross domestic product is expected to increase 2.7 percent in fiscal 2022, rather than the 2.4 percent expansion projected earlier. The core consumer price index excluding volatile fresh food items, a gauge of inflation, is now forecast to rise 0.6 percent from a year earlier in fiscal 2021, instead of the earlier estimate of a 0.1 percent gain.

"Japan's economy has picked up as a trend, although it has remained in a severe situation due to the impact of COVID-19 at home and abroad," the BOJ said, maintaining its assessment.

To continue to support the economy and accelerate inflation toward its 2 percent target, the BOJ will buy exchange-traded funds, or investment products comprising a variety of stocks, as needed with its annual purchase limit set at 12 trillion yen ($109 billion).

Ideas:

If the Japanese economy does grow 2.7 percent that would be good. But it needs to be remembered how bad the economy was, so a 2.7 percent growth in reality might not be that much.

And it needs to be remembered, not all sectors grow at exactly the same rate. So there might be some sectors, such as the export sector, which is and will see excellent growth, but some parts of the services sectors, such at hospitality and tourism, might not see much growth if any at all. 

For example just this week several hotels seemed to have closed until January of next year, hoping that the virus situation might be less then and customers will begin to come back to the hotels. 

An increase of inflation from 0.1 to 0.6 might look good but its too early to say that there is an increase in real demand in the economy which can help increase inflation. Of course supplier prices are another reason inflation might be increasing some. 

An increase in inflation or prices, can sometimes indicate that overall demand in the economy is improving, but at the same time it can mean supplier prices are increasing to which can sometimes be passed on to whomever is next in the supply chain.

To to be fair and honest, for now, the Bank of Japan maybe should not concern itself with its 2 percent target, as it been trying to reach the target the past seven years without much success.

The Bank of Japan, for now and in the foreseeable future should continue to focus on helping companies and families survive the pandemic.

Article: 

Unlike in the United States and some European nations where inflationary pressures have been building up in line with the reopening of their economies, Japan appears to be an exception. The core CPI has been hovering around zero percent and the BOJ's elusive 2 percent target is still far off.

Despite economists saying such inflation overseas is likely to be temporary, rising material costs is a source of concern for Japanese companies, which are reluctant to raise prices when consumption lacks strength.

Ideas:

Yes inflation challenges appear on the horizon in the EU and the US but mostly likely its about increasing demand which might be a good thing for the respective economies.

But Japan, for whatever reason, appears to always be an exception. The Bank of Japan has tried for the past seven years to get inflation to the 2 percent level, without much success.

So that brings up an interesting question, on the issue of inflation and or any other situation, just how much influence does a central bank have on situations in an economy and can they really change them?

Rising material costs are a major challenge for any companies, but even more now, and the pandemic continues to affect supply chains. 

And yes companies are not going to raise prices if there is not enough consumer demand in the economy.

But that has been the challenge for the Japanese economy recently. While consumer spending is around 50 percent of Japan's GPD, it doesn't seem to be enough and or doesn't seem to reach its potential for an economy has large as Japans.

Perhaps consumer spending should be 60 to 65 percent in Japan instead of always staying around the 50 percent level, which is what it is in most advanced economies.

So again if the Bank of Japan wanted to try and get more consumers spending in the economy what more can or could it do, since what it has tried so far as not had much affect in reaching the 2 percent inflation goal.

Have a nice day and be safe!