BOJ maintains rate hike path despite uncertainty around US tariffs
Ideas:
Just because the Bank of Japan says it remains on track to pursue additional interest rates doesn't mean its going to do it anytime soon, with the uncertainty of the global economy facing all countries.
What the Bank of Japan might be trying to do is keep the Japanese stock market calm and not cause any more harm as there has been enough damage done already due to the US administrations actions.
No one is certain at this point as both Washington and Tokyo still haven't come to any solution to the proposed tariffs and it could take some time for everything to be sorted out.
There appears to be too much uncertainty in what is happening now and companies and stock markets don't like uncertainty. Japanese companies, like all companies, need certainty or near certainty to plan and invest correctly and when there is too much uncertainty like now, they put off investment plans or even trade plans.
At the same time it's even a challenge to try and estimate the effects of the tariffs as there is no real certainty about them other than the 10 percent tariff already implemented.
Even though there might be some certainty with the 10 percent tariffs no one knows how long they will be in effect as evidence related to the Mexico and Canada situation.
What this might suggest, related to the inflation situation in Japan, is central banks might not have that much control over inflation and how to really reduce it. For example even the US never completely reduce inflation and it was still a major challenge for the US economy for a very long time.
What Japan needs or maybe needs is some real and effective free trade agreements that can help to lower the cost of imports to Japan, as Japan is resource-poor country and has to import much of that it needs, and if the Japanese yen remains weak, that means imports will be that much more expensive. A free trade agreement might help to reduce the price of imports.
But unfortunately, what the US administration is trying to do it not a free trade agreement that helps both countries but rather is more one-sided and helps the US only.
But it really doesn't help the US, and that is the real problem as US consumers are going to be hit hard with prices of everyday goods are going to be more expensive.
Just what does "back and forth" mean related to the next rate hike. Does it mean the rate could go either way. if so, that is not a good message for the markets or even businesses and how do they prepare for those kinds of actions in the future.
The Japanese economy growing 0.5 percent is neither good or not so good, but its better than no growth at all, as has been the norm for many years with the Japanese economy.
A growth of 1.1 percent might have been a little ambitious but maybe it's better to be optimistic instead of always estimating a near zero or negative growth projection.
Core consumer prices keep increasing in Japan, but do Japanese consumers or Japanese households really feel a 2.2 percent increase. As every consumer is not the same as all consumers don't buy the exact same food or products.
A supposed weak Japanese yen might mean import prices will be higher and the Japanese domestic consumer will have to pay for the whatever they buy in Japan, while for foreign tourists in Japan a weak Japanese yen means they have more purchasing power or can buy more for the same amount for yen.
The weak Japanese yen might not be the best time for the Bank of Japan to increase its key rate as maybe the effects or side-affects of the weak yen could cause more harm to the Japanese economy that needed.
Yes, September or October might be the best time to have a rate hike, but all depends on what the US is going to do, as the proposed tariffs could significantly curtail any economic growth desires in Japan in the future.
You would think the Bank of Japan needs or wants demand-driven inflation, which might mean, in one sense that consumer demand is strong but supplies are limited. So maybe it's not a demand problem but a supply problem in Japan, as companies can't keep up with the demand of Japanese consumers.
The Bank of Japan for a long time said the Japanese economy was too weak to increase the key rate and the side-affects would be too much for most consumers or businesses in Japan.
A country's GDP is not the be all of all economic indicators and it doesn't explain or tell the full story of what's going on in an economy.
Just ask the person on the street if they know anything about GDP or what it means and see if they tell you that their lives have improved with a 0.7 percent increase in the GDP.
Core CPI, while an important economic indicator again doesn't tell the complete story as maybe some Japanese consumers really don't feel the increase in prices while some Japanese consumers might feel the increase a lot in what they buy.
It's important to know about economic indicators but each consumer is different and they all have different experiences related to costs and buying things or anything in an economy.
The global economy and the US economy and most likely the Japanese was doing relative well for each respective economy, but all economies have been hit what a major challenge now and most if not all businesses are not sure what to do and businesses don't like uncertainty and they need certainty to plan and invest correctly.
Unfortunately, most stock markets globally had significant losses due to the tariff situation and real people lost a lot in the stock market not to mention their savings and retirement savings.
This is a good example of what might happen in the future for Japan if demand of Japanese export products such as cars or other products decrease and imports surge, as again, Japan is a resource-poor country and needs to import much of what it needs.
Have a nice day!
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