BOJ chief Ueda reaffirms rate hike path, caution about US economy
Ideas
The Bank of Japan might say it's ready to raise interest rates but that doesn't mean it's going to do it anytime soon. At the same time the BOJ cautioned about "considerable uncertainties" which is a huge statement which could mean it might take a wait and see approach.
Most likely the BOJ is going to watch carefully how the US tariff situation is going to affect the Japanese economy and make a decision based on what happens with the tariffs.
Even if the Japanese economy does show some improvement, if the global economy and US economy is not where they should be, that might be enough for the BOJ to continue to take a wait and see position.
Prices in Japan have been increasing ever since the pandemic and might be slowing a little and or trending down, they are still too high for the average Japanese consumer which means the disposable income of most Japanese families are not where they should be which then means less spending in the economy.
The US trade policies are all over the place as they change from month to month. For example more tariffs in October were just placed in China which means no one really has a clue as to how to plan or prepare for the next few months or even the next year.
A central bank or even a company can make a plan based on what is happening today but everything could easily or quickly change the next day which again makes planning very hard to do and companies want stability and or they want clear policies which are not getting now.
Its going to take some time before the Japanese economy begins to see the real effects of the tariffs, as it hasn't been that long as companies might still be looking at how to really deal with the tariff situation.
All countries, including those not directly having tariffs placed on them are eventually going to see some reciprocal affects as all countries now live in an inter-connected global economy and what affects one country will have some kind of affect on another countries now.
Its only been a few weeks since the 15 percent levy went into effect which means most likely there isn't enough data yet on how the levies are affecting companies and the Japanese economy or even the US economy.
It might take a few months to see the real effects as companies begin to see changes in profits and or changes in sales or even effects on the whole economy which might be known or seen for a few months.
Forward thinking and planning for what is going to happen in the future is important and needed as waiting to react to a situation might be too late to help the economy or companies.
Even if action is only implemented when the actual data is known it might not be too late but its better to makes scenario plans ahead of time as to what might happen in the future.
Again, the BOJ might take a wait and see approach, as it usually does, due to the fact that taking action might actually cause more harm than good and its better to wait than to cause undo damage to the the economy.
The US jobs report, which comes out the first Friday of every month is/was the one report that not only US companies and economists look at but economists from other countries look at it to do gauge what they should do with respect to their economies.
The US jobs report is very secretive as it kept out of reach of everyone until maybe Friday morning at 8:30 as a select group of reporters are brought into a secure room and then exactly at 8:30 they are given a copy of the report to read and then they can transmit the report information to their respective new agencies.
Its so secretive or important that it can change the dynamics of stock markets not only in the US but globally too, as what is known with the report can cause a 24 hours swing of global stock markets staring in NYC and then moving across the world including in Tokyo and so on.
The BOJ is supposed to an independent agency that is not related or affected by any political party but in reality that might not really be so as they do watch and listen to what is happening on the political seen too.
The BOJ of course will be respectful to the new Prime Minister but that doesn't mean they will follow anything a Prime Minister might want to see in the economy, as again, the Bank of Japan is supposed to be an independent agency and makes decisions about the economy based no data, intuition, and inferences, and not political persuasion.
Yes the Prime Minister can make recommendations or suggestions but that doesn't mean the BOJ had to heed the advice of any Prime Minister as again the are not aligned with any party and they are independent which supposedly gives them the freedom to make decisions about the economy without fear or retribution.
But of course if the ideas or the Prime Minister aligns with what the BOJ is thinking then it might look like the BOJ took the advice of the PM and did what the PM wanted, which most likely it was the BOJ's ideas already.
Yes, in normal supply and demand situations decreased demand might lead to a eventual decrease in prices but that is not what is happening in Japan as the Japanese economy has been stagnant for a very long time and prices have continued to increase and if the normal supply and demand mechanisms were in place prices would have begun to decrease years ago.
But because prices of raw materials, energy prices, and even wages keep increasing, and companies continue to pass-on those costs to the next in the supply chain, which prices have remained high despite a decrease in demand in the Japanese economy.
And again, even though consumer sentiment has been less than good and prices continue to increase again normal supply and demand situations just don't seem to be working in Japan, as ever since the pandemic prices in Japan have been well above the 2 percent inflation target of the BOJ.
In most economies when there is persistent or continued inflation consumer demand might decrease to the point where prices naturally begin to decrease but in Japan that hasn't happened.
Prices in Japan might be considered sticky meaning the are stuck and don't go down easily or even at all the past few years, which is a major challenge of the BOJ to solve.
Have a nice day!
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