Bank of Japan To Keep Current Policy For Now: All 2023 Blog Articles Are Completed.

 

Bank of Japan won't rush to change policy because of Fed's outlook: chief

Article Source:  https://mainichi.jp/english/articles/20231219/p2g/00m/0bu/036000c

Ideas:

The Bank of Japan is most likely not going to show its hand about what is going to do in the future, as a way to not upset the markets, if it does something different than what is said.

At this time, as of news about the Japanese economy, the Japanese economy is not in a good condition for changes in the BOJ policy as the economy, again, has fallen into recession.

Inflation might indeed be decreasing, but its the wrong type of inflation that the BOJ is looking for, as its looking for consumer demand and consumer spending to lift up the economy, not companies passing-on their costs.

If and when the US Federal Reserve does reduce its key rate, that will decrease the variance between the US rate and the Japanese rate, which will then increase the Japanese yen, and it will not be a weak as it is now.

The problem still will be will the Japanese yen, which was weak become stronger and by how much, which might dissuade some foreign tourists from going to Japan.

A stronger yen, means less profits for Japanese export companies as they depend on a weak yen for their profits overseas.

But at the same time, a stronger yen, will be better for the domestic Japanese economy, and for improved import prices.

If Japanese financial institutions, including most banks, were having any detrimental impacts to due the negative rate, it would have been known many years ago, as the negative rate policy has been in existence since around 2014.

The financial markets can speculate all they want but the BOJ is not going to do anything until its ready to do something, and when it does something, the change might be so small that in the Japanese economy might not even notice any changes.

And when it does make some changes, it will test the markets to see just how the changes are going to affect the financial markets and maybe the stock market too.

The challenge for wage growth is not with large Japanese companies, but with small and midsize companies who don't have any room with their profit margins to increase wages as this time.

That might mean up to 70 percent of Japanese workers, in April of 2024, might not see a wage increase.

Not only wage increases but consumer spending are the keys to economic improvement, but if wages are not high enough, then again, consumer spending might not be enough for the Bank of Japan to make significant changes.

But again, unfortunately, the Japanese economy, has fallen into a recession because of the Oct. to Dec. quarter having negative growth, which is two consecutive quarters for negative growth.

As a result, because of the negative growth situation, the BOJ most likely will delay any real changes until its sees better economic growth.

Have a nice day and be safe!

Bank of Japan Not Following Policy: Updated Feb. 21, 2024

 

Bank of Japan won't rush to change policy because of Fed's outlook: chief

Article Source: https://mainichi.jp/english/articles/20231219/p2g/00m/0bu/036000c

Ideas:

The Bank of Japan is in no hurry to change its current policy, as it knows the Japanese economy is in a not so good situation right now.

And the fact that the US Federal Reserve is going to reduce its key rate is not a good reason for Japan to increase its key rate, to move it in line more with the global economy.

Even if many or most Japanese companies in April of 2024 increase salaries, as wanted by the Bank of Japan and the government of Japan, that might not be enough to change its current policy of zero interest rates.

The 2 percent inflation rate, that the BOJ keeps talking about is more related to consumer spending and consumer demand and not so much companies passing-on their costs to the next in the supply chain or the final customer.

Its quite possible that consumer demand and consumer spending will not spur an increase in overall inflation to the 2 percent level, as consumer spending is always behind or less than US consumer spending.

Japanese consumers, for the most part, are more savers than spenders. But that doesn't mean the Japanese consumers doesn't spend, it just they don't spend like the US consumer does.

For example, it my latest trip to Japan in Jan, to Yokohama Japan, a city of 3.5 million people, near Tokyo, there seemed to a lot of people at Yokohama station, shopping, which is a major shopping center area along with Sogo department store. 

Inflation in the Japanese economy might be an incentive for some not to spend and only focus on what they need and now what they really want.

Japan also has an ageing society problem, which might limit the overall consumer spending as older people tend to spend less than younger people.

But also, many young workers, unfortunately, might not be working full-time full benefit types jobs and only contract jobs and or part-time jobs as this group also watches their spending closely,

Consumer spending in Japan is maybe half of its GDP, but maybe it not really high enough to see it improve economic growth, as the Japanese economy seems to be focused exports, such as Japanese cars for economic growth.

If Japan's consumer spending, for example 60 percent of more of GDP, then it might be enough to improve economic growth.

But at 50 percent, if a small portion of that 50 percent is not spending that has a major synergistic effect on economic growth.

It might take another year or even two for the Japanese economy to fully escape stagnation and deflation as their seems to be many challenges ahead for the Japanese economy.

Have a nice and be safe!

Bank of Japan Maintains Ultralow Policy: Updated Feb. 20, 2024

 

Bank of Japan maintains ultralow rates at policy meeting

Article Source: https://mainichi.jp/english/articles/20231219/p2g/00m/0bu/021000c

Ideas:

The decision by the Bank of Japan to not change it current policy was not a real surprise, and everyone knew the BOJ didn't really want to make any changes at this time.

It might have just gone through the motions of meeting just to appease those who wanted a meeting as a way to show they were thinking about it.

The Bank of Japan, like other central banks always uses slogans and phrases to reinforce its ideas such as the use of "reference points" and "most challenging".

The Bank of Japan is allowing long term yields to increase, incrementally, instead of any real changes to its current policy.

The weak Japanese yen is both a positive and a negative for the Japanese economy. A weak Japanese yen improves Japanese exporters revenues overseas and it improves the purchasing power of international tourists who travel to Japan and spend money.

A weak yen also is a negative for the domestic economy, and Japanese importers especially, as the weak yen compared to the strong dollar makes Japanese imports more expensive, which means of course, as Japanese is a resource-poor country many of the products in Japan have higher prices due to the weak yen.

While its not going to happen, as the rest of the advance economies begin to cutback or pause rate increases now might be a time time for in 2024, for the Bank of Japan to increase its key rate as a way to get the Japanese yen back in some kind of balance with the Euro and the US dollar.

But the challenge is, as now, looking at other articles, the Japanese economy has slipped back into a textbook recession, which is two consecutive quarters of negative economic growth.

Which means the Bank of Japan, most likely, is going to put off any changes in its current policy of low or zero rates.

Its hard to see when and how the Japanese economy might begin to finally grow, but it might all depend on wage increases in April of 2024. But the problem is most of the wage increases are related to large Japanese companies and maybe as much as 70 percent of workers in Japan don't work for large companies, which might mean no wage increases for many in the Japanese economy.

Have a nice day and be safe!