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BOJ's Wakatabe warns risk of 'Japanification' not gone yet
  + stars: | 2022-12-04 | by ( )   time to read: +2 min
TOKYO, Dec 4 (Reuters) - Even as cost-push factors boost inflation, global central banks must be vigilant to the risk of "Japanification", in which their economies face prolonged low inflation and stagnation, said Bank of Japan (BOJ) Deputy Governor Masazumi Wakatabe. Various structural factors could weigh on the neutral rate, or the rate at which monetary policy is neither stimulating nor restricting growth, across the globe, he said. "What Japan's long experience with deflation shows is that it's quite hard to eradicate fears of deflation," said Wakatabe, who is known as a vocal advocate of aggressive monetary easing. It continues to maintain ultra-low rates, even as rising raw material costs push inflation above the target. Wakatabe, whose five-year term as deputy governor ends in March, has consistently stressed the need to keep monetary policy ultra-loose to put a sustained end to deflation.
But she warned the outlook was "exceptionally" uncertain and dominated by risks, such as the fallout from Russia's war in Ukraine, global financial tightening and a slowdown in China's growth. But we need to rebuild and preserve buffers and be prepared to fully use our policy tool-kit," she told the same forum. The fallout from China's slowdown has been particularly painful in Asia, where factory activity slumped across the region in November. At the forum, Bank of Japan Governor Haruhiko Kuroda said he did not see a significant risk of Asia facing a sudden loss of confidence or a renewed financial crisis. "ASEAN policymakers must be vigilant" to risks and offer "clear, sufficient and timely communication to avoid unintended outcomes," he said.
Amid the pandemic curbs, China's factory activity shrank in November, a private survey showed on Thursday. The figure followed downbeat data in an official survey on Wednesday that showed manufacturing activity had hit a seven-month low in November. South Korea's factory activity shrank for a fifth straight month in November but the downturn moderated slightly, possibly suggesting the worst was over for businesses. Lockdowns in China have hit production at a factory there that is the biggest producer of Apple Inc (AAPL.O) iPhones. Vietnam's PMI fell to 47.4 in November from 50.6 in October, while that for Indonesia slid to 50.3 from 51.8, the private surveys showed.
TOKYO, Nov 30 (Reuters) - A wider range of Japanese companies are raising prices, including those in sectors historically reluctant to pass on higher costs to customers, a Bank of Japan research note said on Wednesday in a nod to broadening inflationary pressure. A thorough analysis of the BOJ's "tankan" quarterly business survey showed price increases were spreading to many industries, including electronic goods retailers and drug stores, which are known for luring customers with big discounts, the note said. Some companies that raised prices did so for the first time in 30 years after a sharp rise in raw material costs, the research note said. "Hearings conducted on companies showed that when a firm with a big market share in the industry raises prices, others tended to follow suit," the research note said. Japan has been mired in decades of deflation and low inflation as many companies avoided raising prices for fear of scaring away cost-sensitive consumers.
Summary Climate change has big impact on economy, inflation - AmamiyaAug survey showed strong demand for green bonds - BOJ AmamiyaBOJ's climate scheme has extended $26 bln in loansTOKYO, Nov 27 (Reuters) - Bank of Japan (BOJ) Deputy Governor Masayoshi Amamiya said on Sunday the central bank will conduct a survey annually of financial institutions and companies, seeking ways to nurture the country's growing climate finance market. An initial survey in August showed "strong demand" in Japan for "green" bonds and other environmental, social and governance (ESG) debt instruments, Amamiya said. Some respondents said they faced challenges in obtaining information and appropriate methods for assessing risks associated with climate change, he said. "Central banks can therefore contribute to achieving macroeconomic stability in the long run by supporting private-sector moves to deal with climate change." The BOJ last year rolled out a funding scheme targeting activities aimed at combating climate change, as part of efforts to align itself with a global push toward a greener society.
Emerging economies started hiking before the Fed, and quickly, partly because their currencies had weakened against the dollar, raising funding costs and importing inflation. That had quickly fed through to prices, especially energy and some food commodities that are generally traded in dollars. "Total reserves in the emerging markets had fallen by over $400 billion, down 7%, this year as of September." ECB & BOJAt the ECB, the Fed's signal bolsters an already strong case for more measured rate hikes after back-to-back 75 basis point moves and eases growth concerns. Slower Fed rate hikes also help the Bank of Japan, whose ultra-low rates have been criticised for fuelling a sharp yen decline that inflates the cost of imports.
Summary Tokyo Nov core CPI up 3.5% vs f'cast +3.4%Tokyo CPI stays above BOJ's 2% target for 6 straight monthsData underscores broadening inflationary pressureTOKYO, Nov 25 (Reuters) - Core consumer prices in Japan's capital, considered a leading indicator of nationwide trends, rose 3.6% in November from a year earlier, marking the fastest annual pace in 40 years in a sign of broadening inflationary pressure. The rise in the Tokyo core consumer price index (CPI), which excludes fresh food but includes fuel costs, exceeded a median market forecast for a 3.5% gain and accelerated from a 3.4% increase in October, government data showed on Friday. Core consumer inflation in Tokyo remained above the Bank of Japan's 2% target for six straight months in November, a sign that rising raw material costs were steadily pushing up a broad range of prices for daily necessities. The Tokyo core-core CPI index, which strips away both fresh food and fuel costs, rose 2.5% in November from a year earlier, pacing up from a 2.2% gain in October. Reporting by Takahiko Wada and Leika Kihara Editing by Chang-Ran Kim and Sam HolmesOur Standards: The Thomson Reuters Trust Principles.
TOKYO, Nov 22 (Reuters) - Japan's weighted median inflation rate, which is closely watched as an indicator on whether price rises are broadening, hit a record 1.1% in October in a sign of heightening inflationary pressure from rising raw material and labour costs. The 1.1% year-on-year rise in the weighted median inflation was the fastest pace on record and followed a 0.5% increase in September, BOJ data showed on Tuesday. Japan's weighted median inflation rate hovered around zero for the past two decades, as firms held off on price hikes for fear of scaring away cost-sensitive consumers. Unlike the consumer price index (CPI) which is swayed by fuel and energy costs, the weighted median inflation rate is useful to trace how broadly prices are rising. In a research note published in 2015, the BOJ said the weighted median inflation rate would rise more only if inflation expectations heighten, and people begin to assume that prices will continue to rise sustainably.
The move angered foreign governments and foreign-owned carmakers who say the change will disqualify a majority of their EV fleets from North American markets. "But it should not have negative side effects on their European allies and the European economy." South Korean President Yoon Suk-yeol also spoke to Biden about the issue during a bilateral meeting at the G20 summit, according to Yoon’s office. The Treasury is working to define the rules for some $278 billion worth of tax credits on EVs, solar and wind power investments and a range of other technologies. While a number of countries have said the U.S. tax credits likely violate World Trade Organization rules, none have sought to file a formal challenge.
"It may not happen everywhere, but several key countries risk sliding into recession," WTO Director-General Ngozi Okonjo-Iweala told Reuters on the sidelines of the G20 leaders' meeting in Bali, Indonesia. "Of course, the impact of that can be quite significant for emerging markets and poor countries, which need external demand from the developed countries to recover." The Geneva-based trade body last month projected global trade to rise just 1.0% in 2023, down sharply from an estimated 3.5% rise for this year. Okonjo-Iweala said she has called on G20 leaders to phase out food export restrictions, which have been on the rise and hurt poor countries by pushing up food prices. In a meeting in September, trade ministers of the G7 advanced economies agreed to work towards having a functioning WTO dispute settlement system by 2024.
Key takeaways from the G20 summit in Bali
  + stars: | 2022-11-16 | by ( )   time to read: +6 min
Here are key takeaways from the meeting:CONDEMNING RUSSIAN AGGRESSIONMeetings of G20 ministers earlier this year ended without joint declarations because of Russian opposition to references to the war in Ukraine. With the Ukraine war, as well as massive pandemic-era spending packages blamed for fuelling red-hot inflation, the G20 countries said further fiscal stimulus measures should be "temporary and targeted". Besides the meeting with Biden, Xi held talks with Australian Prime Minister Anthony Albanese, South Korean President Yoon Suk-yeol, Canadian Prime Minister Justin Trudeau and French President Emmanuel Macron. A meeting with British Prime Minister Rishi Sunak was cancelled due to scheduling issues, Downing Street said. Xi is set to meet Japanese Prime Minister Fumio Kishida later this week.
The central banks will also be mindful of the need to limit spillovers, the statement added, in a nod to emerging economies' concerns about the potential for huge capital outflows if aggressive U.S. rate hikes continue. The emphasis on the need to fight inflation contrasted with the G20 statement last year, which said central banks must avoid overreacting to transitory rises in inflation. The G20 leaders also called for "temporary and targeted" fiscal spending to low-income households which are particularly vulnerable to rising living costs. Now, policymakers are faced with the dilemma of having to combat inflation with interest rate hikes, without cooling economies that are already facing the risk of recession. "It may not happen everywhere, but several key countries risk sliding into recession," said WTO Director-General Ngozi Okonjo-Iweala.
Leaders from the Group of Seven nations as well as Spain and the Netherlands, who are all on the Indonesian island of Bali for the G20 summit, held an emergency meeting in response to the missile strike in Poland. The G20 leaders' meeting on Wednesday will be important to raise their awareness of the war in Ukraine, French President Emmanuel Macron's office said on Tuesday after reports of the blasts in Poland. G20 leaders were due to visit a site in Bali to plant mangroves on Wednesday morning, although the schedule of the meeting hosted by Indonesia has not always run to plan. As at other recent international forums, the United States and its allies were seeking a statement from the G20 summit against Moscow's military actions. A 16-page draft declaration seen by Reuters, which diplomats said was yet to be adopted by leaders, acknowledged the rift over the Ukraine war.
"Most members strongly condemned the war in Ukraine and stressed it is causing immense human suffering and exacerbating existing fragilities in the global economy," the draft said, suggesting that Russia had opposed the language. "There were other views and different assessments of the situation and sanctions," said the draft declaration, which was confirmed by a European diplomat. "Recognising that the G20 is not the forum to resolve security issues, we acknowledge that security issues can have significant consequences for the global economy," the draft declaration said. Fiscal stimulus measures should be "temporary and targeted" to cushion the blow of rising commodity costs for the most vulnerable, to avoid adding to inflationary pressures, the draft declaration said. Wrangling over how to describe the war in Ukraine has prevented G20 ministers earlier this year from issuing a joint communique.
As at other recent international forums, the United States and its allies were seeking a statement from the two-day G20 summit against Moscow's military actions. But Russia, whose forces pounded cities and energy facilities across Ukraine even as the G20 met, said "politicization" of the summit was unfair. [1/12] Leaders gather during the G20 leaders summit in Nusa Dua, Bali, Indonesia, Tuesday, Nov. 15, 2022. China and Russia are close, but Beijing has been careful not to provide any direct material support for the Ukraine war that could trigger Western sanctions against it. Cambodian Prime Minister Hun Sen expressed concern for the health of other world leaders - including Biden - after a positive COVID-19 test forced him to return home early.
[1/10] China's President Xi Jinping greets Indonesia's President Joko Widodo as he arrives for the G20 leaders' summit in Nusa Dua, Bali, Indonesia, November 15, 2022. "We hope the G20 summit can deliver concrete partnerships that can help the world in its economic recovery," President Joko Widodo said after a bilateral meeting with Biden. But Xi and Putin have grown increasingly close in recent years, and reaffirmed their partnership just days before Russia invaded Ukraine. A statement from the Chinese foreign minister said Xi told Biden nuclear weapons cannot be used and nuclear wars cannot be fought. G20 leaders will denounce the use of, or any threat to use, nuclear weapons, according to an early draft of a G20 statement seen by Reuters.
"Previously, the discussion was binary in which you had to choose between renewable energy or existing technology. A "realistic" mix of renewable energy and greener existing infrastructure is needed to help Asia's emerging economies meet a power consumption boom in coming years, Izumisawa said. "You have to think not just about renewable energy, but how to make better use of resources like coal and LNG," he said. Japan, the world's fifth-biggest CO2 emitter, has also called for more focus on promoting the transition of existing fuel plants to greener energy resources. Indonesia is the world's fourth-most populous country and eighth-biggest emitter of greenhouse gases, with coal making up about 65% of its total energy mix.
BOJ inflation target to be scrutinised at government forum
  + stars: | 2022-11-14 | by ( )   time to read: +1 min
Nov 14 (Reuters) - A government-affiliated think tank will host a forum next month to discuss the Bank of Japan's 2% inflation target and the "challenges ahead", the organisation said on Monday. Participants include Columbia University professor Takatoshi Ito, who was a proponent of setting an inflation target when the BOJ had none until 2013, and University of Tokyo academic Tsutomu Watanabe, a former BOJ official known for his analyses on Japan's price trends. Three months later, Abe's hand-picked BOJ governor Haruhiko Kuroda deployed a massive asset-buying programme to meet his pledge of achieving 2% inflation in roughly two years. But stubbornly low inflation and a fragile economy forced the BOJ to maintain a massive stimulus until now, keeping Japan's central bank an outlier among global peers that have been tightening monetary policy to combat soaring inflation. With prolonged easing crushing bank profits and distorting the yield curve, some lawmakers have called for tweaking the joint statement and making the 2% inflation target a long-term goal with some room for flexibility.
Elon Musk says 'I have too much work on my plate'
  + stars: | 2022-11-14 | by ( Leika Kihara | )   time to read: +3 min
[1/2] Elon Musk, Tesla Inc. CEO, is seen on screens as he speaks virtually during the B20 Summit, ahead of the G20 leaders' summit, in Nusa Dua, Bali, Indonesia, November 14, 2022. "I have too much work on my plate that is for sure," Musk said by videolink to a business conference on the sidelines of the G20 summit in Bali. Musk is chief executive of both companies and also runs rocket firm SpaceX, brain-chip startup Neuralink and tunneling firm the Boring Company. Responding to an observation that many business leaders in Asia wanted to be the "Elon Musk of the East," Musk said: "I'd be careful what you wish for. "I'm just looking at this video and it's so bizarre," Musk said.
Addressing the East Asia Summit in Cambodia, Kishida said ensuring peace and stability in the Taiwan Strait was important for regional security, voicing "serious concern" over the human rights situation of the Uyghur people, according to a statement from Japan's foreign ministry. "There has been continued, increasing actions by China in the East China Sea that violate Japan's sovereignty. China also continues to take actions that heighten regional tension in the South China Sea," Kishida told the meeting, according to the statement. Kishida's remarks follow those of U.S. President Joe Biden, who stressed to Asian leaders the importance of peace in the Taiwan Strait and ensuring freedom of navigation in the South China Sea. Kishida is in Cambodia to attend the East Asian summit, which groups 18 countries accounting for half of the global economy including the three biggest economies - the United States, China and Japan - and Southeast Asian nations.
TOKYO, Nov 12 (Reuters) - Japanese Prime Minister told Chinese Premier Li Keqiang on Saturday he hoped the two countries could strive toward building a "constructive and stable" relationship, Japan's foreign ministry said on Saturday. In a speech at the ASEAN plus 3 meeting, Kishida reiterated Japan's view that North Korea's recent ballistic missile launches, including one that flew over Japan, were a clear and serious threat to the international community, and unacceptable. He also called for cooperation among the countries in achieving a complete dismantling of North Korea's ballistic missiles and weapons of mass destruction. Japan's public broadcaster NHK reported Kishida was making final arrangements to hold talks with Chinese President Xi Jinping during the APEC meeting in Bangkok. Reporting by Leika Kihara; Editing by William MallardOur Standards: The Thomson Reuters Trust Principles.
Japan's Oct wholesale prices rise 9.1% yr/yr
  + stars: | 2022-11-11 | by ( Leika Kihara | )   time to read: +1 min
Slideshow ( 2 images )TOKYO (Reuters) -Japan’s wholesale prices rose 9.1% in October from a year earlier, slowing from the previous month’s record gain but remaining at high levels as the weak yen continued to inflate the cost of raw material imports for companies. The corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, rose 9.1% in October from a year earlier, data showed on Friday. Petroleum and coal prices rose 2.6% in October from a year earlier, slowing from a 14.5% gain in September reflecting falling global fuel prices. But steel prices rose 22.4% and those for food by 6.9% as manufacturers continued to translate higher costs to automakers and retailers, the data showed. Rising fuel and raw material prices have weighed on Japan’s fragile economic recovery, as more companies pass on higher costs to households in a hit to still-weak consumption.
TOKYO, Nov 10 (Reuters) - Bank of Japan (BOJ) Governor Haruhiko Kuroda said on Thursday he had no desire to get re-appointed for another five-year term to head the central bank, after his current one ends in April next year. Personally, I have absolutely no desire to get re-appointed," Kuroda told parliament. The government nominates a candidate for BOJ governor, which needs parliament approval to take effect. The choice of next BOJ governor will be crucial to how quickly the central bank could phase out the current radical stimulus programme deployed by Kuroda. While there is no law prohibiting Kuroda from seeking a third five-year term, few had expected him to be reappointed when his current term ends.
Kuroda brushed aside the chance of a near-term interest rate hike, stressing that the BOJ must continue to underpin a fragile economic recovery with loose monetary policy. But he said the BOJ can debate an exit strategy from its massive stimulus and head toward policy normalisation when achievement of its 2% inflation target, accompanied by wage increases, comes into sight. But one major factor of debate will be the pace of increase in the BOJ's short-term policy rate, now set at -0.1%," Kuroda told parliament. Kuroda said wages are likely to increase ahead as companies respond to intensifying labour shortages and recent rises in living costs, though the outlook remained highly uncertain. "It's extremely important for the BOJ to underpin the economy with ultra-loose monetary policy and ensure the necessary environment is falling into place for companies to hike wages," Kuroda said.
Kuroda brushed aside the chance of a near-term interest rate hike, stressing that the BOJ must continue to underpin a fragile economic recovery with loose monetary policy. But one major factor of debate will be the pace of increase in the BOJ's short-term policy rate, now set at -0.1%," Kuroda told parliament. "We discussed the need for the government and the BOJ to work closely together, and guide policy flexibly to structurally raise wages," said Kuroda. "It's extremely important for the BOJ to underpin the economy with ultra-loose monetary policy and ensure the necessary environment falls into place for companies to hike wages," Kuroda said. Kuroda said recent "rapid and one-sided" yen declines were undesirable as they make it difficult for firms to set business plans.
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