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☆ Morning Bid: Have payrolls resurrected the 'soft landing'?
▼ + stars: | 2023-04-10 | by ( ) www.reuters.com time to read: +2 min

[1/2] An employee hiring sign with a QR code is seen in a window of a business in Arlington, Virginia, U.S., April 7, 2023. Earnings for Citi, Wells Fargo and JP Morgan Chase & Co later in the week will be in focus for colour on financial conditions. Inflation figures due Wednesday can also help markets to gauge how aggressive the Federal Reserve may need to be. Friday's jobs data lifted yields, but didn't substantially shift a bigger picture view that hikes are all but finished and cuts are coming. China is running military exercises in the wake of Taiwan's president visiting the United States, while the U.S. scrambles to find the source of a damaging document leak.

☆ Factbox: Possible next steps for BOJ policy under new governor
▼ + stars: | 2023-04-10 | by ( Leika Kihara | ) www.reuters.com time to read: +4 min

ABANDON YIELD TARGETA leadership transition gives the new governor a chance to overhaul his predecessor's policy. Ueda has said YCC was unsuited for minor fine-tuning, suggesting that he could abandon the 10-year yield cap and shift to a policy solely targeting short-term interest rates. One idea would be to widen the band set around the 10-year yield target, now set at 50 basis points on either side. When the BOJ shifted to YCC from a policy targeting the pace of money printing, it used a thorough analysis of its policy framework to justify the shift. Any such move would likely be accompanied by, or come well after, the end of the 10-year yield target.

☆ Japan's new central bank chief assumes office as global risks loom
▼ + stars: | 2023-04-10 | by ( Leika Kihara | ) www.reuters.com time to read: +3 min

[1/2] The Japanese government's nominee for the Bank of Japan (BOJ) Governor Kazuo Ueda speaks during a hearing session at the lower house of the parliament in Tokyo, Japan, February 24, 2023. The 71-year-old academic's term began on Sunday, succeeding Haruhiko Kuroda, whose second, five-year term ended on Saturday. Ueda and his two deputy governors, Shinichi Uchida and Ryozo Himino, will hold a joint news conference at 1015 GMT on Monday. Japan's long-stagnant inflation and wage growth are showing budding signs of change. Ueda served as BOJ board member from 1998 to 2005, during which the central bank introduced zero interest rates and then quantitative easing to combat deflation and economic stagnation.

☆ Ex-BOJ deputy governor Nakaso predicts tweak or end to YCC, Nikkei reports
▼ + stars: | 2023-04-08 | by ( ) www.reuters.com time to read: +2 min

"The increasing side-effects are a sign the policy effect (of YCC) is working its way through the economy," Nakaso said. "When the appropriate timing comes, the BOJ's new leadership will likely modify or abolish YCC," or yield curve control. The next challenge will be to end negative interest rates and start a full-fledged policy normalisation, Nakaso said. Under YCC, the BOJ guides short-term interest rates at -0.1% and caps the 10-year bond yield around zero as part of efforts to sustainably hit 2% inflation. Nakaso, who had been considered among candidates to succeed Kuroda, served as deputy BOJ governor for five years until 2018.

☆ Kuroda departs BOJ after inflation fails to fly like 'Peter Pan'
▼ + stars: | 2023-04-07 | by ( Leika Kihara | ) www.reuters.com time to read: +4 min

The 78-year-old gives his press conference at 0630GMT, the Bank of Japan (BOJ) said. Kuroda was not the first BOJ chief to attempt to influence public perceptions with monetary easing. In 2015, he alluded to the Peter Pan fairy tale in explaining that to fire up inflation, the BOJ needed to have the public believe in its monetary magic with massive stimulus. When allusions to Peter Pan and spacecraft failed, the BOJ shifted to a defensive, long-term approach in 2016 with the introduction of yield curve control (YCC). "The BOJ's failure to change public expectations raises a lot of questions about the effectiveness of unconventional monetary policy."

TOKYO, April 7 (Reuters) - The Bank of Japan (BOJ) should be cautious about changing its unconventional monetary policy for now, given financial market uncertainty due to problems in Western banks, former top financial diplomat Takehiko Nakao told Reuters in an interview. Nakao made the comments amid speculation the BOJ may abandon its yield curve control policy when new Governor Kazuo Ueda takes over incumbent Haruhiko Kuroda, whose term ends on April 8. U.S. bank failures and the buyout of Credit Suisse by UBS last month have driven financial market risk aversion. Nakao said the BOJ must carefully monitor market developments, for now, although credit anxiety was unlikely to morph into anything like the 2008/09 global financial crisis. "Yet, the BOJ cannot continue unconventional monetary policy, including ETF and REIT purchases and YCC, indefinitely.

☆ Kuroda less dovish as he departs BOJ after decade of massive stimulus
▼ + stars: | 2023-04-07 | by ( ) www.cnbc.com time to read: +4 min

Haruhiko Kuroda, governor of the Bank of Japan (BOJ), at the central bank's headquarters in Tokyo, Japan, on Thursday, May 27, 2021. Haruhiko Kuroda, governor of the Bank of Japan (BOJ), at the central bank's headquarters in Tokyo, Japan, on Thursday, May 27, 2021. Kuroda was not the first BOJ chief to attempt to influence public perceptions with monetary easing. When allusions to Peter Pan and spacecraft failed, the BOJ shifted to a defensive, long-term approach in 2016 with the introduction of yield curve control (YCC). "The BOJ's failure to change public expectations raises a lot of questions about the effectiveness of unconventional monetary policy."

☆ Analysis: New BOJ chief to slowly unwind Kuroda's policy experiment
▼ + stars: | 2023-04-06 | by ( Leika Kihara | ) www.reuters.com time to read: +5 min

In a sign he will be in no rush to shift policy, Ueda told a parliamentary confirmation hearing in February that he will "spend time and engage in thorough discussions" with BOJ board members on how to address the side-effects of prolonged easing. But a closer look at his past, more candid remarks as a private-sector economist, and as a BOJ board member during Japan's battle with deflation in the late 1990s, offers a glimpse of his policy and communication style. Removing YCC altogether will deprive the BOJ tools to combat an unwelcome spike in bond yields, says former board member Takahide Kiuchi. Accounts of his days as BOJ board member also suggest Ueda is no fan of heavy money printing. Both in the confirmation hearings and in past remarks as board member, he has stressed the importance of using communication to enhance the effects of monetary policy.

☆ Take Five: An uneasy calm
▼ + stars: | 2023-04-06 | by ( ) www.reuters.com time to read: +5 min

Kazuo Ueda takes over the helm at the Bank of Japan while U.S. bank earnings kick off and Switzerland's parliament debates the UBS-Credit Suisse tie up. 1/ BANKS' BOTTOM LINESThe uneasy calm that has settled over the U.S. banking sector after the collapse of Silicon Valley Bank will be tested as U.S. financials kick off their earnings season. S&P 500 earnings are predicted to fall 5.0%, I/B/E/S data from Refinitiv showed. Reuters Graphics5/ SPRING MEETINGSPolicymakers and investors head to Washington for the World Bank and International Monetary Fund Spring meetings starting on Monday. It will be the first meeting for Ajay Banga, U.S. nominee to run the World Bank and sole contender for the job.

☆ Japan's economy runs below capacity, low rates may stay in place
▼ + stars: | 2023-04-05 | by ( ) www.reuters.com time to read: +1 min

TOKYO, April 5 (Reuters) - Japan's economic output ran below full capacity for the 11th straight quarter in October-December, central bank data showed on Wednesday, suggesting that conditions for ending ultra-low interest rates have yet to fall into place. Japan's output gap, which measures the difference between an economy's actual and potential output, stood at -0.43% in the fourth quarter, widening from -0.08% in July-September, Bank of Japan (BOJ) data showed. A negative output gap occurs when actual output is less than the economy's full capacity, and is considered a sign of weak demand that typically puts downward pressure on inflation. Japan's economy expanded by an annualised 0.1% in the October-December period, only narrowly averting a recession as capital expenditure and consumption remained weak. While an end to COVID-19 curbs is underpinning consumption, growing signs of slowdown in overseas demand are clouding the outlook for Japan's export-reliant economy.

☆ Japan's business mood sours to 2-year low as global slowdown bites, Tankan survey shows
▼ + stars: | 2023-04-03 | by ( ) www.cnbc.com time to read: +2 min

Japan's business sentiment soured in January-March to hit the worst level in more than two years, the closely-watched tankan survey showed on April 3, 2023. Akio Kon | Bloomberg | Getty ImagesJapan's business sentiment soured in January-March to hit the worst level in more than two years, a closely-watched central bank survey showed on Monday, as slowing global growth clouds the outlook for the export-reliant economy. The service-sector mood, by contrast, recovered as easing border controls and an end to Covid-19 curbs heightened hopes for a rebound in tourism and consumption, the Bank of Japan's tankan survey showed. It was the fifth straight quarter of deterioration and the worst level hit since December 2020. Given the fragile nature of Japan's recovery, the BOJ is not in a situation where it can normalize monetary policy anytime soon.

The service-sector mood, by contrast, recovered as easing border controls and an end to COVID-19 curbs heightened hopes for a rebound in tourism and consumption, the Bank of Japan's tankan survey showed. Takeshi Minami, chief economist at Norinchukin Research Institute, expects external factors, such as the fallout from U.S. and European monetary tightening, to weigh on Japan's exports and business sentiment. "Given the fragile nature of Japan's recovery, the BOJ is not in a situation where it can normalise monetary policy anytime soon," he said. Big firms plan to raise capital expenditure by 3.2% in the fiscal year that began in April, less than market forecasts for a 4.9% gain, the tankan showed. Reporting by Leika Kihara and Tetsushi Kajimoto; Editing by Sam HolmesOur Standards: The Thomson Reuters Trust Principles.

Europe-wide inflation data is due at 0900GMT. French inflation data on Friday also came in a whisker above expectations, and Dutch inflation also rose. "Inflation data in the eurozone will be an important driver, (for the euro)" said Francsco Pesole, FX strategist at ING, who expects the euro to reach $1.10 some time next week, after consolidating today. The dollar has also been dragged back as the focus on the U.S. banking sector in March caused U.S. interest rate markets to dramatically reprice the outlook. Both currencies found support from expanding Chinese manufacturing activity, though data on Friday showed the pace was slowing down.

While factory output rebounded in February, some analysts warn of mounting downside risks as slumping global demand for technology goods hits the country's exports. Inflation will probably stay elevated at least during the first half of this year," said Yoshiki Shike, chief economist at Dai-ichi Life Research Institute. Separately, factory output rose 4.5% in February from January, better than a forecast 2.7% gain and rebounding from a revised 5.3% drop in January, on easing supply bottlenecks for carmakers. "There's a bigger risk of a downgrade in manufacturers' output plans due to weaknesses in the information-technology (IT) sector. Global demand is shifting away from goods towards services, which is bad news for Japan's export-reliant economy," Shinke of Dai-ichi Life Research said.

The data underscores the challenge incoming Bank of Japan (BOJ) Governor Kazuo Ueda faces in assessing whether the recent cost-driven inflation will shift to one backed by solid demand and wage growth. The pace of increase slowed from a 3.3% gain in February and a nearly 42-year high of 4.3% hit in January, due largely to the effect of government subsidies to curb utility bills. In a glimmer of hope, factory output rose 4.5% in February from the previous month, government data showed on Friday, more than a median market forecast for a 2.7% gain. Manufacturers surveyed by the government expect to increase output by 2.3% in March and by 4.4% in April, the output data showed. Reporting by Takahiko Wada and Leika Kihara; Editing by Sam Holmes and Jacqueline WongOur Standards: The Thomson Reuters Trust Principles.

The finance ministry will set up a panel of experts as early as April to discuss the feasibility of issuing a digital yen, two sources with knowledge of the matter told Reuters. The step will come after the central bank's decision to start in April a pilot programme to test the use of a digital yen, moving Japan closer to issuing a CBDC in several years. The central bank has said the pilot programme may last for several years. Some laws may need to be revised if the government were to start issuing a CBDC for public use. Public broadcaster NHK reported on Thursday the finance ministry was considering setting up an advisory panel in April to discuss the possibility of a digital yen.

☆ BOJ's new deputy chief flags chance of change to yield control policy
▼ + stars: | 2023-03-29 | by ( Leika Kihara | ) www.reuters.com time to read: +3 min

"If various conditions fall in place, some sort of change to yield curve control may become necessary. If conditions turn positive, (a tweak) will undoubtedly become a possibility," Uchida told parliament. Uchida said trend inflation was "extremely important" in judging whether Japan will sustainably meet the BOJ's 2% price target. Rather than focusing on a particular set of indicators, however, the central bank will look comprehensively at various data in setting monetary policy, he added. A career central banker, Uchida is one of two deputy governors.

☆ Japan's business services prices perk up near BOJ's inflation target
▼ + stars: | 2023-03-27 | by ( Leika Kihara | ) www.reuters.com time to read: +2 min

TOKYO, March 27 (Reuters) - Japan's business-to-business services inflation picked up in February on a tourism rebound and rising labour costs, data showed, offering the central bank hope that steady wage hikes would aid in sustainably hitting its 2% inflation target. The services producer price index, which measures the prices companies charge each other for services, rose 1.8% in February from a year earlier, up from a 1.6% gain in January, BOJ data showed on Monday. Fees for services such as office cleaning, taxi and software development also rose, reflecting higher labour costs. "For services, the pass-through of rising costs isn't as smooth as those for wholesale goods," said Masato Higashi, head of the BOJ's price statistics division, told a briefing. "But when you look closely, the pass-through (of higher labour costs) is gradually broadening," he said.

☆ Morning Bid: Banks queue round the block at Fed discount window
▼ + stars: | 2023-03-24 | by ( ) www.reuters.com time to read: +3 min

A look at the day ahead in European and global markets from Wayne ColeIt's been a slow day in Asian markets, no doubt with everyone tired and emotional after another rough week. The whole yield curve from one month to 30 years is now below the overnight Fed rate, which is something you see only once in a very blue moon. Rather, history shows the curve steepens like this just before recession arrives, as short-term yields dive in anticipation of rate cuts. Fed futures are currently 65% for no hike in May and 85% for a rate cut in July, a U-turn that the Fed is surely hoping to avoid. Yet the strains are showing in the Fed books as borrowing at its discount window as of Wednesday was a hefty $110.2 billion.

☆ Take Five: And let there be calm
▼ + stars: | 2023-03-24 | by ( ) www.reuters.com time to read: +5 min

LONDON, March 23 (Reuters) - At the incredible end to the first quarter for financial markets, rattled by bank turmoil, some stability will be much hoped for in coming days. SNB chief Thomas Jordan reckons the next two weeks will be vital to securing UBS's Credit Suisse takeover. Market cap of US regional banks included in the S&P 500 regional bank index3/ DID YOU SAY AT1? Potential legal action is also possible after Swiss authorities ruled that holders of Credit Suisse AT1 bonds would get nothing in the deal. And U.S. and European banks turmoil show how quickly a crisis can surface, giving Ueda even more reason for caution.

☆ Central banks stick to rate hikes with eye on market turmoil
▼ + stars: | 2023-03-23 | by ( ) www.reuters.com time to read: +5 min

Overall, 10 developed economies have raised rates by a combined 3,290 basis points (bp) in this cycle to date. Reuters Graphics1) UNITED STATESThe Fed raised rates by a quarter point on Wednesday, continuing its most aggressive series of hikes since the 1980s. After setting its policy rate to 4.75%-5.00%, the Fed hinted it may soon pause rate rises. Reuters Graphics3) CANADAThe Bank of Canada on March 8 became the first major central bank to halt monetary tightening during this cycle. Reuters Graphics5) AUSTRALIAAustralia's central bank raised its key rate by a quarter point to 3.6% in March, the highest since May 2012, but hinted rate hikes may be over for now.

☆ Dollar slips as Fed outlook shifts
▼ + stars: | 2023-03-23 | by ( Tom Westbrook | ) www.reuters.com time to read: +3 min

That's a contrast to Europe where markets see another 50 bp or so to go, and the gap sent the euro surging. Dollar/yen fell 0.7% overnight and was edging lower in the Asian morning at 131.19. "From the foreign exchange perspective, we think that argues for further dollar weakness as the ceiling for the Fed cycle has clearly come down." The risk-sensitive Australian dollar recoiled sharply from a two-week high of $0.6759 to be back at $0.6707 on Thursday morning. The New Zealand dollar also gave up overnight gains, but was firm in morning trade at $0.6238.

With inflation still exceeding the Bank of Japan's 2% target, the data will keep alive market expectations of a near-term tweak to its bond yield control policy, analysts say. The core consumer price index (CPI), which excludes volatile fresh food but includes oil products, rose 3.1% in February from a year earlier, government data showed, matching a median market forecast and slowing sharply from a 41-year high of 4.2% seen in January. "The new BOJ leadership will scrutinise Japan's price trend, as well as U.S. and European developments, in deciding its policy move," he said. But some BOJ policymakers have flagged the chance inflation could exceed initial expectations, as price hikes and wage gains show sign of broadening. Reporting by Takahiko Wada and Leika Kihara; Editing by Sam HolmesOur Standards: The Thomson Reuters Trust Principles.

☆ Pessimism persists at big Japanese manufacturers amid global slowdown
▼ + stars: | 2023-03-22 | by ( Tetsushi Kajimoto | ) www.reuters.com time to read: +3 min

The Reuters Tankan, designed to closely track the Bank of Japan's key quarterly tankan survey, suggested the central bank's survey due next April 3 will likely show deterioration in business confidence at big manufacturers. The sentiment index for big manufacturers stood at minus 3, slightly up from minus 5 seen in the previous month, according to the survey conducted March 8-17. Compared with three months ago, the manufacturers' index was down 11 points, suggesting worsening of sentiment in the BOJ tankan's headline big manufacturers index. The Reuters Tankan index is expected to rebound to plus 10 over the next three months. The large service-sector firms' index rebounded to plus 21 in March from plus 17 seen in the previous month.

☆ Dollar muted as traders await Fed rate decision
▼ + stars: | 2023-03-22 | by ( Ankur Banerjee | ) www.reuters.com time to read: +3 min

The U.S. dollar index , which measures the currency against six peers, was at 103.19, just above the five-week low of 102.99 touched overnight. Markets are now pricing in about a 15% chance of the Fed not increasing rates, with a roughly 85% chance of a 25 basis point hike, showed the CME FedWatch tool. Just a month earlier, the market was pricing in a 24% chance of a 50 basis point hike. Such circumstances would usually be ripe for a return to a 50 basis point hike were it not for worries over financial stability, he said. The Australian dollar rose 0.36% to $0.6694, while the New Zealand dollar gained 0.11% to $0.6199.

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