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☆ IMF sees scope for BOJ to tweak yield target this year
▼ + stars: | 2023-04-15 | by ( Leika Kihara | ) www.reuters.com time to read: +2 min

Salgado said the BOJ must keep monetary policy ultra-loose as sustainable achievement of 2% inflation is not yet in sight. Once the BOJ has confidence that Japan will see inflation and wage growth durably accelerate, it can tweak its long-term interest rate target, he said. Under its yield curve control (YCC) policy, the BOJ guides short-term interest rates at the -0.1% level and the 10-year bond yield around zero with an implicit cap of 0.5%. As long as the short-term rates remain zero or slightly negative, the BOJ can keep monetary policy accommodative even if it tweaks the yield target, Salgado said. "Our personal view is, yes," he said, when asked whether conditions could fall in place for the BOJ to tweak the 10-year yield target this year.

☆ BOJ executive warns of 'extremely high' uncertainty over Japan's economy
▼ + stars: | 2023-04-14 | by ( Leika Kihara | ) www.reuters.com time to read: +2 min

Summary BOJ must keep easy policy to support economy - ShimizuFinancial stress warrants close monitoring - ShimizuOverseas risks key to BOJ's growth, inflation forecastsWASHINGTON, April 14 (Reuters) - Bank of Japan Assistant Governor Tokiko Shimizu said on Friday there had been "extremely high" uncertainty regarding Japan's economy, as slowing global growth and recent financial market stress cloud its outlook. "More recently, financial market stress is drawing attention," she said. "Taking these risks into account, it's necessary to pay due attention to developments in the financial sector" and the impact on Japan's economy and prices. Japan's economy has made a delayed recovery from the scars of the COVID-19 crisis, with an end to pandemic-induced curbs propping up consumption. But global recession fears cloud the outlook for the export-reliant economy, a risk that may keep the BOJ from phasing out its massive stimulus.

☆ New BOJ chief Ueda sticks to upbeat view on wages, global economy
▼ + stars: | 2023-04-14 | by ( Leika Kihara | ) www.reuters.com time to read: +2 min

"The BOJ's forecasts already take into account the chance of a global economic slowdown. But they don't see a severe global recession as a baseline projection," Ueda told a news conference on Thursday after attending the Group of 20 (G20) finance leaders' meeting in Washington. "As our base scenario is for global growth to pick up after a period of slowdown, Japan's wages will likely keep rising," he said. Markets are focusing on the BOJ's first policy meeting chaired by Ueda to be held on April 27-28, when the board will produce fresh quarterly growth and inflation forecasts extending through fiscal 2025. I'll think about it closely once I'm back," Ueda said, when asked about prospects for the April policy meeting.

It remains uncertain, however, whether Sri Lanka's biggest bilateral creditor - China - will join the initiative launched by Japan, this year's G7 chair, with the aim of kicking off a series of meetings among Sri Lanka's creditors. "I hope the creation of this platform will become a model case" for debt restructuring of middle-income countries, Suzuki said. Sri Lanka owes $7.1 billion to bilateral creditors, according to official data from its government, with $3 billion owed to China, followed by $2.4 billion to the Paris Club and $1.6 billion to India. The government also needs to renegotiate more than $12 billion of debt in eurobonds with overseas private creditors, and $2.7 billion on other commercial loans. Sri Lanka kicked off talks to rework part of its domestic debt this month and aims to finalise the deal by May.

WASHINGTON, April 13 (Reuters) - Japan, India and France on Thursday announced a common platform for talks among bilateral creditors to coordinate restructuring of Sri Lanka's debt, a move they hope would serve as a model for solving the debt woes of middle-income economies. It remains uncertain, however, whether Sri Lanka's biggest bilateral creditor - China - will join the initiative launched by Japan, this year's G7 chair, with the aim of kicking off a series of meetings among Sri Lanka's creditors. Sri Lanka owes $7.1 billion to bilateral creditors, according to official data from its government, with $3 billion owed to China, followed by $2.4 billion to the Paris Club and $1.6 billion to India. The government also needs to renegotiate more than $12 billion of debt in eurobonds with overseas private creditors, and $2.7 billion on other commercial loans. Sri Lanka kicked off talks to rework part of its domestic debt this month and aims to finalize the deal by May.

☆ China takes swipe at Western 'friend-shoring' efforts
▼ + stars: | 2023-04-14 | by ( Leika Kihara | ) www.reuters.com time to read: +2 min

WASHINGTON, April 14 (Reuters) - China's central bank governor on Friday took a swipe at efforts by Western economies to trade more with allies and rely less on the world's largest goods-exporting country, saying such "friend-shoring" attempts could prevent global supply chain tension from easing. Reducing their deep dependence on supply chains with China at their center has become a top priority among Western economies as Beijing's threats to Taiwan heighten geopolitical risks in Asia. "Despite an overall easing of supply chain tensions, they continue to be challenged by protectionist measures such as onshoring, nearshoring, and friend-shoring," Yi said. U.S. Treasury Secretary Janet Yellen has recently encouraged "friend-shoring," or the diversification of supply chains away from China to market-oriented democracies such as India. The fragmentation of global trade has drawn warnings from international institutions including the IMF.

☆ IMF urges Asia to keep monetary policy tighter for longer
▼ + stars: | 2023-04-13 | by ( Leika Kihara | ) www.reuters.com time to read: +2 min

REUTERS/Siphiwe SibekoSummarySummary Companies IMF revises up this year's Asia-Pacific growth f'castChina's reopening to underpin Asia's recoveryImpact of global banking stress on Asia limited - IMFWASHINGTON, April 13 (Reuters) - Asian central banks may need to keep monetary policy "tighter for longer" to combat still substantial inflation risks, senior International Monetary Fund official Krishna Srinivasan said on Thursday. The latest forecast implies the region will contribute over 70% of global growth this year, Srinivasan said. The IMF expects China's economy to expand by 5.2% in 2023, higher than the previous year's 3.0% growth. "China's reopened economy is rebounding strongly, and this will generate positive spillovers to its trading partners, providing fresh momentum for Asia's growth," he said. "Unless strains increase and raise broad-based stability concerns, central banks should separate monetary policy objectives from financial stability goals," he said.

☆ Sovereign debtors, creditors agree on steps to jumpstart debt restructurings
▼ + stars: | 2023-04-13 | by ( Andrea Shalal | ) www.reuters.com time to read: +4 min

WASHINGTON, April 12 (Reuters) - Global creditors, debtor nations and international financial institutions on Wednesday agreed to improve data sharing, set clearer timetables and take other steps aimed at jumpstarting debt restructuring processes. Reuters reported Beijing was poised to drop its demand that multilateral development banks share in debt restructuring losses, partly in exchange for the IMF and World Bank providing earlier access to their debt sustainability analyses for countries receiving debt treatments. The statement said the debt roundtable participants agreed on the importance to urgently improve information sharing on macroeconomic projections and debt sustainability assessments in debt treatment cases. "This work will also help in clarifying potential timetables to accelerate debt restructurings," the statement said. It said the IMF, World Bank and the G20 presidency will continue to work closely together and with other partners to further support the international response to current debt challenges.

WASHINGTON, April 13 (Reuters) - Angola's next sovereign debt issuance will be an ESG bond of up to $1 billion, its finance minister told Reuters on Thursday, but she added that the southern African oil producer's government would not tap the market this year. "We are open to get funding from whoever is interested to participate," she said. But any ESG issuance will be the first one for us, so we want to start with the hard work." "We are very cautious about the moment to step into the markets because we want to stabilise our debt," she said, noting the current challenging market conditions. Reporting by Leika Kihara; Editing by Chizu NomiyamaOur Standards: The Thomson Reuters Trust Principles.

☆ IMF says more flexible BOJ yield control can prevent market whiplash
▼ + stars: | 2023-04-12 | by ( Leika Kihara | ) www.reuters.com time to read: +3 min

Under yield curve control (YCC), the BOJ guides the 10-year government bond yield around 0% as part of efforts to sustainably achieve its 2% inflation target. The central bank's decision in December to widen the tolerance band around the yield target has heightened market bets of a further near-term tweak or end to YCC. Changes to the BOJ's yield control policy may affect financial markets through exchange rates, term premiums on sovereign bonds and global risk premiums, the IMF said. While the yield control policy has helped keep borrowing costs low, it has come under increasing criticism for distorting market pricing and crushing financial institutions' profits. "Clear communication in the event of adjustments to the Bank of Japan's monetary policy is critical to avoid market volatility," it said.

Reuters GraphicsNOTHING 'BROKEN' YETInternational economic officials gathering in Washington this week for the IMF and World Bank spring meetings can take some comfort that pandemic-era risks are continuing to diminish. An aggressive year of central bank rate hikes hasn't yet "broken" any of the economies involved, with the U.S. unemployment rate at 3.5%, near its lowest level since the late 1960s. Still, that terminal rate remains unclear, and the end of synchronized tightening by the Fed, BoE and European Central Bank doesn't mean tight monetary policy is going away. Wages, services and food are driving price growth to the point that the ECB's attention has shifted almost entirely to underlying inflation on fears that rapid price growth is at risk of getting stuck above target. The U.S. central bank is expected to increase its benchmark overnight interest rate by another quarter of a percentage point next month, and signal whether more hikes may be warranted.

WASHINGTON, April 12 (Reuters) - Japan, France and India will announce a new platform for creditors to coordinate restructuring of Sri Lanka's debt, Japanese Finance Minister Shunichi Suzuki said on Wednesday, adding it would be "very nice" if China were to join the effort. As chair of this year's Group of Seven (G7) meeting, Japan has put efforts to address debt vulnerabilities of middle-income countries such as Sri Lanka as among priorities for debate. The announcement of the new platform, initiated by Japan, France and G20 chair India, will be made on Thursday, Suzuki said in a news conference after the G7 finance leaders' meeting. The platform will likely consist of a series of meetings of the creditor nations to discuss the debt. It will be very nice if China will join," Suzuki said.

☆ G7 to discuss digital currency standards, crypto regulation
▼ + stars: | 2023-04-11 | by ( Leika Kihara | ) www.reuters.com time to read: +3 min

"As a priority of this year, the G7 will consider how best to help developing countries introduce CBDC consistent with appropriate standards, including the G7 public policy principle for retail CBDC," he said. Outside the G7, China has been leading the pack on issuing a digital currency. G7 central banks have set common standards toward issuing CBDCs as some proceed with experiments. The collapse of crypto exchange FTX last year "was a serious wake-up call" for policymakers to create regulation across borders, he said. Reporting by Leika Kihara in Tokyo; Editing by Jamie FreedOur Standards: The Thomson Reuters Trust Principles.

☆ Analysis: Japan's upbeat wages may keep new BOJ chief on hook for policy tweak
▼ + stars: | 2023-04-11 | by ( Leika Kihara | ) www.reuters.com time to read: +4 min

However, a widely expected upgrade in the Bank of Japan's price forecasts due this month may show inflation staying near 2% for several years. "The BOJ will probably upgrade its price forecasts this month. In doing so, it could offer new guidance on future policy and tweak YCC around summer or autumn," she said. With more firms hiking prices and employees' pay, the BOJ may revise up the forecasts and see inflation stay around 2% through fiscal 2025, analysts say. "The BOJ may see scope to tweak YCC as early as June," he said.

But Ueda said the Bank of Japan (BOJ) must also avoid being too late in normalising monetary policy, a sign he will be more open to the idea of tweaking its controversial bond yield control policy than his dovish predecessor Haruhiko Kuroda. "If the BOJ suddenly realises that inflation will stably and sustainably hit 2% and decides to normalise monetary policy, it will have to make very big policy adjustments," Ueda said in an inaugural news conference on Monday. The dollar extended its gains against the yen to hit 133.055 , the highest since April 4, on receding expectations of a near-term tweak to Japan's ultra-loose monetary policy. PRICE TRENDS HOLD KEYIf the BOJ sees that it can achieve its price target, it might need to normalise monetary policy, Ueda said. But the BOJ must sustain Kuroda's stimulus programme for the time being, including YCC, remarks that diminish the chance of a policy shift at this month's policy meeting.

[1/3] New Governor of Bank of Japan Kazuo Ueda waits for Japanese Prime Minister Fumio Kishida before their meeting at prime minister?s official residence in Tokyo, Japan, April 10, 2023. "Given high economic uncertainty, the BOJ will communicate closely with the government and guide monetary policy flexibly," Ueda told reporters after meeting with Prime Minister Fumio Kishida to receive his official appointment letter. In parliamentary confirmation hearings in February, Ueda has stressed the need to keep ultra-easy policy to ensure Japan sustainably achieves the BOJ's 2% inflation target backed by wage growth. Ueda will chair his first policy meeting on April 27-28, when the board produces fresh quarterly growth and price forecasts extending through fiscal 2025. 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.

☆ 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."

☆ 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.

☆ 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.

☆ Asia's factory activity weakens as global demand falters
▼ + stars: | 2023-04-03 | by ( Leika Kihara | ) www.reuters.com time to read: +3 min

"With global growth set to remain weak in the coming quarters, we expect manufacturing output in Asia to remain under pressure," said Shivaan Tandon, emerging Asia economist at Capital Economics. South Korea's PMI fell to 47.6 in March from 48.5 in February, contracting at the fastest pace in six months as export orders took a hit from weak global demand. Vietnam and Malaysia saw factory activity shrink in March, while that of the Philippines expanded at a slower pace than in February, surveys showed. While indications are that the U.S. Federal Reserve will pause its tightening cycle soon, the outlook remains clouded by the banking-sector troubles, still-high inflation and slowing global growth. "Given much of the drag from higher interest rates is yet to feed through to advanced economies, we expect global growth and demand for Asia's exports to remain weak in the coming quarters," Capital Economics' Tandon said.

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.

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.

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