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☆ Asia shares hesitant ahead of updates on Fed, BOJ policies
▼ + stars: | 2023-02-20 | by ( Wayne Cole | ) www.reuters.com time to read: +4 min

All of which made for a cautious start and MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) nudged up 0.3%, after sliding 2.2% last week. Chinese blue chips (.CSI300) firmed 0.9% as Beijing kept interest rates steady as expected, having already poured liquidity into the banking system in recent days. CORE PCE A RISKMinutes of the Fed's last meeting due on Wednesday should add colour on the deliberations, though they have been superseded somewhat by barnstorming numbers on January payrolls and retail sales. The Fed's favoured inflation indicator, the core PCE index, is seen rising 0.4%, the biggest gain in five months, while the annual pace may have slowed just a fraction to 4.3%. There are also at least five Fed presidents speaking this week, to provide running commentary.

☆ Asia shares muted by unease over Fed, Bank of Japan policy
▼ + stars: | 2023-02-20 | by ( Wayne Cole | ) www.reuters.com time to read: +4 min

All of which made for a cautious start and MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was largely flat, after sliding 2.2% last week. Markets have steadily lifted the expected peak for Fed funds to 5.28%, while sharply scaling back rate cuts for later this year and next. There are also at least five Fed presidents speaking this week, to provide running commentary. Investors are anxiously awaiting Friday's testimony from the newly nominated head of the Bank of Japan, and his thinking on the future of yield curve control (YCC) and super-easy policy. Oil prices were trying to steady after shedding around 4% last week amid signs of ample supply and concerns over future demand.

☆ Take Five: A year of war in Ukraine
▼ + stars: | 2023-02-17 | by ( ) www.reuters.com time to read: +5 min

LONDON, Feb 17 (Reuters) - The coming week will mark a year since Russia invaded Ukraine. The war goes on, but the world, and the markets, are in a very different place from last February. 1/A YEAR OF WARSenior politicians and military leaders from around the globe meet in Germany this weekend, days before the anniversary on Feb. 24 of Russia's invasion of Ukraine - Europe's biggest conflict since World War Two. Moscow is ramping up its spring offensive, while Ukraine - armed with heavier and longer-range firepower from the West - gathers strength for a counter push. On the same day as the Ukraine anniversary - Feb. 24 - Ueda should offer clues on timing when he testifies with his two would-be deputies to the lower house.

Kazuo Ueda, a 71-year-old university professor who has kept a low profile despite strong credentials as a monetary policy expert, ticked some important boxes. While he was not even on the list of dark horse candidates floated by the media, Ueda was well known in global central bank circles. The bank's preferred choices were incumbent deputy governor Amamiya, as well as former deputies Hiroshi Nakaso and Hirohide Yamaguchi, given their deep knowledge on monetary policy. Matsuno said he hoped the BOJ works closely with the government and guides monetary policy flexibly, when asked whether Ueda's appointment could lead to a retreat from Abenomics. While he warned of the rising cost of the BOJ's yield control policy, Ueda has called for the need to keep monetary policy loose to ensure Japan stably achieves the bank's 2% inflation target.

☆ BlackRock downgrades Japan stocks on possible monetary policy shift
▼ + stars: | 2023-02-15 | by ( Jihye Lee | ) www.cnbc.com time to read: +3 min

Kazuhiro Nogi | Afp | Getty ImagesBlackRock, the world's largest asset manager, cut Japanese stocks to "underweight" – as Japan is set to appoint a new governor to lead its central bank. "We downgrade Japanese stocks on policy uncertainty and a worsening economic environment," BlackRock's research arm said Monday, before the government submitted its central bank picks to parliament. U.S. Treasury yields spiked, with the 10-year note and the 30-year note jumping 7 and 8 basis points respectively. One possibility is the Bank of Japan further widening its tolerance range beyond 50 basis points. Nikkei separately reported earlier this month that the central bank purchased 23.7 trillion yen ($182 billion) of JGBs in January, a new record high.

☆ Bank of Japan’s new governor starts on back foot
▼ + stars: | 2023-02-14 | by ( Pete Sweeney | Thomson Reuters | Asia Economics Editor Pete Sweeney Joined Reuters Breakingviews In Hong Kong In September Previously He Served As Reuters' Chief Correspondent For China Economy | ) www.reuters.com time to read: +3 min

HONG KONG, Feb 14 (Reuters Breakingviews) - Academic Kazuo Ueda faces a rocky time as the new governor of the Bank of Japan (8301.T). He is stepping down just as his signature yield curve control (YCC) policy is becoming increasingly unsustainable as domestic inflation rises. The Nikkei news service reported that officials had approached Deputy Governor Masayoshi Amamiya and were rebuffed. It seems likely Ueda will have to modify or abandon YCC given how much damage it is doing to the bond market and the BOJ’s balance sheet. Follow @petesweeneypro on TwitterloadingCONTEXT NEWSJapan's government on Feb. 14 named academic Kazuo Ueda as its pick to become the next governor of the country’s central bank.

☆ Kazuo Ueda is set to become Japan's next central bank governor. Here's what it means
▼ + stars: | 2023-02-14 | by ( Jihye Lee | ) www.cnbc.com time to read: +2 min

Bloomberg | Bloomberg | Getty ImagesKazuo Ueda is set to become the next governor of the Bank of Japan, succeeding current central bank chief Governor Haruhiko Kuroda. Kishida recently emphasized the need for the next central bank governor to have "global communication skills" and be able to coordinate closely with global peers, Reuters reported, citing his comments in parliament. He has led the central bank's ultra-dovish monetary policy, including maintaining a negative interest rate since 2016 – even as global peers have been hiking to tackle inflation. Bank of America Global Research expects gradual policy normalization under the central bank's new leadership instead of an abrupt change, according to the firm's economists led by Izumi Devalier. 'Well-suited' deputiesJapan's government also reportedly announced its nominees for other central bank roles including Shinichi Uchida, currently the central bank's executive director, and Ryozo Himino, the former chief of Japan's Financial Services Agency.

☆ Kazuo Ueda nominated to lead Japan's central bank in possible move away from ultra-easy policy
▼ + stars: | 2023-02-14 | by ( Laura He | ) edition.cnn.com time to read: +5 min

Hong Kong CNN —The Japanese government has nominated Kazuo Ueda to lead its central bank, in a surprise move that could pave the way for the country to wind down its ultra-loose monetary policy. Accommodative is a term used to describe monetary policy that adjusts to adverse market conditions and usually involves keeping interest rates low to spur growth and employment. As part of that program, the central bank targeted some short-term interest rates at an ultra-dovish minus 0.1% and aimed for 10-year government bond yields around 0%. But as prices rose and interest rates elsewhere went up, pressure has grown on the BOJ to wind down YCC. But Kuroda later dismissed a near-term exit from his ultra-loose monetary policy.

If this continues, liquidity from Japan will continue to support global markets," he adds. The BOJ flow in January outstripped the combined liquidity drain from the Fed, European Central Bank and Bank of England, resulting in a G4 net liquidity provision of $115.3 billion. Operations from the ECB and, most notably, the PBOC, have helped pour around $1 trillion of liquidity into the global financial system in recent months. As Citi's King says, when changes in even the least significant line items on central bank balance sheets are measured in the hundreds of billions of dollars, "they should command investors' respect." Related columns:- U.S. debt ceiling saga softens Fed's QT- Bank of Japan shock raises 2023 global liquidity risksBy Jamie McGeever; Editing by Paul SimaoOur Standards: The Thomson Reuters Trust Principles.

☆ At BOJ's helm, MIT-educated Ueda to put theory into practice
▼ + stars: | 2023-02-14 | by ( Leika Kihara | ) www.reuters.com time to read: +5 min

At MIT, he studied economics under Stanley Fischer, whose students include former U.S. Federal Reserve chair Ben Bernanke and former European Central Bank President Mario Draghi. He is a good listener and a consensus-builder, rather than a leader with a strong view on the direction of monetary policy, they say. "His style is to discuss monetary policy based on facts and evidence," said Tetsuya Inoue, who was Ueda's staff secretary when he was a central bank board member. In a column published in July, Ueda warned against raising rates prematurely in response to cost-push inflation - a sign he would be in no rush to tighten monetary policy. Upon approval by parliament, Ueda will assume the top BOJ post on April 9 and chair his first policy-setting meeting on April 27-28.

☆ Morning Bid: Is it a bird?
▼ + stars: | 2023-02-13 | by ( ) www.reuters.com time to read: +2 min

Officials declined to say whether it resembled the large white Chinese balloon that was shot down earlier this month, though U.S. Air Force General Glen VanHerck is not ruling out aliens. Markets have kept an eye on the geopolitical mystery, but more focus is on whether U.S. inflation is earthbound or stubbornly hovering. Economists expect Tuesday data to show monthly rates ticked up in January, but the annual measures declined. Revised figures on Friday showed that inflation in December was a little stronger than originally reported, and a closely-watched consumer inflation expectations survey showed a notable spike in the short-term outlook. The BOJ’s YCC faces a reckoningKey developments that could influence markets on Monday:- Fed's Bowman speaks- ECB's Lagarde participates in Eurogroup meetingReporting by Tom Westbrook; Editing by Jacqueline WongOur Standards: The Thomson Reuters Trust Principles.

[1/2] Kazuo Ueda, a former member of the BOJ's policy board, is seen at the headquarters of Bank of Japan in Tokyo, Japan May 25, 2022, in this photo taken by Kyodo. Ueda, a 71-year-old former Bank of Japan policy board member and an academic at Kyoritsu Women's University, will succeed incumbent Haruhiko Kuroda, whose second, five-year term ends on April 8. The governor and deputy governor nominees will testify at confirmation hearings to be held on Feb. 24 for the lower house, and Feb. 27 for the upper chamber. International markets have been closely watching Kishida's choice of next BOJ governor for clues on how soon the bank could phase out its yield curve control (YCC) policy. With markets creaking under the BOJ's heavy-handed intervention, many investors are betting the central bank will start hiking rates under Kuroda's successor.

☆ Japan’s next central bank chief may rue promotion
▼ + stars: | 2023-02-13 | by ( Pete Sweeney | Thomson Reuters | Asia Economics Editor Pete Sweeney Joined Reuters Breakingviews In Hong Kong In September Previously He Served As Reuters' Chief Correspondent For China Economy | ) www.reuters.com time to read: +7 min

In fact, it has spent an average of 1.3 trillion yen per trading day since the band widened: nearly 50 trillion yen in total, per Refinitiv data, and still counting. The central bank already owns over half of Japan’s sovereign bonds and is sure to suffer large losses when their prices fall, which they eventually must. The central bank chief must also work to put the country’s vast stack of inert money back to work. Kuroda effectively put the central bank at the service of former Prime Minister Shinzo Abe’s “Abenomics” stimulus programme. Fumio Kishida, the current leader, is having popularity problems and will want the central bank to support his aggressive agenda, which includes hiking defence spending, promoting innovative startups and redistributing wealth.

With inflation accelerating, Ueda could finally set Japan on a path to raise rates after the BOJ spent a decade fighting deflation risks with its unorthodox bond buying scheme costing trillions of yen. Ueda himself on Friday said current policy settings were appropriate, which also put a bit of a dampener on expectations of any shift. Implied volatility has also eased in the forex options market, suggesting an ebbing in bets on big shifts in the yen exchange rate. "It's not very apparent that (Ueda) would take on the job and then immediately change the policy." To be sure, 10-year Japanese yields were untraded at the BOJ's ceiling on Monday, indicating plenty of investors are staying short.

Ueda, a 71-year-old former Bank of Japan (BOJ) policy board member, will succeed incumbent Haruhiko Kuroda, whose second, five-year term ends on April 8, according to documents presented to parliament on Tuesday. Analysts expect Ueda, who had warned of the dangers of premature interest rate hikes in the past, to hold off on tightening monetary policy. "Ueda is likely to focus on theory and empirical analysis in guiding monetary policy," said Naomi Muguruma, senior market economist at Mitsubishi UFJ Morgan Stanley Securities. Upon parliament's approval, Ueda will chair his first BOJ policy meeting on April 27-28. A soft-spoken academic with a PhD from the Massachusetts Institute of Technology, Ueda is seen as a pragmatist who can adjust his views on monetary policy flexibly.

☆ BOJ's deputy governor Amamiya sees no imminent need to tweak YCC
▼ + stars: | 2023-02-10 | by ( Leika Kihara | ) www.reuters.com time to read: +3 min

"YCC is an extraordinary policy, so we must carefully balance the benefits and costs," Amamiya said. "For now, I don't see the need to make further steps to enhance the flexibility of YCC," he added. The government will present its nominees for the new BOJ governor and two deputies to parliament on Feb. 14, a ruling party lawmaker told reporters on Friday. Analysts see Amamiya as being more dovish on monetary policy than other contenders like former deputy governors Hiroshi Nakaso and Hirohide Yamaguchi. He stressed the need to maintain current stimulus to ensure inflation hits the BOJ's 2% target in a sustainable manner.

☆ Morning Bid: Volatility stirs
▼ + stars: | 2023-02-10 | by ( ) www.reuters.com time to read: +5 min

World markets end a rough week of confusing and competing narratives in distinctly edgy form, with peculiarly subdued volatility gauges flickering back to life. Both 10 and 30-year yields hit their highest levels in over a month early on Friday. Job shedding in the digital sector continued, with Yahoo's plans to lay off more than 20% of its total workforce. That said, the year-on-year oil price trend continues to be negative, as it's been all year and base effects from last year's price spike around the Ukraine invasion will only deepen that and weigh on headline inflation further. Goldman Sachs lowered its oil price forecasts for this year and next, cutting its Brent 2023 price forecast by $6 to $92 per barrel - still above current levels around $86.

The BOJ’s YCC faces a reckoningThe surprise news left investors and analysts trying to parse Ueda's recent commentary. "There is probably a lack of clarity on Ueda's policy leanings at the moment, but at least it is clear that Amamiya (who is seen as a dove) is out. That removes one of the headwinds for the yen," said Christopher Wong, currency strategist at OCBC in Singapore. "The knee-jerk reaction in yen appreciation is more of a reaction to Amamiya being out of the race." I think the new team means that they will redesign the BOJ's monetary policy, not maintain the current policy," said Takayuki Miyajima, a senior economist at Sony Financial Group in Tokyo.

The massive buying highlights the increasing difficulty the central bank faces in sustaining its yield control policy, as inflation perks up well above its 2% inflation target. With its heavy-handed intervention drying up bond market liquidity, the BOJ is increasingly relying on a new funds-supply tool to keep the 10-year yield from breaching its 0.50% ceiling. The BOJ's bond buying in January, at 23.69 trillion yen ($182 billion), was the biggest amount on record and exceeded the previous high of 16.2 trillion yen marked in June 2022, central bank data showed. Under yield curve control, the BOJ guides short-term interest rates at -0.1% and the 10-year bond yield around 0%. The 10-year bond yield stood at 0.480% on Wednesday, remaining close to the BOJ's 0.5% cap.

☆ IMF: BOJ should let long-term yields rise, be ready to raise rates
▼ + stars: | 2023-01-26 | by ( Leika Kihara | ) www.reuters.com time to read: +4 min

REUTERS/Kim Kyung-HoonTOKYO, Jan 26 (Reuters) - The Bank of Japan should let government bond yields move more flexibly and be ready to raise short-term interest rates swiftly if "significant" upside risks to inflation materialise, the International Monetary Fund (IMF) said on Thursday. "Given the two-sided risks to inflation, more flexibility in long-term yields would help to avoid abrupt changes later. This would help better manage inflation risks and also help address the side-effects of prolonged easing," the IMF said. EYING THE EXITThe IMF said the BOJ could also consider options such as targeting a shorter-term yield or the pace of its bond buying. The BOJ doubled its allowance band for the 10-year yield in December to 0.5% above or below zero.

☆ IMF urges BOJ to let long-term yields rise, be ready to raise rates
▼ + stars: | 2023-01-26 | by ( Leika Kihara | ) www.reuters.com time to read: +5 min

It's more to balance some of the impact on the real economy against the impact on financial markets," IMF Japan Mission Chief Ranil Salgado said on Thursday. "Given the two-sided risks to inflation, more flexibility in long-term yields would help to avoid abrupt changes later. This would help better manage inflation risks and also help address the side-effects of prolonged easing," the IMF said in a statement issued after the policy consultation. EYING THE EXITThe IMF said the BOJ could also consider options such as targeting a shorter-term yield or the pace of its bond buying. The BOJ surprised markets in December by doubling its allowance band for the 10-year yield to 0.5% above or below zero.

☆ Dollar stuck near nine-month low vs euro as yen bounces
▼ + stars: | 2023-01-24 | by ( Amanda Cooper | ) www.reuters.com time to read: +3 min

LONDON, Jan 24 (Reuters) - The dollar hovered near a nine-month low against the euro and surrendered recent gains against the yen on Tuesday, as traders weighed the risks of a U.S. recession against the outlook for Federal Reserve monetary policy. Euro zone data on Tuesday reinforced the view that the economy is surviving a winter of intense price pressures reasonably well, analysts said. "That's integral to our bearish U.S. dollar view, that the U.S. is not going to be the global growth leader." Elsewhere, the dollar fell 0.4% to 130.18 yen , breaking a two-day rally. Last week, the dollar fell as low as 127.215 yen, its weakest since May, before a Bank of Japan policy review as investors bet the BOJ would begin to end its stimulus programme.

☆ Suntory CEO expects next BOJ governor to show clear policy roadmap
▼ + stars: | 2023-01-24 | by ( ) www.reuters.com time to read: +2 min

The BOJ stuck to its ultra-easy policy at a two-day policy meeting that ended on Jan. 16, defying investors who had bet on it ceasing to defend a cap on the 10-year government bond yield. The cap is part of a policy called yield curve control (YCC). But Niinami said expectations were growing that the BOJ would sooner or later end its expansionist experiment. "The ultra-easy policy can't be kept forever, given current (economic) conditions. Niinami also said economic growth led by the private sector would be needed to help prevent Japan's financial health worsening further.

☆ Morning Bid: Euro rising
▼ + stars: | 2023-01-23 | by ( Wayne Cole | ) www.reuters.com time to read: +2 min

SYDNEY, Jan 23 (Reuters) - A look at the day ahead in European and global markets from Wayne Cole. It's been a quiet start to the week in Asia with much of the region on holiday. U.S. stocks futures are near flat, but EUROSTOXX futures added 0.5% to extend their recent bullish run. Analysts assume the same sea change will deliver an improvement in the EU flash PMIs for January this week, likely outperforming the U.S. surveys. Key developments that could influence markets on Monday:- ECB's Lagarde and Panetta are appearing- No major economic data due on Monday.

☆ Bank of Japan's policy tweak drew rare request from government for a break
▼ + stars: | 2023-01-23 | by ( Leika Kihara | ) www.reuters.com time to read: +2 min

TOKYO, Jan 23 (Reuters) - Government representatives who attended the Bank of Japan's policy meeting in December were granted a half-hour adjournment to contact their ministries, minutes showed, a sign the decision to tweak its yield control policy may have been hastily arranged. At the Dec. 19-20 meeting, the BOJ kept its ultra-easy monetary policy but shocked markets with a surprise tweak to its yield curve control (YCC) policy that allowed long-term interest rates to rise. Governor Haruhiko Kuroda approved the request as chair of the BOJ meeting, according to the minutes. The two representatives did not voice opposition to the yield control tweak nor any other elements of the BOJ's discussion, the minutes showed. Two government representatives - one from the MOF and another from the Cabinet Office - are legally entitled to attend BOJ policy meetings and voice the government's views on policy decisions, though they cannot cast votes.

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