Asian markets up on recovery hopes, yen sinks after BoJ decision

HONG KONG - Asian markets rose Wednesday to maintain their strong start to the year, with Tokyo soaring and the yen tumbling after the Bank of Japan decided against further tweaking monetary policy.

Weak earnings from banking titan Goldman Sachs, a jobs warning by Microsoft, and a plunge in manufacturing data highlighted the bumpy road ahead for the United States, the world's top economy, even as optimism over inflation and the interest rate outlook improved.

Still, hopes for China's recovery continued to provide much-needed support, with Vice Premier Liu He telling the Davos forum that growth will likely rebound this year as the country reopens from zero-Covid while adding that Covid infections had peaked.

His comments came after data showed the economy expanded last year at its slowest pace since 1976 -- excluding pandemic-hit 2020 -- but beat forecasts.

The news added to hopes for a global recovery after last year's pain caused by rising prices, rate hikes, China's economic woes, a spike in energy costs and the war in Ukraine.

"Last fall, there was broad consensus that China was in the wrong place, Europe was slipping into a recession, and the Fed was ultimately caught 'wrong-footed' by very sticky inflation," said SPI Asset Management's Stephen Innes.

"But fast-forward to these early weeks of January, and China's reopening has put the country on a path to much better growth, investors are far more optimistic about Europe's recovery, and the bane of all ills US inflation is even starting to recede."

Hong Kong, Shanghai, Sydney, Singapore, Wellington, Manila, Bangkok, Mumbai and Jakarta were all on the rise, though Seoul dipped.

Tokyo was the standout, however, piling on more than two percent after the Bank of Japan left its key policy rate unchanged.

But the yen tumbled from around 128.50 per dollar to more than 131 Wednesday after the move. It also tumbled against the euro and sterling.

Traders had been keenly anticipating the decision, which came after the BoJ last month shocked markets by announcing a tweak that allowed its tightly controlled bond yields to move in a wider bracket.

Clifford Bennett, chief economist at ACY Securities, said the decision indicated the BoJ was "acting appropriately in what is still an uncertain economic growth path, and still low inflation levels".

While other central banks have hiked rates, "Japan has long been a different story and remains so", he added in a note.

The move in December sent the yen soaring, and while the bank held firm Wednesday, there is a growing expectation that officials will eventually move away from the policy of buying up bonds to keep yields in check.

"Speculation will remain that it will eventually review its policy," said Takahide Kiuchi, executive economist at Nomura Research Institute and a former BoJ policy board member.

"Market focus will now shift to the appointment of a new governor," he told AFP, noting that the bank needs to "make its policy flexible" whoever is appointed.

However, other observers said if the BoJ continued to stick to its position, the Japanese unit could fall back to around 135 per dollar.

The strategy has been in place for years as the BoJ has attempted to boost the stuttering economy by keeping borrowing costs low, but with other central banks hiking rates, the yen came under immense pressure and hit a three-decade low of around 152 per dollar in October.

Key figures around 0520 GMT 

Tokyo - Nikkei 225: UP 2.5 percent at 26,790.52

Hong Kong - Hang Seng Index: UP 0.2 percent at 21,616.17

Shanghai - Composite: UP 0.1 percent at 3,228.60

Dollar/yen: UP at 131.40 yen from 128.13 yen on Tuesday

Euro/dollar: DOWN at $1.0772 from $1.0794 

Pound/dollar: DOWN at $1.2283 from $1.2285

Euro/pound: DOWN at 87.70 pence from 87.85 pence

West Texas Intermediate: UP 0.9 percent at $80.89 a barrel

Brent North Sea crude: UP 0.8 percent at $86.58 a barrel

New York - Dow: DOWN 1.1 percent at 33,910.85 (close)

London - FTSE 100: DOWN 0.1 percent at 7,851.03 (close)

Agence France-Presse

Global central banks pull out all stops as coronavirus paralyses economies

SYDNEY - The US Federal Reserve and its global counterparts moved aggressively with sweeping emergency rate cuts and offers of cheap dollars to help combat the coronavirus pandemic that has jolted markets and paralysed large parts of the world economy. 

The coordinated response from the Fed to the European Central Bank (ECB) and the Bank of Japan (BOJ) came amid a meltdown in financial markets as investor anxiety deepened over the difficulty of tackling a pathogen that has left thousands dead and put many countries on virtual lockdowns.

The Fed moved first on Sunday, cutting its key rate to near zero in a move reminiscent of the steps taken just over a decade ago in the wake of the financial crisis.

The U.S. decision triggered emergency policy easings by central banks in New Zealand, Japan and South Korea, with Australia also joining with a liquidity injection in a coordinated move aimed at stabilising confidence as the pandemic threatened a global recession.

"The virus is having a profound effect on people across the United States and around the world," Fed Chair Jerome Powell said in a news conference after cutting short-term rates to a target range of 0% to 0.25%, and announcing at least $700 billion in Treasuries and mortgage-backed securities purchases in coming weeks.

The Reserve Bank of New Zealand (RBNZ) slashed rates to a record low as markets in Asia opened for trading this week, while Australia's central bank pumped extra liquidity into a strained financial system and said it would announce more policy steps on Thursday.

Later, the Bank of Japan too eased policy in an emergency meeting, ramping up purchases of exchange-traded funds (ETFs) and other risky assets to combat the widening economic fallout from the coronavirus epidemic.

Neighbouring South Korea stepped in as well with a 50 basis point rate cut in a rare inter-meeting review on Monday.

"I don't think we have reached a limit on how deep we can cut interest rates," BOJ Governor Haruhiko Kuroda said.

"If necessary, we can deepen negative rates further," he added.

"We can continue to pump ample liquidity into the market."

MARKETS RATTLED

The measures did little to calm market nerves though, as Asian shares and U.S. stock futures plummeted, underscoring the fears the health crisis might prove much more damaging to the global economy than initially anticipated.

France and Spain joined Italy in imposing lockdowns on tens of millions of people, while the United States saw school closings, runs on grocery stores, shuttered restaurants and retailers, and ends to sports events.

"Market reactions to each surprise monetary policy easing have been sell first and ask questions later," said Selena Ling, head of treasury research and strategy at OCBC Bank in Singapore.

"The more unprecedented measures by the Fed and other central banks, the more investors worry if (they) know something we don’t... fear remains the crux of the problem here as market players remain unconvinced that monetary policy easing and liquidity injections will solve an essentially healthcare crisis."

Five other central banks cut pricing on their swap lines to make it easier to provide dollars to their financial institutions, ramping up efforts to loosen gummed up funding markets and calm credit markets. They also agreed to offer three-month credit in U.S. dollars on a regular basis and at a rate cheaper than usual.

The move was designed to bring down the price banks and companies pay to access U.S. dollars, which has surged in recent weeks as a coronavirus pandemic spooked investors.

However, analysts say flooding banks with cash at near-zero rates won't help fix dislocations in credit markets caused by fear of lending to businesses with mounting losses, which in turn fuels distrust among banks.

Moreover, analysts at major banks and ratings agencies are predicting a marked downturn in the world economy, and some say a recession is unavoidable.

"We believe that financial markets stress could ultimately be the proverbial 'straw that breaks the camel’s back’, and hence, we continue to monitor these very closely," Fitch Solutions said in a note on Monday, adding its forecasts were subject to "downside risks."

"While we expect to see more major central banks cut interest rates further in a bid to support growth...there are limits to how low they can go."

The People's Bank of China (PBoC), which has rolled out powerful stimulus measures since the outbreak began in the country's Hubei province late last year, was a bit of an outlier as it kept its rates steady, though analysts expected a cut later this week.

(Additional reporting by Winni Zhou and Tom Westbrook; Editing by Shri Navaratnam)

Bank of Japan keeps rates, resists global easing trend

TOKYO - The Bank of Japan left its ultra-easy monetary policy unchanged Thursday, resisting pressure to join other major central banks in taking additional steps to stimulate growth amid global economic uncertainty.

At the end of a two-day meeting, the BOJ Policy Board decided to keep the short-term interest rate at minus 0.1 percent and guide long-term rates at around zero percent. It also maintained its massive asset purchase program.

The BOJ Policy Board said in a statement that "it is necessary to pay closer attention to the possibility that the momentum toward achieving the price stability target will be lost," as "slowdowns in overseas economies have continued to be observed, and their downside risks seem to be increasing."

The Policy Board also said it "will re-examine economic and price developments" at the next meeting in October, citing risks including "the U.S macroeconomic policies and their impact on global financial markets and the consequences of protectionist moves and their effects."

The decision came after the U.S. Federal Reserve cut short-term interest rates by 0.25 percentage points to 1.75 to 2 percent Wednesday, following one in July, amid global fallout from the prolonged U.S.-China trade conflict.

Meanwhile, the European Central Bank last week cut rates for the first time in over three years and said it will restart purchasing government bonds.

The board voted 7 to 2 to maintain the current monetary policy, but Goshi Kataoka, one of the two nay votes, demanded a further cut in short-term interest rates, according to the statement.

The BOJ had been seen as facing pressure from the government to take its own action to prevent the yen's surge against the dollar following the Fed's decision.

A strong yen could weigh on Japanese exports and growth at a time when the government and the BOJ are bracing for an impact on domestic demand from the consumption tax hike scheduled for Oct. 1.

It is feared that the tax hike, to 10 percent from 8 percent, will keep inflation far below the BOJ's 2 percent target by weakening business and household spending, although the board left unchanged its outlook that "Japan's economy is likely to continue on a moderate expanding trend," according to the statement.

The board reiterated that the BOJ "will not hesitate to take additional easing measures" if there is a greater possibility that the momentum toward the 2 percent target will be lost, as Governor Haruhiko Kuroda repeated at the previous press conference following the policy meeting in July.

The inaction by the BOJ could fuel market speculation that the bank is running short of policy tools to provide additional monetary stimulus, and that it wants to save ammunition in case Japan's economy is seriously hurt by the tax hike or damaged by recent global trade conflicts.

Apparently trying to dismiss the widespread view, Kuroda said earlier this month in an interview with the Nikkei newspaper that cutting interest rates further into negative territory is among its policy options.

But the negative rate policy has already triggered criticism that it has squeezed the profitability of commercial banks. Lowering the rate further would require the BOJ to consider measures to ease the pressure on their lending margins.

Kuroda will meet the press to explain the BOJ's decision later in the day.

source: news.abs-cbn.com

Bank of Japan keeps rates steady

TOKYO - The Bank of Japan kept monetary policy steady on Thursday and maintained its upbeat view of the economy, signalling its conviction that a solid recovery will gradually accelerate inflation towards its 2 percent target without additional stimulus.

But new board member Goushi Kataoka dissented to the BOJ's decision to maintain its interest rate targets, saying current monetary policy was insufficient to push inflation up to 2 percent during fiscal 2019.

In a widely expected move, the BOJ maintained the 0.1 percent interest it charges on a portion of excess reserves that financial institutions park at the central bank.


At the two-day policy meeting that ended on Thursday, it also kept its yield target for 10-year Japanese government bonds around zero percent.

The decision was made by an eight-to-one vote.

BOJ Governor Haruhiko Kuroda will hold a news conference at 3:30 p.m. (0630 GMT) to explain the policy decision.

The BOJ revamped its policy framework last year to one targeting interest rates rather than the pace of money printing, after three years of huge asset purchases failed to drive up inflation to its 2 percent target.

source: news.abs-cbn.com

Japan Q2 GDP blows past expectations on robust domestic demand

TOKYO - Japan's economy grew in the second quarter at the fastest pace in more than two years as consumer spending and capital expenditure both rose at the fastest in more than three years, highlighting stronger domestic demand.

Gross domestic product expanded an annualized 4 percent in April-June, government data showed, more than the median estimate for 2.5 percent annualized growth and the biggest increase since January-March 2015.

Compared to the previous quarter, the economy expanded 1 percent, versus the median estimate for 0.6 percent growth.

Annualized GDP for previous quarter was revised to a 1.5 percent increase, while quarterly real (inflation adjusted) GDP was revised up to 0.4 percent growth from a 0.3 percent increase.

Economic growth is expected to continue in coming quarters, offering the Bank of Japan (BOJ) the hope that a tight labor market is finally starting to boost consumer spending, which in turn makes it easier to generate sustained inflation.

The economy grew for 6 straight quarters in April-June. The last time the economy had a run of six consecutive quarters of growth was January-March 2005 through April-June 2006.

Private consumption, which accounts for about two-thirds of GDP, rose 0.9 percent from the previous quarter, more than the median estimate of 0.5 percent growth.

That marked the fastest expansion in more than 3 years as shoppers splashed out on durable goods, an encouraging sign that consumer spending is no longer the weak spot in Japan's economic outlook.

Capital expenditure jumped by 2.4 percent in April-June from the previous quarter, versus the median estimate for a 1.2 percent increase. That was the fastest growth in business investment since January-March 2014.

External demand subtracted 0.3 percentage point from GDP growth in April-June in part due to an increase in imports. This is notable because Japan usually relies on exports to drive growth.

Since launching quantitative easing in April 2013, the BOJ has pushed back the timing for reaching its 2 percent inflation target 6 times in part due to weak consumer spending.

The GDP data for April-June show private consumption is finally starting to move in the direction that the BOJ and other government ministers have long predicted.

source: news.abs-cbn.com