Flash Note 29/07/2016 Japan - Latest news about the monetary

Flash Note
29/07/2016
Alex Fusté
@AlexfusteAlex
[email protected]
Japan - Latest news about the monetary
approach & markets (preparing for a not
yet tried options?).
•
Markets
o
Japan markets closed higher Friday with the Nikkei
up 0.56% and TOPIX up 1.20% to finish the week with
small declines of 0.35% and 0.36% respectively. TOPIX
sectors were mostly higher, led by a surge in finance
stocks on the back of the BoJ's expanded easing.
o
Extreme volatility in all asset classes reflecting the
heightened focus on the BoJ Meeting
o
Market disruptions by reports that JGB futures were
temporarily suspended owing to a technical glich and a
sharp drop in equity futures triggering a dynamic circuit
breaker in TOPIX even before the BoJ decisions were
announced.
•
Monetary Policy
o
BoJ board members voted (8-1 majority) to
continue expanding the monetary base at an annual
pace of about ¥80T.
o
Regarding asset purchases, board members voted
(7-2 majority) to expand ETF purchases to ¥6T from the
previous ¥3.3T, while voting (8-1) to maintain JGB
purchases at an ¥80T annual pace, J-REITs ¥90B,
commercial paper ¥2.2T and corporate bonds at ¥3.2T.
o
The bank decided (vote count 7-2) to continue
applying an interest rate of minus 0.1% to the policyrate portion of the current account balances held by
financial institutions.
o
BoJ weighs more easing amid increasing pressure
for action: The highly anticipated BoJ meeting decisions
for more easing against the backdrop of waning inflation
and pressure from the government was accompanied by
some assessment by the central bank suggesting that
the BoJ is considering a "wide range of options,"
including those not yet tried.
o
Preparing the population for new stimulus? In fact,
Reuters reported that the BoJ is considering specific
Este documento ha sido realizado por Andbank, principalmente para su distribución interna e inversores profesionales. Este
documento no debe ser considerado como consejo de inversión ni una recomendación de compra de ningún activo, producto
o estrategia. Las referencias a cualquier emisor o título, no pretenden ser ninguna recomendación de compra o venta de
dichos títulos.
steps for expanding monetary stimulus. According to a
draft statement, the government would welcome this
decision and will deploy all necessary policy steps
including a scheduled big stimulus package.
o
Government welcomes BoJ decision to ease:
Comments from Japan Finance Minister Taro Aso
reflected the government’s welcoming of the BoJ's
decission to expand easing measures, adding that the
government will work closely with the BoJ in undertaking
monetary, fiscal and structural reform policies as a
cohesive unit.
o
BoJ still sees core CPI reaching 2% inflation target
in FY17: In the July Outlook for Economic Activity and
Prices report, the BoJ maintained that the core CPI will
reach its 2% price stability target during FY17. The bank
assumes a moderate increase in crude oil prices, The
statement
noted
"considerable
uncertainties"
accompanying the baseline scenario.
•
Data (Negative figures)
o
Deflation persists: June nationwide core CPI (0.5%)
y/y vs (0.4%) in May. June BoJ CPI excl. fresh food &
energy +0.8% y/y vs +0.8% in May
o
Private spending remains subdued: June household
spending (2.2%) y/y vs (1.1%) in May, although retail
sales up ticked +0.2% m/m vs (0.1%) in May
o
Construction is weak: June housing starts (2.5%)
y/y +9.8% in May, June construction orders (2.4%) y/y
vs +34.5% in May
o
On the positive side we had: June unemployment
rate 3.1% vs consensus 3.2% and 3.2% in May. June
industrial production +1.9% m/m vs (2.6%) in May
Regards,
Alex Fusté
Chief Economist
Andbank
Este documento ha sido realizado por Andbank, principalmente para su distribución interna e inversores profesionales. Este
documento no debe ser considerado como consejo de inversión ni una recomendación de compra de ningún activo, producto
o estrategia. Las referencias a cualquier emisor o título, no pretenden ser ninguna recomendación de compra o venta de
dichos títulos.