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Bank of Japan may offer less gloomy view of US tariff hit in report, sources say
Bank of Japan may offer less gloomy view of US tariff hit in report, sources say

Yahoo

time18-07-2025

  • Business
  • Yahoo

Bank of Japan may offer less gloomy view of US tariff hit in report, sources say

By Leika Kihara TOKYO (Reuters) -The Bank of Japan will warn of uncertainty over the impact of U.S. tariffs in a quarterly report due this month, but may offer a less gloomy view on the near-term hit to Japan's economy than three months ago, said three sources familiar with its thinking. With the BOJ set to keep interest rates steady at 0.5% at its July 30-31 meeting, markets are focusing on how it will describe the growth and price outlook in a quarterly report due after the meeting. They are seeking clues on the timing of the next rate hike. In the upcoming report, the BOJ is likely to maintain its warning that uncertainty over the economic impact of U.S. tariffs remains very high, the sources, who declined to be identified, said. But the report may also reflect signs of resilience in U.S. and Chinese economies, as well as recent domestic data showing output and capital expenditure holding up, the sources said. "While the impact of tariffs will likely intensify, it's not showing up much in data so far," a factor that may affect the tone of BOJ's upcoming report, one of the sources said. "The BOJ must remain on high alert over risks from tariffs. But it also shouldn't be overly pessimistic either," another source said, a view echoed by a third source. The last report was compiled at the BOJ's previous rate review on April 30-May 1, when investors' pessimism was at its peak with markets still volatile after President Donald Trump's announcement of sweeping "reciprocal" tariffs. That report warns that uncertainty over U.S. tariffs will hit Japan's economy through various channels including by slowing global demand, weakening exports and souring business sentiment. But data released since then has not shown any clear evidence of damage from U.S. tariffs, or Japan's stalled trade talks with Washington, at least for now. The BOJ's "tankan" quarterly survey, released on April 1, showed business sentiment holding up. The bank's regional branch managers also gave a fairly sanguine view on the immediate hit from U.S. tariffs. Such data may be reflected in the next report's language on the economic outlook and risks, as well as in the board's growth projections, the sources said. In the last report, the BOJ expected the economy to grow 0.5% in fiscal 2025, 0.7% in 2026 and 1.0% in 2027. The BOJ is likely to maintain its view that inflation will durably hit its 2% target in the latter half of its three-year projection period running through fiscal 2027, the sources said. Domestic prices, on the other hand, have been moving higher than expected as steady rises in food costs keep consumer inflation well above the BOJ's 2% target, the sources said. Some BOJ policymakers, such as hawkish board member Naoki Tamura, have warned of second-round effects from such cost-push price pressure, which may push up underlying inflation in a way that warrants resuming rate hikes. Sources have told Reuters the BOJ will consider revising up its inflation forecast for the current fiscal year reflecting persistent rises in rice and broader food costs.

Bank of Japan may offer less gloomy view of US tariff hit in report, sources say
Bank of Japan may offer less gloomy view of US tariff hit in report, sources say

Yahoo

time18-07-2025

  • Business
  • Yahoo

Bank of Japan may offer less gloomy view of US tariff hit in report, sources say

By Leika Kihara TOKYO (Reuters) -The Bank of Japan will warn of uncertainty over the impact of U.S. tariffs in a quarterly report due this month, but may offer a less gloomy view on the near-term hit to Japan's economy than three months ago, said three sources familiar with its thinking. With the BOJ set to keep interest rates steady at 0.5% at its July 30-31 meeting, markets are focusing on how it will describe the growth and price outlook in a quarterly report due after the meeting. They are seeking clues on the timing of the next rate hike. In the upcoming report, the BOJ is likely to maintain its warning that uncertainty over the economic impact of U.S. tariffs remains very high, the sources, who declined to be identified, said. But the report may also reflect signs of resilience in U.S. and Chinese economies, as well as recent domestic data showing output and capital expenditure holding up, the sources said. "While the impact of tariffs will likely intensify, it's not showing up much in data so far," a factor that may affect the tone of BOJ's upcoming report, one of the sources said. "The BOJ must remain on high alert over risks from tariffs. But it also shouldn't be overly pessimistic either," another source said, a view echoed by a third source. The last report was compiled at the BOJ's previous rate review on April 30-May 1, when investors' pessimism was at its peak with markets still volatile after President Donald Trump's announcement of sweeping "reciprocal" tariffs. That report warns that uncertainty over U.S. tariffs will hit Japan's economy through various channels including by slowing global demand, weakening exports and souring business sentiment. But data released since then has not shown any clear evidence of damage from U.S. tariffs, or Japan's stalled trade talks with Washington, at least for now. The BOJ's "tankan" quarterly survey, released on April 1, showed business sentiment holding up. The bank's regional branch managers also gave a fairly sanguine view on the immediate hit from U.S. tariffs. Such data may be reflected in the next report's language on the economic outlook and risks, as well as in the board's growth projections, the sources said. In the last report, the BOJ expected the economy to grow 0.5% in fiscal 2025, 0.7% in 2026 and 1.0% in 2027. The BOJ is likely to maintain its view that inflation will durably hit its 2% target in the latter half of its three-year projection period running through fiscal 2027, the sources said. Domestic prices, on the other hand, have been moving higher than expected as steady rises in food costs keep consumer inflation well above the BOJ's 2% target, the sources said. Some BOJ policymakers, such as hawkish board member Naoki Tamura, have warned of second-round effects from such cost-push price pressure, which may push up underlying inflation in a way that warrants resuming rate hikes. Sources have told Reuters the BOJ will consider revising up its inflation forecast for the current fiscal year reflecting persistent rises in rice and broader food costs.

Bank of Japan may offer less gloomy view of US tariff hit in report, sources say
Bank of Japan may offer less gloomy view of US tariff hit in report, sources say

Yahoo

time18-07-2025

  • Business
  • Yahoo

Bank of Japan may offer less gloomy view of US tariff hit in report, sources say

By Leika Kihara TOKYO (Reuters) -The Bank of Japan will warn of uncertainty over the impact of U.S. tariffs in a quarterly report due this month, but may offer a less gloomy view on the near-term hit to Japan's economy than three months ago, said three sources familiar with its thinking. With the BOJ set to keep interest rates steady at 0.5% at its July 30-31 meeting, markets are focusing on how it will describe the growth and price outlook in a quarterly report due after the meeting. They are seeking clues on the timing of the next rate hike. In the upcoming report, the BOJ is likely to maintain its warning that uncertainty over the economic impact of U.S. tariffs remains very high, the sources, who declined to be identified, said. But the report may also reflect signs of resilience in U.S. and Chinese economies, as well as recent domestic data showing output and capital expenditure holding up, the sources said. "While the impact of tariffs will likely intensify, it's not showing up much in data so far," a factor that may affect the tone of BOJ's upcoming report, one of the sources said. "The BOJ must remain on high alert over risks from tariffs. But it also shouldn't be overly pessimistic either," another source said, a view echoed by a third source. The last report was compiled at the BOJ's previous rate review on April 30-May 1, when investors' pessimism was at its peak with markets still volatile after President Donald Trump's announcement of sweeping "reciprocal" tariffs. That report warns that uncertainty over U.S. tariffs will hit Japan's economy through various channels including by slowing global demand, weakening exports and souring business sentiment. But data released since then has not shown any clear evidence of damage from U.S. tariffs, or Japan's stalled trade talks with Washington, at least for now. The BOJ's "tankan" quarterly survey, released on April 1, showed business sentiment holding up. The bank's regional branch managers also gave a fairly sanguine view on the immediate hit from U.S. tariffs. Such data may be reflected in the next report's language on the economic outlook and risks, as well as in the board's growth projections, the sources said. In the last report, the BOJ expected the economy to grow 0.5% in fiscal 2025, 0.7% in 2026 and 1.0% in 2027. The BOJ is likely to maintain its view that inflation will durably hit its 2% target in the latter half of its three-year projection period running through fiscal 2027, the sources said. Domestic prices, on the other hand, have been moving higher than expected as steady rises in food costs keep consumer inflation well above the BOJ's 2% target, the sources said. Some BOJ policymakers, such as hawkish board member Naoki Tamura, have warned of second-round effects from such cost-push price pressure, which may push up underlying inflation in a way that warrants resuming rate hikes. Sources have told Reuters the BOJ will consider revising up its inflation forecast for the current fiscal year reflecting persistent rises in rice and broader food costs. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

How could Japan's election affect economic policy?
How could Japan's election affect economic policy?

Japan Today

time17-07-2025

  • Business
  • Japan Today

How could Japan's election affect economic policy?

By Leika Kihara Japan's Liberal Democratic Party ruling coalition may lose its majority in the upper house in an election on Sunday, which could heighten calls for the government to boost spending and cut tax. Here is a guide on how the election outcome could affect Japan's fiscal and monetary policy: LOOMING POLITICAL UNCERTAINTY Recent media polls show the LDP coalition could lose its majority, heightening the risk of political instability when the country is struggling to strike a trade deal with the U.S., and stoking fears of an increase in debt. Japan's debt burden is the highest in the developed world at about 250% of GDP. Prime Minister Shigeru Ishiba is regarded as a fiscal hawk, but concern over possible increased spending by parties to ensure political support on Tuesday pushed up bond yields to multi-decade highs. Yields may rise further if the chance of big spending or a sales tax cut increases. WOULD JAPAN HAVE A NEW PRIME MINISTER? If the election loss is small, Ishiba could remain prime minister and seek opposition parties' cooperation to pass bills through parliament. Faced with a big defeat, Ishiba could step down and his party will hold a leadership race to choose a successor. Depending on the extent of loss, there is a slim chance a new premier could be chosen from an opposition party. WOULD JAPAN SEE BIGGER SPENDING? Regardless of the election outcome, Japan will increase spending as Ishiba has pledged to offer cash payouts to households to ease the cost of living. The estimated 3.5 trillion yen ($23.6 billion) in payouts will be funded by tax revenues. But spending may balloon if the LDP coalition suffers a big loss, as it would heighten calls from within the party and opposition forces to take bolder steps to cushion rising living costs. Some analysts expect Japan to compile an extra budget around autumn this year to fund spending of at least 10 trillion yen, which will likely require additional debt issuance. HOW LIKELY IS A CUT TO JAPAN'S SALES TAX RATE? Japan's sales tax rate is set at 10%, except for food items at 8%. Ishiba has shunned opposition calls to slash the sales tax, which funds social welfare costs for a rapidly ageing population. An election defeat could force Ishiba to cut sales tax, which would leave a huge hole in Japan's finances. Excluding proceeds from debt issuance, the sales tax is Japan's biggest source of revenue. In fiscal 2025, it collected 25 trillion yen, or 21.6% of total budget. Analysts say halving the tax rate would cut revenues by over 10 trillion yen. A sales tax cut will require passing legislation through parliament, so will not take place until April at the earliest. WHAT WOULD BE JAPAN'S WORST-CASE SCENARIO? A worst-case scenario is a credit rating downgrade on Japan's sovereign debt, which could trigger a triple selling of bonds, yen and Japanese stocks - and boost the cost of dollar funding for Japanese banks. Moody's Ratings has said an increase in tax cut pressure could be negative for Japan's rating depending on the size and duration of the cut. It rates Japan A1, the fifth-highest level. HOW WOULD THE ELECTION OUTCOME AFFECT BOJ POLICY? The ruling coalition has given a quite nod to gradual interest rate hikes, as has the biggest opposition Constitutional Democratic Party of Japan. If the clout of other smaller opposition parties increases, the BOJ could come under pressure to go slow in rate hikes. But the BOJ's long-term rate hike path is unlikely to be affected unless Ishiba is replaced by vocal advocates of bold monetary easing like Sanae Takaichi, who Ishiba narrowly defeated in a LDP leadership race last year. © (c) Copyright Thomson Reuters 2025.

BOJ likely to opt for gradual selling of ETFs in markets, Goldman says
BOJ likely to opt for gradual selling of ETFs in markets, Goldman says

Yahoo

time11-07-2025

  • Business
  • Yahoo

BOJ likely to opt for gradual selling of ETFs in markets, Goldman says

By Leika Kihara TOKYO (Reuters) -The Bank of Japan will gradually sell exchange-traded funds (ETF) in the market, rather than opt for other ideas like transferring them to government entities, when it decides to unload its holdings in the future, Goldman Sachs said on Friday. The central bank purchased ETFs for 13 years from 2010 as part of its ultra-loose monetary policy aimed at reflating a moribund economy. While the BOJ stopped purchases last year, it has not said when and how it could unload its 37-trillion-yen ($252 billion) ETF holdings, which have a market value of 70 trillion yen. When it decides to unload the holdings, the BOJ has said it would do so based on three principles: to dispose ETFs at an appropriate price that avoids the bank from incurring losses, and in a way that causes minimum disruptions in the market. "Experts have proposed various options, such as transferring them to government entities and transferring them to the public," Goldman Sachs said in a report on how the BOJ could unload its ETF holdings. "However, the method that satisfies all three conditions is likely to be small-scale selling on the open market over time," it said in the report. To minimise the BOJ's loss and the impact on stock markets, a reasonable schedule would be for the BOJ to begin disposing ETFs from around fiscal 2026 or 2027, and sell at an annual pace of slightly over 600 billion yen to one trillion yen in book value, the report said. The report was compiled by Goldman's economists including Akira Otani, a former BOJ executive with experience heading the bank's financial markets department. BOJ Governor Kazuo Ueda has said the central bank will need more time to scrutinise how best to unload its ETF holdings. ($1 = 146.8800 yen) Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

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