Unsurprisingly, the Bank of Japan kept interest rates unchanged yesterday.The decision was unanimous. . Obviously that now opens the question as to whether they will in fact ever (in the short run I mean) be able to get round to raising. It depends on the external environment, and how much exporting they will be able to do in Q1 2007, I guess. But still they won't be going very far.
Bonds rose and the yen fell after Fukui said the bank wants to check more statistics on consumer spending and prices, which he described as ``somewhat weak.'' The bank isn't under pressure to raise rates because the economy, while in its longest expansion since World War II, grew at the slowest pace in almost two years last quarter.
``Fukui admitted that the some sectors of the economy, such as spending, are weak,'' said Hitomi Kimura, a bond strategist in Tokyo at JPMorgan Securities Japan Co. ``Such comments reduced expectations for higher rates.''
The yield on the benchmark 10-year bond fell 5 basis points to 1.63 percent at 5:54 p.m. in Tokyo. The yen declined to 118.12 per dollar from 117.92 before the announcement the key lending rate would be unchanged.
Tankan Report
The yen had its biggest drop in four months last week as reports, including the Tankan survey of business confidence, failed to provide enough evidence that the economy is accelerating.
The Tankan survey released last week showed confidence among large manufacturers rose to a two-year high and companies increased their forecasts for spending, profit and sales. They also said production capacity was the tightest since 1991 amid the most severe labor shortages in 14 years.
That survey wasn't enough to allay concern that the economy is slowing that followed the third-quarter gross domestic product report. The economy grew at an annual 0.8 percent pace in the period, less than half the government's initial estimate, as consumer spending slumped.
Meantime Cluas Vistesen has another timely post digging a bit deeper into the Japan phenomenon.
Subscribe to:
Post Comments (Atom)
2 comments:
What we have in Japan is a conundrum, as Alan Greenspan might say. Per the post; "production capacity was the tightest since 1991 amid the most severe labor shortages in 14 years."
Tight labor supply should lead to higher wages which would allow for greater consumer spending. What is a good source for tracking wage levels in Japan?
hi,
"Tight labor supply should lead to higher wages which would allow for greater consumer spending."
Well this is what you would have anticipated in theory, but this isn't what we are seeing, and since we aren't really seeing this in Germany or Italy either, then we might want to examine our theory to see just what we can learn from the newly emerging data.
My guess is that this will surprise us all.
What is a good source for tracking wage levels in Japan?
Japan national statistics office I guess.
Post a Comment