Japanese and Chinese Central Banks Show Some Hesitation
September 20, 2024
The dollar recouped some ground overnight, most notably in rising 1.1% against the Japanese yen. Smaller gains were made of 0.2% versus the Swiss franc and Turkish lira and of 0.1% relative to the Canadian, Australian and New Zealand dollar, but the euro and sterling held steady.
In some Asian stock markets, further sizable gain were made of 1.5% in Japan, 1.4% in Hong Kong and 1.6% in India. Others suffered setbacks including drops of 2.1% in Indonesia and 1.4% in New Zealand. The Shanghai Composite index went nowhere after the People’s Bank of China’s 1-year and 5-year loan prime facility rates were again left unchanged in the face of slower-than-desired growth in that key economy. The one-year LPR has been cut just once in 2024, a 10-basis point move to 3.35%.
European share prices are lower in Germany, France, Italy and the U.K., and U.S. futures have given back some of yesterday’s substantial gains.
Gold’s price hit a fresh record high of $2,637.90 per ounce and is currently trading near that level. Bitcoin’s price has advanced 1.0%, while oil is down 0.7%.
Japanese monetary policy has been out of step with other central banks. The Bank of Japan implemented its first interest rate hike since 2007 this past March and took a second step toward policy normalization in July, but the targeted short-term rate of 0.25% constitutes a very negative real level considering that core consumer price inflation has exceeded 2.0% for the past 29 reported months. It’s 2.8% reading for last month that was reported today was the fourth acceleration in a row and up from 2.2% in April.
Although analysts were not anticipating a third Bank of Japan rate hike today, the gist of the released statement and subsequent remarks by Governor Ueda contained a more nuanced message than expected.
With firms’ behavior shifting more toward raising wages and prices recently, exchange rate developments are, compared to the past, more likely to affect prices. The effects of the pass-through to consumer prices of cost increases led by the past rise in import prices are expected to wane. Japan’s economy has recovered moderately, although some weakness has been seen in part. There remain high uncertainties surrounding Japan’s economic activity and prices, including developments in overseas economic activity and prices, developments in commodity prices, and domestic firms’ wage- and price-setting behavior.
The latest Bank of Japan decision not to raise its interest rate was unanimous, and it appears that some of the hesitancy reflected concern about the yen’s quick rise from 160 to 140 per dollar and the recent volatility of Japan’s stock market including an single-day plunge of over 1000 points early in August.
Released data today featured many inflation and consumer sentiment reports.
Turkish and Danish consumer confidence improved to 3- and 2-month highs, while the British, Slovenian, Dutch and Belgian indices fell to their lowest readings in six, six, five and four months, respectively.
Japanese consumer price inflation in August of 3.0% was at a 10-month high despite a monthly 0.8% dip in the energy component, and core inflation rose to a half-year peak of 2.8%.
German producer price inflation last month matched July’s -0.8% reading and was negative for a fourteenth straight time.
Consumer price inflation in Hong Kong of 2.5% in August also matched July’s level. Moroccan inflation rebounded 0.4 percentage points to a 2-month high of 1.7% in August.
Producer price inflation for August printed at -2.6% in Latvia, -0.1% in Slovenia, 1.7% in Estonia, and 8.8% in Georgia.
The volume of British retail sales advanced 1.0% in August, more than twice as much as analysts were forecasting. This lifted their 12-month rate of change to +2.5% from +1.5% in July and -0.5% in June.
French business confidence rose to a 3-month high in September but, at 97.5, were below the long-term average reading of 100 and a peak shortly before Russia’s invasion of Ukraine of 114 in November 2021. Sentiment in the French labor market of 99.6 also printed at a 3-month high in September.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Japan, French business confidence, German PPI, Japanese CPI
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