Latest news with #KazuoUeda
Reuters
a day ago
- Business
- Reuters
BOJ may paint less gloomy view, signal rate-hike resumption
TOKYO, July 28 (Reuters) - The Bank of Japan is set to hold off raising interest rates on Thursday but may offer a less gloomy view on the outlook after Tokyo's trade agreement with the U.S. last week, signalling rate hikes may resume later this year. Receding global trade tensions following Sunday's agreement between the U.S. and the European Union add relief for BOJ policymakers on the outlook of Japan's export-heavy economy. But the BOJ is likely to warn of lingering uncertainty on how U.S. tariffs affect business activity with the hit to exports seen intensifying later this year, analysts say. "It's very big progress that reduces uncertainty for Japan's economy - but obviously, some uncertainty remains," BOJ Deputy Governor Shinichi Uchida said last week on the Japan-U.S. trade deal. Uchida noted questions around how soon Washington strikes trade deals with other countries, how the tariffs affect domestic and global economies and how long it could take for the tariffs' effects to be seen in hard data. At the two-day meeting ending on Thursday, the BOJ is widely expected to keep short-term interest rates steady at 0.5%. Markets are focusing on the bank's quarterly outlook report and Governor Kazuo Ueda's post-meeting news conference for clues on the timing of the next rate hike. A Reuters poll, taken before last week's Japan-U.S. trade deal announcement, showed a majority of economists expect the BOJ to raise rates again by year-end. In the quarterly report, the BOJ is likely to revise up this fiscal year's inflation forecast due to persistent rises in rice and other food costs, sources have told Reuters. The BOJ may also tweak its current view that risks to the price outlook were skewed to the downside, and offer a less gloomy view on the economy compared with the current one focused on tariff-induced risks, according to separate sources. The board 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, they said. In current projections made on May 1, the BOJ projects core consumer inflation to hit 2.2% in fiscal 2025, before slowing to 1.7% in 2026 and 1.9% in 2027. Japan struck a trade deal with President Donald Trump last week that lowers U.S. tariffs for imports of goods including its mainstay automobiles, easing the pain for the export-reliant economy and clearing a key hurdle for further BOJ rate hikes. The positive development contrasts with the gloom that surrounded the economy on May 1, when the BOJ produced its current estimates amid heightened market volatility caused by Trump's April announcement of sweeping "reciprocal" tariffs. The BOJ exited a decade-long, massive stimulus last year and raised its short-term policy rate to 0.5% in January on the view Japan was progressing towards durably achieving its price goal. With rising food costs hurting households and keeping inflation above its 2% target for three years, some hawkish board members have highlighted mounting price pressures that could justify resuming rate hikes.
Forbes
4 days ago
- Business
- Forbes
Japan's Inflation Surge Is Now A Political Crisis
Kazuo Ueda, governor of the Bank of Japan (BOJ), speaks during a news conference at the central bank's headquarters in Tokyo, Japan. Toru Hanai/Bloomberg On any list of central bankers dying to get off this crazy thing called 2025, Japan's Kazuo Ueda deserves a spot at the very top. Sure, Jerome Powell has an argument that he's having a worse year as Donald Trump threatens to fire him. This week, the Federal Reserve chair even found himself donning a hard hat with Trump as the president stopped by Fed headquarters on a tour of sorts. But the economic script is writing itself for Fed decision-making. Any argument that the Fed should be cutting rates is based on loyalty to Trump World, not economics. With core inflation rising at a 2.9% annual rate and tariffs likely to raise costs further, easing now might just troll the 'bond vigilantes' into boosting U.S. Treasury yields anyway. The call Ueda's team in Tokyo will make at the July 30-31 policy meeting is altogether more difficult. Virtually every serious BOJ watcher sees Ueda & Co. standing pat next week. But the BOJ is probably itching to hike rates 25 basis points to 0.75% to let the markets know its 'normalization' strategy remains alive and well. Ueda has every reason to worry that the BOJ is now at the same fork in the road as it was in 2007, the last time the central bank managed to hike rates to today's 0.5% level. By 2008, in the aftermath of the 'Lehman shock,' the BOJ was reversing course. Rates were soon back at zero. Also back was the quantitative easing strategy the BOJ thought it had put to rest. Will Ueda also have to reverse his rate hikes since July 2024? It's a very open question, particularly with Japan agreeing to a tariff deal with Trump. Clearly, Japan facing a 15% Trump tax — not the 35% it might have — is good news. Ditto for Japanese auto exporters escaping the earlier 25% tariff rate. But Japan's economy contracted 0.2% in the first quarter even before the main tariffs were imposed. The second quarter was hit by a triple whammy of tariffs, domestic inflation and sudden spikes in bond yields that made banner headlines. As the third quarter begins, Japan isn't exactly firing on all cylinders. China is slowing and exporting deflation, while neither the U.S. nor Europe is booming to juice Japanese exports. Japan's inflation troubles are pushing it into stagflationary territory. How the Ueda BOJ should play the months ahead is anyone's guess. That includes Ueda, as Tokyo politics veers into an unusually tumultuous period, thanks largely to high inflation. In the July 20 election, the ruling Liberal Democratic Party lost control of Japan's upper house. It means the party that's led Japan with only two brief interruptions since 1955 controls neither house of parliament directly. It must now cobble together a coalition to lead the nation. And Prime Minister Shigeru Ishiba is likely to resign in short order to take responsibility. The price for that partnership is likely to be lower taxes, a risk that's unnerving the bond market. One policy success Ishiba has had, arguably, is avoiding huge budget-busting stimulus packages. That's about to change, further swelling Japan's already crushing debt load. Last week, an auction of 40-year Japanese government bonds (JGBs) attracted the weakest demand since 2011. In mid-May, a routine sale of $6.9 billion of 20-year bonds yielded some of the worst numbers since 1987. The 'tail,' the gap between the average and lowest-accepted prices, was the worst in 38 years. It's never good to see #JGBCrash trending on social media. If the BOJ were to raise rates as Ishiba's party is adding to the national debt, Japanese borrowing costs might skyrocket and increase recession risks. Of course, if Ueda goes easy on inflation and prices stay well above the BOJ's 2% target, the BOJ might only have to tighten more aggressively in the later months of 2025 and into 2026. As Ueda tries to make sense of things, one thing is clear: 2025 can't end fast enough for this BOJ team.
Bloomberg
5 days ago
- Business
- Bloomberg
BOJ Watchers Still Predict Next Rate Hike in October or January
Bank of Japan watchers increasingly expect authorities to raise the benchmark interest rate either in October or January, according to a Bloomberg survey conducted before US President Donald Trump announced a trade deal with Japan. All 56 economists forecast Governor Kazuo Ueda's board will leave the benchmark rate at 0.5% at the July 31 conclusion of its next two-day policy meeting, according to the poll.
Business Times
14-07-2025
- Business
- Business Times
BOJ finishes offloading bank stocks, bringing focus to ETFs
[TOKYO] The Bank of Japan (BOJ) finished selling millions of US dollars of stocks it bought from besieged banks during a domestic banking crisis in the early 2000s and the later Lehman Shock, ending a nearly two-decade process and bringing closer market attention to the fate of its much bigger pile of exchange-traded funds. The BOJ's holdings of the shares purchased from banks hit zero as of Jul 10, falling from 2.5 billion yen (S$26 million) 10 days ago, according to its balance sheet report on Monday (Jul 14). It was well ahead of a self-imposed deadline of March next year, although the milestone was expected to happen around this time after a steady drop of roughly 10 billion yen per month in recent years. The offloading of the shares suggests that the BOJ's normalisation process more broadly could be accomplished without disrupting financial markets, although it would take a considerable amount of time. The assets were originally bought as a crisis response measure, years before the introduction of the massive monetary easing programme that governor Kazuo Ueda's board is now in the process of unwinding. 'The completion of the stock sales is one step towards ETF selling, but it's still too early to start that process,' said Kazuhiro Sasaki, head of research at Phillip Securities Japan. At a time when equity markets are already jittery around US President Donald Trump's trade policy, the BOJ will have to choose its timing carefully, Sasaki added. Between 2002 and 2010, the BOJ acquired about 2.4 trillion yen of stocks from private banks in two separate periods to help stabilise the financial system at the time – initially seen as extraordinary steps to take for a major central bank. The BOJ's actions in the years following have ultimately made those steps less shocking. The central bank became the biggest holder of Japanese stocks around 2020 and the size of the central bank's ETF holdings is now 15 times larger than the shares it obtained from beleaguered banks. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up In a report on Friday, Goldman Sachs economists noted that it's reasonable to expect the bank to start gradually selling ETFs in fiscal 2026 to minimise its loss and the impact on the stock market. It's taken the central bank nearly 18 years to offload the bank shares completely, after it first began selling in October 2007. If the BOJ applies the same selling pace it did for the bank stocks, it would take more than 200 years to completely offload the far larger ETF holdings from its balance sheet. 'It fulfilled the intended objective,' Ueda said at a press conference last month, referring to the bank stocks buying initiative. 'Offloading them isn't completely finished yet but so far it's been proceeding without negative market impact or financial loss for us.' Getting rid of the bank stocks entirely helps lower the hurdle to consider ETFs, as the simultaneous sale of both asset types could risk a overly large negative impact on the markets. Starting with the end of negative interest rates and expansionary asset purchases in March last year, the BOJ has been cautiously normalising policy, with the latest updated government bond buying plan in June illustrating its caution. One BOJ policy board member said in April last year that the bank should reduce the ETF holdings to zero even if it takes time. At the same time, Ueda has kept his options open – in March he did not rule out holding ETFs indefinitely. From the perspective of the BOJ's financial health, there is little need to rush to dispose of its stock fund assets. The bank earned 1.4 trillion yen in revenue from ETF dividends in the fiscal year ended in March 2025. That's offering sizable support for the bank's finances at a time when the cost of paying interest to banks is bound to rise further in tandem with rate hikes. The ETF profits have drawn attention from investors and politicians. Some opposition party lawmakers are already calling for using the BOJ's ETFs to fund government finances. Some analysts say that the BOJ could hand out the ETFs to the public. 'As I have said many times, there is no change in our stance to take time to consider what to do with the ETF holdings,' Ueda told reporters last month. BLOOMBERG
Japan Times
14-07-2025
- Business
- Japan Times
BOJ finishes offloading bank stocks, bringing attention to ETFs
The Bank of Japan finished selling millions of dollars of stocks it bought from besieged banks during a domestic banking crisis in the early 2000s and the later Lehman Shock, ending a nearly two decade process and bringing closer market attention to the fate of its much bigger pile of exchange-traded funds. The BOJ's holdings of the shares purchased from banks hit zero as of July 10, falling from ¥2.5 billion ($17.4 million) 10 days ago, according to its balance sheet report Monday. It's well ahead of a self-imposed deadline of March next year, although the milestone was expected to happen around this time after a steady drop of roughly ¥10 billion per month in recent years. The offloading of the shares suggest that the BOJ's normalization process more broadly could be accomplished without disrupting financial markets, although it would take a considerable amount of time. The assets were originally bought as a crisis response measure, years before the introduction of the massive monetary easing program that Gov. Kazuo Ueda's board is now in the process of unwinding. Between 2002 and 2010, the BOJ acquired about ¥2.4 trillion ($16.3 billion) of stocks from private banks in two separate periods to help stabilize the financial system at the time — initially seen as extraordinary steps to take for a major central bank. The BOJ's actions in the years following have ultimately made those steps less shocking. The central bank became the biggest holder of Japanese stocks around 2020 and the size of the central bank's ETF holdings are now 15 times larger than the shares it obtained from beleaguered banks. In a report Friday, Goldman Sachs economists noted that it's reasonable to expect the bank to start gradually selling ETFs in fiscal 2026 to minimize its loss and the impact on the stock market. The BOJ began buying stocks held by banks in November 2002, after a severe banking crisis that saw bank shares tumbling for about three years. The central bank kept buying for about two years in a bid to help banks address their dire nonperforming loan problem. In the wake of the global financial crisis, the BOJ bought again between February 2009 and April 2010. It's taken the central bank nearly 18 years to offload the shares completely, after it first began selling in October 2007. At the end of 2015, the BOJ said it would extend the selling duration by a decade, through to March 2026. If the BOJ applies the same selling pace it did for the bank stocks, it would take more than 200 years to completely offload the far larger ETF holdings from its balance sheet. "It fulfilled the intended objective,' Ueda said at a news conference last month, referring to the bank stocks buying initiative. "Offloading them isn't completely finished yet but so far it's been proceeding without negative market impact or financial loss for us.' Getting rid of the bank stocks entirely helps lower the hurdle to consider ETFs, as the simultaneous sale of both asset types could risk a overly large negative impact on the markets. Starting with the end of negative interest rates and expansionary asset purchases in March last year, the BOJ has been cautiously normalizing policy, with the latest updated government bond buying plan in June, illustrating its caution. Ueda's board decided to slow the pace of tapering the bond buying from the next fiscal year given recent heightened volatility in the bond market. One BOJ policy board member said in April last year that the bank should reduce the ETF holdings to zero even if it takes time. At the same time, Ueda has kept his options open — in March he didn't rule out holding ETFs indefinitely. From the perspective of the BOJ's financial health, there is little need to rush to dispose of its stock fund assets. The bank earned ¥1.4 trillion in revenue from ETF dividends in the fiscal year ended in March 2025. That's offering sizable support for the bank's finances at a time when the cost of paying interest to banks is bound to rise further in tandem with rate hikes. The sizable ETF profits have drawn attention from investors and politicians. Some opposition party lawmakers are already calling for using the BOJ's ETFs to fund government finances. Some analysts say that the BOJ could hand out the ETFs to the public. "As I have said many times, there is no change in our stance to take time to consider what to do with the ETF holdings,' Ueda told reporters last month.
