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Business Times
15 hours ago
- Business
- Business Times
BOJ may paint less gloomy view, signal rate-hike resumption
[TOKYO] The Bank of Japan (BOJ) is set to hold off raising interest rates on Thursday (Jul 31) but may offer a less gloomy view on the outlook after Tokyo's trade agreement with the US last week, signalling rate hikes may resume later this year. Receding global trade tensions following Sunday's agreement between the US 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 US 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-US 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 per cent. 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 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-US 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 per cent 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 per cent in fiscal 2025, before slowing to 1.7 per cent in 2026 and 1.9 per cent in 2027. Japan struck a trade deal with President Donald Trump last week that lowers US 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 per cent in January on the view that Japan was progressing towards durably achieving its price goal. With rising food costs hurting households and keeping inflation above its 2 per cent target for three years, some hawkish board members have highlighted mounting price pressures that could justify resuming rate hikes. REUTERS
Yahoo
18 hours ago
- Business
- Yahoo
Subdued dollar firms after ECB leaves rates alone; tariffs and Fed in focus
By Alden Bentley and Stefano Rebaudo (Reuters) -The dollar traded sideways versus the euro on Thursday after the European Central Bank held rates steady, and was confined to a tight range against the yen as prospects for higher Japanese rates offset worries about political risk after Sunday's elections. The greenback showed fractional gains late in a subdued U.S. session, with investors girding for a busy news flow next week. The European Central Bank left its policy rate at 2%, as expected, on Thursday, taking a break after a year of policy easing to wait for clarity over Europe's future trade relations with the United States. "The view that the ECB is probably on hold here is probably gaining a bit more traction. We've trimmed expectations for the cuts in September to certainly less than 50/50," said Shaun Osborne, chief foreign exchange strategist at Scotiabank in Toronto. The Japanese central bank's deputy governor, Shinichi Uchida, said Tuesday's trade deal with Washington had reduced economic uncertainty, comments that fuelled optimism in the market about the potential resumption of interest rate hikes. Analysts believe the yen will face persistent headwinds after Sunday's upper house election, with the opposition considering a no-confidence motion. The European Union is nearing a deal that would impose a broad 15% tariff on EU goods, diplomats said. The rate, which could also extend to cars, would mirror the framework agreement the United States struck with Japan. "The ECB faces a challenge that is quantitatively different from the BoJ's," said Thierry Wizman, global forex and rates strategist at Macquarie Group. "The euro has appreciated by far more than the JPY so far in 2025, meaning that the disinflationary impulse from U.S. import tariffs may be greater in the EU than in Japan, or the ECB may suspect as much," he added. PMI data showed fragility in France following budget-cut proposals there, but also resilience in Germany and other parts of the euro zone. Data showed that German business activity continued to grow marginally in July. "As of now, there has been very little tariff impact on the hard data," said Mohit Kumar, economist at Jefferies. ECONOMIC FALLOUT Meanwhile, risk assets rallied as the trade deals eased fears over the economic fallout of a global trade war. Next week the Federal Open Market Committee meets and is expected to leave rates where they are as policy makers wait for the expected impact from tariffs on inflation and growth to show up. Traders are now pricing in a 60% chance of a quarter point September rate cut, according to CME's FedWatch tool. A number of U.S. employment releases next week culminate with Friday's big June payrolls report, while the July Personal Consumption Expenditures Price Index and the first revision to 2nd quarter Gross Domestic Product could also move markets. "A lot of event risk next week and not just from the Fed, we've got a lot of data next week as well, so that's probably going to shape expectations to some extent for September," Osborne said. The euro was last off 0.03% $1.1766, near the $1.1830 high from earlier this month, which marked its strongest level in more than three years. Against the yen, the dollar was 0.27% firmer at 146.88, having hit a two-week low earlier in the session at 145.86. Olivier Korber, forex strategist at Societe Generale, expects the yen to strengthen further, citing support from the trade deal and prospects for higher interest rates. Japanese Prime Minister Shigeru Ishiba denied on Wednesday he had decided to quit after a source and media reports said he planned to announce his resignation to take responsibility for a bruising upper house election defeat. Currencies mostly shrugged off news that U.S. President Donald Trump, a vocal critic of Federal Reserve Chair Jerome Powell, will visit the central bank on Thursday, a surprise move that escalates tensions between the administration and the Fed. The dollar index, which measures the greenback against a basket of six currencies including the euro and yen, rose 0.17% to 97.36. In cryptocurrencies, bitcoin rose 1.17% to $119,376.30. Ethereum rose 4.62% to $3,735.62. Sign in to access your portfolio
Business Recorder
19 hours ago
- Business
- Business Recorder
BOJ may paint less gloomy view, signal rate-hike resumption
TOKYO: 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.
New Straits Times
20 hours ago
- Business
- New Straits Times
BOJ may paint less gloomy view, signal rate-hike resumption
TOKYO: The Bank of Japan (BOJ) 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 United States last week, signalling rate hikes may resume later this year. Receding global trade tensions following Sunday's agreement between the US 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 US 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-US 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 per cent. 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-US 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 2.0 per cent 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 per cent in fiscal 2025, before slowing to 0.7 per cent in 2026 and 0.9 per cent in 2027. Japan struck a trade deal with President Donald Trump last week that lowers US 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 per cent 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 2.0 per cent target for three years, some hawkish board members have highlighted mounting price pressures that could justify resuming rate hikes.
Reuters
21 hours 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.
