Japan’s central bank yesterday revised down inflation forecasts, making only minor tweaks to a monetary policy that has so far fallen short of lifting prices and boosting the world’s third-largest economy.
There was widespread speculation in the run-up to the Bank of Japan’s (BOJ) two-day meeting that it would adjust its ultra-loose policy, seeking to offset the effects of negative interest rates and its massive bond and asset buying.
However, the bank offered only marginal adjustments to its policy, introducing some flexibility, and revised down further its forecasts for inflation through fiscal 2020.
The BOJ has faced criticism for the side effects of its policy, including concerns that its massive purchases are skewing the bond market and financial markets.
In a nod to those concerns, the bank said it would seek to keep yields on benchmark 10-year government bonds about zero percent, but added that “the yields may move upward and downward to some extent” and said it would “conduct purchases in a flexible manner.”
The bank also said it would shift its purchases of exchange-traded funds away from the Nikkei toward the TOPIX, to address concerns that it is inadvertently hiking stock prices, and could “increase or decrease the amount of purchases depending on market conditions.”
Earlier this year, the BOJ dropped an inflation target of 2.0 percent for 2020, and revised down its forecasts yesterday, saying that it now expected inflation of just 1.1 percent in fiscal 2018, rising to 1.5 percent in fiscal 2019 and 1.6 percent in fiscal 2020.
Experts say several factors are keeping prices low, including stagnant salaries.
“For me, the primary reason for weak inflation in Japan is that salaries do not rise,” NLI Research Institute senior economist Taro Saito said. “Workers’ demand for a rise in salaries has not been very strong, because their level of living has not been changing if prices are not rising.”
The BOJ has referred to a “deflation mindset,” under which consumers and employers have gotten used to the status quo.
“The mindset and behavior ... became embedded in the economy, and it has been taking time for these factors to change,” the bank said in a quarterly report on the economy and prices.
With inflation stubbornly low, the BOJ has kept its easing in place even as the US Federal Reserve and European Central Bank have tightened policies.
However, some analysts said that yesterday’s tweaks, while minor, suggested the start of a shift in thinking.
“We were surprised to see so many adjustments in the statement, but all-in-all the Bank of Japan still sent a message saying it will continue its current easing policy,” Dai-ichi Life Research Institute head economist Hideo Kumano said.
“The adjustments were minor, but this may be the beginning of a major shift. When history changes, it always begins with a minor change,” he added.
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to