As peers in the US and Europe take a dovish turn, Bank of Japan (BOJ) Governor Haruhiko Kuroda yesterday signaled he is unfazed as yields in his own country get caught up in the global shift.
“There is no need to be extremely and strictly mindful about a concrete range for the rate” on Japan’s benchmark 10-year bond yield, Kuroda said.
The BOJ targets that rate to be about 20 basis points plus or minus zero.
His flexibility egged on buyers, with the yield pushing as low as minus-0.18 percent as he spoke during an afternoon news conference.
The market is likely to test just how flexible Kuroda is in the days and weeks ahead.
The BOJ kept its benchmark interest rate at minus-0.1 percent and 10-year yield target at about 0 percent earlier in the day.
Hours before that, the US Federal Reserve followed the European Central Bank in signaling a willingness to cut rates in the face of rising threats to global growth.
Economists surveyed by Bloomberg unanimously forecast no change at yesterday’s BOJ meeting, but for the first time in more than two years, a majority had predicted the BOJ’s next policy move would be to increase stimulus.
Some expect action as early as next month.
Many BOJ watchers say Fed rate cuts, seen as increasingly likely, could force the BOJ’s hand by pushing the yen to what it would consider an uncomfortably strong level.
A stronger yen would hamper the BOJ’s efforts to hit 2 percent inflation.
Core inflation, to be released today, is expected to have fallen last month to 0.7 percent and is forecast to drop further in coming months.
The US dollar yesterday fell to as low as 107.47 versus the yen in Tokyo, paring losses after Kuroda’s news conference.
Again, Kuroda expressed comfort with taking a wait-and-see approach, saying that in the end, a Fed cut might not have much of an effect if the markets have already priced it in.
“At any rate, monetary policy isn’t targeted at foreign exchange rates,” he said.
Still, Kuroda reiterated that the BOJ stands ready to add stimulus if momentum toward its 2 percent inflation goal is threatened.
However, it is unlikely to be that simple, as the BOJ also faces concerns about the accumulation of side effects from six-plus years of radical stimulus.
Many economists doubt the BOJ could even have much impact with whatever it chooses to do, because its toolbox is almost empty — complicating the risk-reward scenario.
Japan’s trade-dependent economy showed some resilience in the first three months of the year, but some economists are warning of a contraction this quarter.
The BOJ still expects conditions to improve in the second half of the year.
AI BOOST: Although Taiwan’s reliance on Chinese rare earth elements is limited, it could face indirect impacts from supply issues and price volatility, an economist said DBS Bank Ltd (星展銀行) has sharply raised its forecast for Taiwan’s economic growth this year to 5.6 percent, citing stronger-than-expected exports and investment linked to artificial intelligence (AI), as it said that the current momentum could peak soon. The acceleration of the global AI race has fueled a surge in Taiwan’s AI-related capital spending and exports of information and communications technology (ICT) products, which have been key drivers of growth this year. “We have revised our GDP forecast for Taiwan upward to 5.6 percent from 4 percent, an upgrade that mainly reflects stronger-than-expected AI-related exports and investment in the third
Mercuries Life Insurance Co (三商美邦人壽) shares surged to a seven-month high this week after local media reported that E.Sun Financial Holding Co (玉山金控) had outbid CTBC Financial Holding Co (中信金控) in the financially strained insurer’s ongoing sale process. Shares of the mid-sized life insurer climbed 5.8 percent this week to NT$6.72, extending a nearly 18 percent rally over the past month, as investors bet on the likelihood of an impending takeover. The final round of bidding closed on Thursday, marking a critical step in the 32-year-old insurer’s search for a buyer after years of struggling to meet capital adequacy requirements. Local media reports
TECHNOLOGICAL RIVALRY: The artificial intelligence chip competition among multiple players would likely intensify over the next two years, a Quanta official said Quanta Computer Inc (廣達), which makes servers and laptops on a contract basis, yesterday said its shipments of artificial intelligence (AI) servers powered by Nvidia Corp’s GB300 chips have increased steadily since last month, should surpass those of the GB200 models this quarter. The production of GB300 servers has gone much more smoothly than that of the GB200, with shipments projected to increase sharply next month, Quanta executive vice president Mike Yang (楊麒令) said on the sidelines of a technology forum in Taipei. While orders for GB200 servers gradually decrease, the production transition between the two server models has been
ASE Technology Holding Co (日月光投控), the world’s largest integrated circuit (IC) packaging and testing supplier, yesterday announced a strategic collaboration with Analog Devices Inc (ADI), coupled with the signing of a binding memorandum of understanding. Under the agreement, ASE intends to purchase 100 percent shares of Analog Devices Sdn Bhd and acquire its manufacturing facility in Penang, Malaysia, a press release showed. The ADI Penang facility is located in the prime industrial hub of Bayan Lepas, with an area of over 680,000 square feet, it said. In addition, the two sides intend to enter into a long-term supply agreement for ASE to
RSS