According to the latest news, the Bank of Japan is expected to maintain its massive stimulus next week. As we know, supply bottlenecks caused by factory shutdowns in Asia weakened the economy.
Some analysts assume that the rate review comes ahead of a ruling party leadership race. Moreover, analysts say that it may also shift the administration’s focus away from the current stance.
Bank of Japan’s Governor Haruhiko Kuroda is set to grieve his beliefs on the candidates’ stance at his post-meeting briefing.
At the two-day meeting ending on September 22, the Bank of Japan is likely to keep its short-term interest rate target at -0.1%. Moreover, it is set to maintain 10-year bond yields about 0%.
Furthermore, the Bank of Japan is set to offer a bleaker view on exports and output as Asian factory shutdowns caused by the COVID-19 pandemic led Japanese manufacturers to cut production plans.
According to Mari Iwashita, chief market economist at Daiwa Securities, the economy is declining in the current quarter, which is causing some delay in Japan’s recovery. Iwashita added that there’s a high chance the Bank of Japan may revise its view on output, which could remain weak for the rest of 2021.
Notably, the ruling party race is not likely to lead to any change in the Bank of Japan’s near-term policy. Furthermore, the candidates agree on the need to keep massive monetary support for now. However, it could change the long-term path toward whittling down stimulus.
Tokyo and some other regions remain in a state of emergency amid COVID outbreaks
Japan’s exports surged 26% in August from a year earlier, below analysts’ estimates, as supply chain disruptions hit manufacturers.
The figures revealed that the world’s third-largest economy logged a trade deficit of $5.8 billion, as imports climbed approximately 45% to $66 billion, driven largely by oil, gas, and coal imports.
Tokyo and some other regions remain in a state of emergency amid outbreaks spurred largely by the delta strain of coronavirus. The strong growth in imports implies that consumer demand has remained relatively strong.
Overall exports to the United States increased 23%, and shipments to Asia soared 26%. However, exports to China were weaker, surging nearly 13%.
Furthermore, the data revealed exports of cars declined 1.5% in August, while imports of oil and other fuels climbed 21%.