Bank of Japan
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May 16, 2024 10:30 AM UTC
Most of the surge in debt/GDP in Japan and 40% in France is due to higher government debt and this should not be a binding constraint provided that large scale QT is avoided – we see the ECB slowing QT in 2025 and are skeptical about BOJ QT in the next few years. The adverse impact of higher deb
April 25, 2024 6:24 AM UTC
In the period of time when JPY significantly weakens or strengthens, BoJ will intervene in the FX market either through verbal or actual intervention. As JPY weakened significantly in the past months, once again we found ourselves in the proximity of FX intervention with unknowns for anonymity is ke
April 22, 2024 6:13 AM UTC
Our central forecast is for the BoJ to remain on hold for interest rate and signals the market they are in no rush to further tighten while allowing trend inflation data to lead policy direction in their forward guidance. BoJ has moved interest rate to 0% and officially removed YCC in March, citing
March 25, 2024 4:54 AM UTC
Bottom Line:
Forecast changes: We revised 2024 GDP lower to +0.8% from +0.9% because private consumption is now expected to contract in Q1 2024. 2024 CPI is revised higher to +2.1% from +1.7% to address the stronger wage hike Japanese unions secured.
March 13, 2024 3:17 AM UTC
Our central forecast is for the BoJ to change forward guidance in March, indicating trend inflation will be achieving target and ultra-ease monetary policy is no longer necessary and hike interest rate to 0% in April as wage growth has accelerated and the latest wage negotiation is likely to ensure
March 12, 2024 11:23 AM UTC
Bottom Line: Japanese equities tailwind from a weak JPY boosting corporate earnings will likely go into reverse, as the extreme JPY undervaluation ebbs with small BOJ rate hikes and Fed easing. We also forecast less nominal GDP growth in 2024 and 2025 than the market consensus. As this come thro
January 18, 2024 10:15 AM UTC
The more subdued profile of Japanese wages, plus a delay in the 1st BOJ hike, has prompted us to lower the forecast of a rise in 10yr JGB yields in 2024 – though we still see a rise above 1% (Figure 1). As BOJ tightening stops, we see 10yr JGB yields falling back again in 2025.
January 15, 2024 5:41 AM UTC
The BoJ has kicked the can down to the spring wage negotiation before another step in monetary policy. While current inflation forecast has exceeded BoJ's 2% target in all three items of headline, ex fresh food and ex fresh food & energy, the wage growth did not reach a "sustainable" level, which Ue
December 19, 2023 9:26 AM UTC
To our surprise, not only the BoJ did not aggressively bring rates to zero percent, they did not even change their forward guidance. Given the latest inflation dynamics, it is surprising BoJ would not seize the time to hint a change of monetary policy. Yet, if BoJ only want to wait for the perfect m
December 19, 2023 12:00 AM UTC
The BoJ meeting on December 18-19 is going to announce a change in forward guidance by suggest BoJ will be ready to exit ultra-loose monetary policy as trend inflation is in close sight of 2% target. Some hawkish market participants maybe anticipating an immediate hike from the BoJ to bring rates to
December 15, 2023 10:19 AM UTC
• EZ debt yields will also see a swing back towards a positive shaped yield curve. Gradual ECB rate cuts will translate into a persistent decline in 2yr yields in 2024, but slower in 2025 as the market will be uncertain about the terminal policy rate and the ECB forward guidance will like
September 28, 2023 7:16 AM UTC
Risks to our views: A mild recession in the U.S. would lead to larger than projected Fed easing in 2024, which would bring yields down across the curve – though still with disinversion occurring. The spillover would impact government bond yields in other DM countries except Japan.
Figure 1: U.S.
September 27, 2023 6:00 AM UTC
Macroeconomic and Policy Dynamics
Japanese headline inflation has been moderating for 2023 so far, as global supply chains swing back to normal and energy prices rotates lower before the recent bounce. However, the pace of moderation has been hindered by stronger food prices (record chicken culling o
September 4, 2023 9:31 AM UTC
As DM policy tightening nears a peak, 10yr government bond spreads are starting to diverge.What is driving this and how much further can they diverge?
Figure 1: 10yr U.S. Treasury-Bund Spread and Fed Funds-ECB Depo Rate (%)
Source: Datastream/Continuum Economics
U.S. Soft Landing and EZ/UK Recess
June 22, 2023 1:03 PM UTC
• In the U.S. we see inflation in the remainder of this decade being closer to 2.5% than 2.0% and also see higher real yields than the 0.45% that existed between 2015-19 (we see 2020’s supply problems, QT and inflation uncertainty meaning higher real yields). This means that nominal 10yr yield
June 21, 2023 10:05 AM UTC
Macroeconomic and Policy Dynamics
The easing of supply chain restraints, lower energy price and global tightened financial condition has led to Japanese headline inflation moderation. However, CPI ex Fresh Food & Energy has been unfazed by aforementioned factors and continuously rose in H1 2023.
March 27, 2023 1:45 PM UTC
Risks to our views: A moderate U.S. recession on larger than expected tightening of financial conditions could bring forward Fed rate cuts and prompt a downward shift in 2yr yields, but similar yield curve steepening between 10-2yr.
Figure 1: U.S. Treasuries Fed, Funds, 2yr and 10yr Yield Forecasts (
February 22, 2023 10:44 AM UTC
M/T Quick Roadmap – Fundamental MMKT/CB Roadmap and Rationale
February 2023
US FEDERAL RESERVE
The February 1 December FOMC meeting saw the pace of tightening slowed to 25bps. Inflation has slowed, but January's CPI details still show broad based inflationary pressures at a pace well above the Fed's
January 18, 2023 5:53 AM UTC
The BoJ meeting on 18th December was widely expected to have little change to their monetary policy but market participants would be closely watching its forward guidance as some are speculating for any signals of an early exit from ultra-loose monetary policy. There were headlines crossing the wire
January 13, 2023 1:26 PM UTC
While we are eclectic on money supply relationship with growth/inflation, but it cannot be ignored and the recent sharp deceleration warrants investigation in the U.S. and Eurozone.
Figure 1: U.S./China/Eurozone M2 Growth (Yr/Yr %)
Source: Datastream/Continuum Economics
Slow U.S. and EZ Money Suppl
July 6, 2022 2:36 PM UTC
Figure 1: G4 10yr Government Bond Yields (%)
Source: Datastream, Continuum Economics
Government Bonds Become Two-way
The one-way upward surge in DM government bond yields has finished for now, and government bond yields are torn between high inflation and slowdown/recession risks (Figure 1). The rece
June 17, 2022 10:44 AM UTC
Figure 1: 10yr U.S. Treasury Forecasts to end-2024 (%)
Source: Continuum Economics
How Much Fed Tightening and the Yield Curve
We are of the view after the June 15 FOMC meeting that the Fed will likely tighten by 75bps in July, 50bps in September and 25bps in November to a 3.00-3.25% Fed Funds target
June 17, 2022 10:11 AM UTC
Our Forecasts
Source: Continuum Economics
Risks to Our Views
Source: Continuum Economics
Macroeconomic and Policy Dynamics
2022 is going to be a rare year when Japanese GDP and inflation are both above 2%. Our forecast of 2.1% growth reflects the rebound of private consumption after the rolling states of