Tokyo inflation remains stagnant after Japan’s October sales tax hike

By Yoshiyasu Shida and Leika Kihara

TOKYO (Reuters) – Core consumer prices in Tokyo, a leading indicator of nationwide inflation, rose 0.5% in October from a year earlier, data showed on Tuesday, staying distant from the Bank of Japan’s elusive 2% target and keeping it under pressure to ramp up stimulus.

The data offered the first clue on how a sales tax hike that kicked off in October could affect price growth, which remains subdued despite years of heavy money printing by the Bank of Japan.

The rise in the core consumer price index (CPI) in the Japanese capital, which includes oil products but excludes fresh food prices, was slower than a median market estimate for a 0.7 percent gain.

Japan’s government proceeded with a twice-delayed increase in the sales tax rate to 10% from 8% in October as part of efforts to rein in the country’s huge public debt.

In forecasts made in July, the BOJ expects nationwide core consumer inflation to hit 1.0% in the current fiscal year ending in March 2020, including the effect of the higher tax.

The central bank is likely to trim the inflation forecast at a rate review on Thursday. But it is leaning toward keeping monetary policy steady as stable markets, a truce in U.S.-China trade talks and robust domestic demand give it room to save its dwindling ammunition, sources have told Reuters.

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Economy News

Japan’s LDP (Abe’s ruling party) will propose tax breaks to encourage retained earnings into new businesses

The headline is my generous reading of this news in the Nikkei

  • Japan’s ruling party will propose tax breaks to encourage businesses to channel their record stashes of cash into mergers and acquisitions that fuel new thinking and businesses.

Akira Amari, the Liberal Democratic Party’s tax policy chief, to the Nikkei in an interview.

  • considering a tax credit to encourage business to invest retained earnings in new businesses
  • seek to incentivize investments in other companies and startups 
The headline is my generous reading of this news in the Nikkei

I quite like it. 

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If you are Japan’s top dog currency intervention guy, this is your next job

In Japan its the Ministry of Finance that orders (or not) currency intervention.

Japan’s Finance Ministry’s Vice Finance Minister for International Affairs is the guy (its normally a guy, yeah) who will instruct the BOJ to intervene, when he judges it necessary. Often referred to as Japan’s ‘top currency diplomat’.

Anyway, at the moment its Masatsugu Asakawa:

In Japan its the Ministry of Finance that orders (or not) currency intervention.

Who has just been nominated as next head of Asian Development Bank.

But, get this … the current head of the ADB is Takehiko Nakao, who was a previous ‘top currency diplomat’. 

Peculiar. 

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Bloomberg: Japan’s Government Pension Investment Fund has started to hedge overseas bond investments

Could hit the USDJPY

Bloomberg is reporting that Japan’s Government Pension Investment Fund has started to hedge overseas bond investments.

The move could tilt the USDJPY lower and push the price to the lower end of the recent range.

The author notes that the “details are sketchy”, but it is worth keeping an eye on.

The USDJPY has moved lower and trades at new session lows at 108.479. The high for the day was up at 108.683. The next target comes in at 108.37 (high from July 16) and then the 100 hour MA/trend line at 108.308.  The 200 hour MA is lower at 108.089.  The recent lows are down at 107.20 (low for July) and the low for June was down at 106.77.  

First things first, if the “sketchy details” are true, a break below the 100 hour MA and trend line at 108.308 would tilt the bias more to the downside for the pair. 

USDJPY moves lower

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Japan’s Aso: US-China situation seems a little different this time

Comments by Japanese finance minister, Taro Aso

  • Says US and China are talking about fundamental issues

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It’s either he knows something more (which I doubt) or he’s just assuming how the situation currently is. And you know what they say about people who ass-u-me.

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