Japanese PM Abe to call for further stimulus measures re disaster recovery

Japanese press, Nikkei with the report:

  •  Prime Minister Shinzo Abe is set to call for stimulus measures to prop up an economy battered by a string of natural disasters and sustain growth past next year’s Tokyo Olympics, Nikkei has learned.
  • The government will revamp a 7 trillion yen plan to prepare infrastructure for natural disasters over three years through fiscal 2020
  • also looking to bolster Japan’s growth potential beyond the summer Olympics in 2020

Central bankers around the glove have been calling for more government stimulus. Its ongoing in Japan. 

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Forex – Dollar Steady on Safe-Haven Weakness as Stimulus Dims Economic Fears

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RBA’s Kent Says Rate Cuts, Currency Drop Are Providing Stimulus

(Bloomberg) — Australia’s back-to-back interest-rate cuts are flowing through the financial system and into the economy, while the falling currency should provide a similar stimulus to sustained declines of previous years, a senior Reserve Bank official said.

“The transmission of monetary policy in Australia to financial conditions is working in the usual way,” Christopher Kent, assistant governor for financial markets, said in Sydney Tuesday. “In particular, the change in the stance of policy has underpinned the decline in risk-free rates along the yield curve. It has also contributed to a decline in the cost of funding in corporate bond markets, supported equity prices, and lowered the cost of funding for banks.”

Kent also said in his speech to the Finance & Treasury Association that much of the reduction in banks’ funding costs has been passed through to business and household borrowers. The cash rate currently stands at 1%, with traders pricing in another quarter-point cut this year and a further one in 2020.

Kent noted that a spike in commodity prices over the past year had impacted the currency less than in the past, due to expectations that the supply-driven gains were likely to be short-lived. He estimated that, in trade-weighted terms, the dollar was down about 7% over the past year; it was trading at 67.57 U.S. cents at 10:52 a.m. in Sydney, near the lowest level since 2009.

Some Support

“Notwithstanding an easier stance of monetary policy globally, the decline in interest rates in Australia has contributed to the depreciation of the Australian dollar,” he said. “That broad-based easing in financial conditions in Australia will provide some additional support to demand in the period ahead.”

Asked after the address whether the currency would deliver the same impetus to the economy as on previous occasions, given changes in the industrial base, Kent was categorical in his response: “Absolutely.”

“Education and tourism benefit just as much through a depreciation in terms of their competitiveness as any other industries which are no longer so prominent,” he said. “So yes I think it’s going to have about the same sort of effect in terms of the stimulus.”

Kent was also asked whether the central bank’s focus was still inflation or perhaps unemployment or even under-employment now. He reiterated the bank’s line that there was more spare capacity in the economy than had been anticipated, as strong hiring had been met by a “substantial increase” in the participation rate.

“We’re certainly not unemployment rate targeters, we still are inflation targeters,” he said. “But it’s a dual mandate, we care about inflation, we care about full employment. We care about the general welfare of the populace.”

(Updates with Q&A currency comments from first paragraph.)

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IMF says China may need more stimulus if trade war worsens

© Reuters. Customers are served at a counter at a currency exchange store in Shanghai © Reuters. Customers are served at a counter at a currency exchange store in Shanghai

By David Lawder

WASHINGTON (Reuters) – The International Monetary Fund on Friday stood by its assessment that the value of China’s yuan was largely in line with economic fundamentals, but an IMF official said the fund was encouraging China to pursue a more flexible exchange rate with less intervention.

James Daniel, director of the IMF’s China department, said that an assessment of China’s economic policies found the yuan exchange rate in 2018 to be “not significantly over-valued or under-valued.”

The IMF’s views on the yuan are at odds with those of its largest shareholder, the United States, which this week declared China a “currency manipulator” after it allowed the yuan to slip below 7 to the dollar to 11-year lows.

U.S. Treasury Secretary Steven Mnuchin is seeking to engage the IMF to help “correct” an unfair trade advantage from Beijing’s currency actions, but Daniel declined to say how the IMF was responding to the request.

“Our discussions with the U.S. Treasury are ongoing on a range of issues,” Daniel told reporters on a conference call, echoing an earlier statement from an IMF spokesperson.

The IMF said in the report that a worsening of trade tensions with the United States could put China’s economic and financial stability at risk, making new fiscal stimulus measures from the government warranted.

The IMF said if the United States were to impose 25% tariffs on a remaining $ 300 billion list of Chinese imports, this would reduce China’s growth by around 0.8 percentage points over the following 12 months, driven by a sharp fall in demand and a tightening of financial conditions. Negative global spillovers could be significant, it added.

Daniel said that a 10% tariff on this category of goods — as U.S. President Donald Trump intends to impose on Sept. 1 — could result in a 0.3 percentage point cut to growth.

Weighed down by weak demand at home and abroad, China’s growth slowed to 6.2% in the second quarter, a near 30-year low.

More exchange rate flexibility could help China deal with these external pressures, freeing up monetary policy to deal with domestic demand conditions, Daniel said.

He also said the IMF was pressing China for structural reforms to its economy, including opening more sectors to foreign competition and reducing the role of the state in certain industry — goals also broadly sought by the Trump administration.

“We see continued rebalancing and opening up by China and increased exchange rate flexibility as being in China’s own interests and also benefiting the global economy.”

IMF directors in a statement agreed with staff assessments that China’s external position in 2018 was broadly in line with fundamentals.

But they also called for more transparency in China’s exchange rate policies, the IMF said, with some seeking disclosures of China’s foreign exchange market interventions.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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ECB Officials Ready to Add Stimulus But Won’t Say When or How

© Reuters.  ECB Officials Ready to Add Stimulus But Won’t Say When or How © Reuters. ECB Officials Ready to Add Stimulus But Won’t Say When or How

(Bloomberg) — European Central Bank policy makers reiterated their readiness to add monetary stimulus for the euro zone, but signaled they’re not yet united on when or how to act.

Executive Board member said in remarks broadcast Monday that loose policy is needed now “more than ever” and cuts and quantitative easing are both on the table. Bank of France Governor Francois Villeroy de Galhau said the ECB has the “determination” to act but noted mixed readings on the economy and suggested there’s no need to rush into a decision this month.

“We have several Governing Councils to come in the next months,” Villeroy said in a CNBC interview. “If and when needed, there must be no doubt about our determination to act and our capacity to act. I repeat, if and when needed.”

Economic reports on Monday showed how there are silver linings amid the euro zone’s slowdown, as German saw a slight pick-up in May. At the same time, the Bank of France cut its growth estimate for the second quarter and said confidence among manufacturing executives has dropped to its lowest level in six years.

The euro area has been cooling for more than a year, driven by global trade tensions and political uncertainties that have especially weighed on manufacturers. Another Governing Council member, Bank of Finland Governor Olli Rehn, said last week that the slump should no longer be considered a “temporary dip” and that ECB has a number of instruments available for support.

Coeure, who is in charge of market operations and was a driving force behind QE, shared that view in his comments in an interview this weekend in Aix-en-Provence, France.

“We have piloting expectations for monetary policy — forward guidance; we have rates which are very low and we said we are ready to cut them even more if necessary — I always add if necessary; and we have a presence on financial markets with reinvestment of our portfolio of assets,” he said on BFM Business Radio. “We could hypothetically restart net asset purchases again if circumstances make it necessary.’’

IMF Job

Coeure also took the opportunity to rule himself out of the race to lead the International Monetary Fund when Christine Lagarde succeeds Mario Draghi as ECB president in November. European governments are actively discussing nominating Bank of England Governor Mark Carney as the next head, a person familiar with the matter said last week.

“My specialty is Europe, so I’d rather remain in Europe and continue to serve Europe; we’ll see how but there are different ways of doing it,” said Coeure, whose ECB term ends in December. “There are all sort of good candidates” for the IMF.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Japan PM Abe wants more fiscal stimulus to support economy

Japanese Prime Minister Abe spoke earlier, calling for even more public works spending 

  • Abe wants further stimulus for the economy
  • Wants a boost to H1 2019 spending
  • Abe’s proposal at the Council on Economic and Fiscal Policy (CEFP)

No indications to the size of the spending package

Comments from  Economy Minister Toshimitsu Motegi said at the end of the CEFP meeting

  • “The prime minister asked me to take firm measures to ensure that our economic recovery continues
  • He also said the public works spending program expected at the end of this year should be compiled with this point in mind.” 

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