North Korea warns the US that there may not be deunclearisation if sanctions continue

Some comments from North Korea being cited by Reuters

US NK
  • US has ignored year-end deadline for nuclear talks
  • No reason for North Korea to be unilaterally bound to any commitment
  • US is applying ‘the most brutal and inhuman sanctions’
  • If US continues with ‘hostile policies’ towards North Korea, there will never be denuclearisation of the Korean peninsula
Much like the Iran issue, this is one that does not really matter until it does – when something escalates in a significant manner. For now, just take note that US-North Korea relations have been deteriorating as of late and tensions are beginning to mount once again.

Trump: Our relationship with China has never been better

Trump touches a little on China

  • My relationship with Chinese president Xi is an extraordinary one
  • Phase Two negotiations will start very shortly
  • Most of the tariffs will remain in place during Phase Two negotiations
  • We’re being paid billions and billions of dollars
He’s finally touching on more international issues now but not in much detail. The Phase Two remarks are a little more optimistic but I highly doubt we will get into extensive discussions given that China isn’t as keen to begin talks at this stage.

Trump takes mild jab at the Fed in Davos speech

Says that the Fed has raised rates too fast and lowered them too slowly

That is nothing out of the ordinary but that is about the only line that really stands out. The rest of his speech seems to be centered around how his administration has improved the US economy and how the country has benefited from his presidency and his policies.

US president Trump: The US is in the midst of an economic boom

Trump is speaking in Davos, Switzerland

Trump
  • US in in the midst of an economic boom like never seen before
  • Trade deals with China, Mexico represent new model for the 21st century
  • US economy was in a dismal state under the previous administration
  • Says he is creating the most ‘inclusive’ economy in the history of the country
  • Fed has raised rates too fast and lowered them too slow
It looks more like he is setting the stage for an election campaign speech, as he is talking down US and global economic growth under the previous administration before going on to talk about how things have changed ever since he took office.
Oh my, he is still going on about how the US has benefited from his presidency and the changes brought upon by his administration. I don’t think that there is going to be anything relevant for markets if things carry on in this manner.

From the BOJ’s quarterly report – risks are skewed toward downside for economy, prices

More now, this from the quarterly outlook report:
  • Japan’s economy to continue expanding moderately as a trend
  • Japan’s economy likely to face impact of global slowdown for time being, though effect on domestic demand to be limited
  • inflation to gradually accelerate toward 2%
  • risks are skewed toward downside for economy, prices
  • Japan’s economy sustaining momentum for hitting 2% inflation, but momentum lacking strength
  • Japan’s economy expanding moderately as a trend, though overseas slowdown, natural disasters affecting exports, output, business sentiment
  • Consumer inflation hovering around 0.5%
  • Inflation expectations are moving sideways
  • downside risks regarding overseas economies remain high
  • no sign so far of excessively bullish expectations in asset markets, financial institutions’ activities
  • prolonged downward pressure on financial institutions’ profits from low rates could destabilise financial system
  • risk of financial system destabilising not big for now as financial institutions have sufficient capital bases

Quick Headlines via Reuters

BOJ raises its GDP forecasts but lowers its CPI forecasts

From today’s Bank of Japan policy meeting outcome:

  • median core CPI forecast for fiscal 2019/20 at +0.6% vs +0.7% projected previously
  • median core CPI forecast for fiscal 2020/21 at +1.0% vs +1.1% projected previously
  • median core CPI forecast for fiscal 2021/22 at +1.4% vs +1.5% projected previously

Growth:

  • median real GDP forecast for fiscal 2019/20 at 0.8% vs +0.6% previously projected
  • median real GDP forecast for fiscal 2020/21 at 0.8% vs +0.7% previously projected
  • for 2021/22 GDP forecast is +1.1% (vs. +1.0% previously)
The thing to keep in mind is that while they are a little more optimistic on growth the CPI is still well below target … thus policy will be loose for some time to come.

BOJ announce no change to monetary policy settings, as expected

Bank of Japan monetary policy meeting for January 2020 has concluded

As expected, policy unchanged:
  • keeps monetary policy steady
  • maintains short-term interest rate target at -0.1%
  • maintains 10-year JGB yield target around 0%
  • maintains forward guidance on interest rates, says they will remain at current or lower levels for as long as needed to guard against risk momentum for hitting price goal may be lost
I’ll have more on this separately