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

  
Analysis, Economy
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

  
Analysis, Economy

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

  
Analysis, Economy
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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

IMF: Growth is worse but at least uncertainty is lower

  
Analysis, Economy
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IMF lowers 2019 global growth estimate for the sixth straight quarter

IMF lowers 2019 global growth estimate for the sixth straight quarter
2019 is over but the outlook for growth keeps getting worse. The IMF lowered its 2019 global growth forecast to 2.9% from 3.0% in October. It was the sixth consecutive cut to the 2019 outlook.
The 2021 forecast was also lowered to 3.4% from 3.6%.
On the upside, the IMF maintained its 2020 GDP forecast at 3.3% and said that economic uncertainty is diminished with risks “less skewed” toward negative outcomes, albeit still tilted to the downside.
The big loser in this round of forecasts was India with the 2020 forecast cut to 5.8% from 7.0% on declining credit growth.
Other highlights:
  • 2020 Eurozone GDP seen at 1.3% vs 1.4% in Oct due to manufacturing contraction in Germany
  • Boosts China 2020 GDP to 6.0% from 5.8% on trade deal
  • Cuts 2020 US GDP to 2.0% from 2.1%
  • UK forecast unchanged at 1.4%
For me, these forecasts don’t have much value on their own (as you can see from the frequent revisions) but they are a valuable way to visualize and interpret the evolving growth picture.

IMF trims 2020 global growth forecast to 3.3% from 3.4% previously in October

  
Analysis, Economy
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IMF attributes the slight downwards revision to a sharper-than-expected anticipated slowdown in India

  • Sees tentative signs that manufacturing and global trade are bottoming out
  • That is partially due to the US-China trade deal
  • Sees risks less tilted to the downside than in October
  • US-Iran tensions, social unrest and a flare-up in trade tensions are key concerns
  • 2021 global growth forecast seen at 3.4% (3.6% previously)
  • US 2020 growth forecast seen at 2.0% (2.1% previously)
  • China 2020 growth forecast seen at 6.0% (5.8% previously)
  • Euro area 2020 growth forecast seen at 1.3% (1.4% previously)
  • UK 2020 growth forecast seen at 1.4% (unchanged)
  • India 2020 growth forecast seen at 5.8% (7.0% previously)

(more…)

China Q4 GDP 6.0% (vs. 6.0% expected). Full year GDP 6.1% (expected 6.2%)

  
Analysis, Economy
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China Q4 GDP comes in at 6.0%  … in line

  • expected is +6.0% y/
  • prior was +6.0%  y/y

And for the whole of 2019: 6.1% for a slight miss.

  • expected +6.2% y/
  • prior was +6.2%  y/y
OK, for 2019 as a while a small miss, and its slowest for 29 years – but do be aware its coming down from double digits not too long ago. As the economy grows the breakneck rates of expansion become mire difficult to sustain.
Also, this is offset by the improved dece December activity data (separate post).
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