Archive

No Alarm From Global Cycle

• Broad increases in the flash services PMIs reinforced the signal that global activity remains resilient enough not to require forceful monetary easing.
• Residual seasonality hasn’t appeared in the PMIs again this summer, but it pollutes some unemployment data. A slight majority of countries have a higher UR than a year ago.
• Softening labour market trends from a relatively neutral cyclical position are consistent with gradual and limited rate cuts, even if they need reversing without a recession.

By Philip Rush

Japan Policy Rate 0.25% (consensus 0.1%) in Jul-24

• The BOJ raised its policy rate by 15 basis points to 0.25%, contrary to consensus expectations, signalling a proactive stance in addressing inflationary pressures while supporting economic recovery.
• Future interest rate decisions will be influenced by global economic developments, domestic economic indicators, inflation trends, financial market stability, and the impact of government economic measures.
• The BOJ’s strategy focuses on gradual policy normalization, with a cautious approach to reducing JGB purchases and raising interest rates, ensuring sustained economic growth and stable inflation.

Japan Unemployment Rate 2.6% (consensus 2.6%) in May-24

- Japan's labour market remains stable, with the unemployment rate constant at 2.6% and a robust jobs-to-applications ratio of 1.24, indicating tightness and potential wage growth.
- Despite contractions in GDP and consumption growth in Q1 2024, positive signals from the Tankan Surveys and PMI indices suggest a nuanced outlook, with the non-manufacturing sector expected to offset manufacturing sector challenges.

Japan Policy Rate 0.1% in Jun-24

• The BOJ maintained its policy rate at 0.0-0.1%, aligning with expectations and signalling a gradual approach to policy normalization. It plans to reduce JGB purchases over the next one to two years.
• Global conditions, domestic economic indicators, inflation dynamics, financial market stability, and government measures will influence future interest rate decisions.
• The BOJ’s strategy focuses on sustaining economic recovery and ensuring financial stability, with the flexibility to adjust policies based on evolving economic and financial conditions.