Glat&Taggart Published Stock Market Weekly Updates For Japan. According to the document, Japan’s stock markets rose over the week, with the Nikkei 225 Index gaining 4.20% and the broader TOPIX Index up 3.35%. As widely expected, the Bank of Japan (BoJ) maintained its ultra-loose monetary policy to support the country’s still-fragile economic recovery, continuing to diverge from other central banks’ tightening policies. The yield on the 10-year Japanese government bond finished the week at 0.22%, down from 0.23% at the end of the previous week, while the yen strengthened to around JPY 137.4 against the U.S. dollar, from about JPY 138.5 the prior week. Japan’s currency has remained near 24-year lows, with BoJ Governor Haruhiko Kuroda attributing the weakness to the rise of the greenback against other major and emerging market currencies, rather than the BoJ’s accommodative policy stance.
At its July monetary policy meeting, the BoJ left its short-term policy interest rate unchanged at -0.1%, while maintaining its long-term yield target and asset purchase program, with a view to achieving its inflation target of 2%. It had been widely anticipated that Japan’s central bank would maintain its accommodative stance, which is in stark contrast to the tighter monetary policy being pursued by other major central
banks.
The BoJ downgraded its forecast for economic growth, to 2.4% year on year (y/y) in fiscal 2022 (from the 2.9% expansion it projected in April), while revising upward its outlook for inflation, expecting the consumer price index (CPI) to rise by 2.3% y/y, up from April’s 1.9%. In June, Japan’s core CPI rose 2.2% y/y, remaining above the BoJ’s target for the third month, as higher global raw material costs pushed up domestic prices. Inflation in Japan remains low compared with other developed economies.
EXPANSION IN PRIVATE SECTOR ACTIVITY SOFTENED IN JULY
Flash PMI data showed softening expansion in activity across Japan’s private sector in July. Services activity growth slowed sharply, while operating conditions in the manufacturing sector improved modestly. Regarding the year-ahead outlook, private sector firms were less optimistic, amid inflationary pressures stemming from sustained material shortages and the prolonged impact of the war between Russia and Ukraine.
GOVERNMENT DOES NOT PLAN TO IMPOSE MOVEMENT RESTRICTIONS
Japan’s daily COVID-19 cases rose to record highs, including in the capital Tokyo. While the government is watching the impact on the medical system with maximum caution, it has ruled out the possibility of imposing movement restrictions.
