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BOJ to remain dovish outlier, keep rates low as its yen dilemma deepens



© Reuters. FILE PHOTO: A man wearing a protective mask stands in front of the headquarters of Bank of Japan amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, May 22, 2020.REUTERS/Kim Kyung-Hoon

By Leika Kihara

TOKYO (Reuters) – The Bank of Japan is likely to keep interest rates ultra-low on Friday, unfazed by a relentless fall in the yen that is boosting import costs and shows little sign of abating while other central banks around the world withdraw monetary stimulus.

The yen’s weakness, once welcomed for the boost it gives to the export-reliant economy, has become a source of concern for Japanese policymakers as it inflates already-rising import costs and inflicts pain on households.

The deepening dilemma for the central bank was evident last week when BOJ Governor Haruhiko Kuroda faced a storm of criticism on social media for saying that households were becoming more accepting of higher prices.

He was forced to retract that comment, and backtracked on Monday from his long-held view that a weak yen was good for the economy.

Despite grumbling over the yen’s weakness, however, the BOJ is likely to maintain ultra-low interest rates on the view that hiking rates now would do more harm than good by cooling a fragile economy, said three sources familiar with the central bank’s thinking.

“The BOJ does not target exchange rates in guiding monetary policy,” one of the sources said.

“What’s important now is to support the economy with ultra-loose policy,” the source said. That view was echoed by the other two sources.

At a two-day meeting that ends on Friday, the BOJ is expected to keep unchanged both its -0.1% short-term rate target and its 0% cap for 10-year government bond yields.

The BOJ is caught in a fresh conundrum. While core consumer inflation exceeded its 2% target in April for the first time in seven years, the rise is driven mostly by fuel and food costs.

Wary that such cost-push inflation will hurt consumption, the BOJ has repeatedly stressed its resolve to keep monetary policy ultra-loose until wage growth intensifies.

But the BOJ’s dovish stance has driven down the yen, which weakened to 135.22 per dollar on Monday, the lowest since 1998. That is piling pain onto households by pushing up their cost of living.

While the BOJ could raise rates as a last resort if the yen spirals into free-fall, analysts doubt whether such a move could reverse a broad, strong-dollar trend driven by the U.S. Federal Reserve’s aggressive rate hike plans.

“It’s clear the BOJ has no intention of tweaking ultra-loose monetary policy any time soon,” said Naomi Muguruma, senior market economist at Mitsubishi UFJ (NYSE:MUFG) Morgan Stanley (NYSE:MS) Securities.

“But the environment surrounding the BOJ is changing rapidly,” she said. “If the yen slides below 140 or 145 to the dollar, the BOJ may be forced to raise its yield target.”


South Korean exports dropped 14% in November, the highest in 2.5 years



exports South Korea

South Korea’s exports fell 14 percent year-on-year to $51.91 billion in November, preliminary data from the Ministry of Commerce, Industry and Energy showed. The November drop was the biggest in 2.5 years since May 2020 and was caused both by the deteriorating global economy, which even a Google price chart showed, and a truckers’ strike in the country.

South Korea exports 2022 – reasons for the drop

Exports fell for the second month in a row. Analysts on average expected an 11% decline, according to Trading Economics. Respondents to MarketWatch predicted a 10.5% decline.

Shipments of semiconductor products overseas, the country’s top export item, fell 29.8%; petrochemicals fell 26.5% and steel exports fell 10.6%. Meanwhile, exports of automobiles jumped 31% and petroleum products 26%.

Exports to China, South Korea’s largest trading partner, fell by 25.5%, and to Asian countries – by 13.9%. Below, supplies to the USA grew by 8% and to the European Union – by 0.1%.

In January-November exports rose by 7.8% on the same period last year and reached a record $629.1 billion.

South Korean imports rose 2.7% to $59.2 billion in November, marking the 23rd consecutive month of gains, but the current rate of growth is the lowest since November 2020. Experts had predicted an increase of only 0.2%.

South Korea’s trade deficit last month was $7.01 billion, compared with a surplus of $2,973 billion a year earlier.

The negative balance was recorded for the eighth month in a row. As a result, by the end of 2022, the country may record a foreign trade deficit for the first time since the financial crisis in 2008.

Earlier we reported that the UN estimates the cost of humanitarian aid in 2023 at a record $51 billion.

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The UN estimates humanitarian aid costs in 2023 at a record $51 billion because of an impending humanitarian crisis



a humanitarian crisis

Joint humanitarian operations will require a record $51.5 billion in 2023 to address urgent problems.

The UN Office for the OCHA estimates that 339 million people will need urgent aid in 2023. At the same time, OCHA called on donor countries to provide funds for assistance in 2023 to the 230 million people most in need, living in 68 countries.

Griffiths explained that aid is needed not only for people experiencing conflicts and disease outbreaks. but also for those suffering the effects of climate change, such as people in peninsular Somalia facing drought and those in Pakistan experiencing severe flooding. For the first time, the growing humanitarian crisis has brought the number of displaced people worldwide to the 100 million mark. Also worsening an already bad situation is the worldwide coronavirus pandemic, which affects the poor. Note that the general economic crisis has begun to negatively affect even the Netflix price chart.

Earlier we reported that house prices in the UK fell by 1.4% in November.

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Average house prices in the UK fell 1.4% in November



average house prices in the uk

Average house prices in the UK fell 1.4% in the previous month in November to 263,788 thousand pounds (about $319,000), according to the British mortgage company Nationwide Building Society.

The decline was recorded at the end of the second consecutive month and was the most significant in almost 2.5 years – since June 2020. Analysts on average had forecast a decline of only 0.3%, according to Trading Economics.

Are house prices in the UK going to fall even more?

Residential real estate prices in November compared to the same month last year increased by 4.4%. At the same time, experts expected a larger increase of 5.8%. The growth rate slowed down significantly compared with 7.2% in October. Because of the difficult economic situation, British investors are investing in other instruments. The Microsoft price chart, for example, is showing potential for growth, so many are interested in the U.S. stock market. 

“The market looks set to remain under pressure in the coming quarters. Inflation will remain high for some time, and interest rates are likely to continue to rise,” believes Nationwide Senior Economist Robert Gardner. – The outlook is unclear, and much will depend on how the overall economy behaves, but a relatively soft landing is still possible.”

Earlier we reported that Sanctions Circumvention was included in the EU’s list of criminal offenses.

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