Friday 29 October 2010

BoJ cuts growth forecast as Japanese industrial production falls again

The Bank of Japan took no additional monetary policy action on Thursday. Reuters reports:

The Bank of Japan held fire on policy on Thursday, but brought forward its next review to right after the Fed meets, sending a signal to markets it was ready to ease policy further if more yen strength threatened the economy.

The central bank said it moved its meeting to Nov. 4-5 from mid-November date to speed up the roll-out of a 5-trillion-yen ($61 billion) asset buying plan, which the BOJ unveiled early this month and detailed at this week's meeting...

In its twice-yearly economic report, the BOJ cut its growth forecast for the fiscal year to March 2012 to 1.8 percent from the 1.9 percent predicted three months ago, less than markets had expected.

It also gave its first forecasts for the following year, projecting a pick-up in growth to 2.1 percent and predicting consumer prices would rise 0.6 percent after creeping up by 0.1 percent in 2011/2012.

Data on Friday suggest that the BoJ may not want to stay idle for too long. From AFP/CNA:

Japan's export-led recovery showed further signs of losing steam Friday, as data showed industrial production falling for the fourth consecutive month in September as consumer prices continued to slide...

Output slid 1.9 per cent in September from the previous month, data showed Friday, in the fourth consecutive monthly fall and missing expectations of a 0.6 per cent drop.

Production of automobiles, electronics and other manufacturing were hardest hit, the Trade Ministry said, giving a bleak forecast for a 3.6 per cent fall in October before an increase of 1.7 per cent in November...

Separate data Friday showed that consumer prices fell 1.1 per cent in September from a year earlier, marking the 19th straight month of decline and illustrating entrenched deflation...

In other data Friday, Japan's unemployment rate fell to 5.0 per cent in September, dropping by 0.1 percentage points from the previous month.

In another sign of Japan's weakening economy, the Nomura/JMMA manufacturing PMI fell to 47.2 in October from 49.5 in September.

In contrast, the eurozone economy has proven surprisingly resilient. From Reuters on Thursday:

Euro zone economic sentiment improved in October against market expectations of a flat reading, pointing to continued economic growth in the second half of the year, even if slower than the second quarter peak.

The European Commission's monthly sentiment survey showed sentiment in the 16 countries using the euro rose to 104.1 points this month from 103.2 in September, the highest reading in almost three years.

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