The BoJ lowered its growth forecast as it held interest rates unchanged on Tuesday. AFP/CNA reports:
The Bank of Japan on Tuesday lowered its real GDP growth forecast for this fiscal year to 0.4 percent from an earlier 0.6 percent projection due to the impact of the March 11 earthquake and tsunami.
The central bank upgraded its view of the economy, saying it is "picking up" as post-quake supply-side constraints ease, but it said growth prospects for Japan would be lower for the fiscal year ending March 2012 due to "the sharp downturn immediately after the earthquake".
The bank's board also voted unanimously for the key rate to remain unchanged at between zero and 0.1 percent.
China, though, may have to keep tightening monetary policy. From Bloomberg on Tuesday:
China’s new loans exceeded estimates in June and foreign-exchange reserves jumped by $153 billion in the second quarter, bolstering the case for more increases in bank reserve requirements.
New loans were 633.9 billion yuan ($98 billion), compared with the 622.5 billion yuan median estimate in a Bloomberg News survey of economists. M2, the broadest measure of money supply, rose by a more-than-forecast 15.9 percent, and foreign-exchange reserves climbed to $3.2 trillion. The People’s Bank of China released the data on its website today.
The BoE looks likely to keep its monetary policy unchanged though after inflation moderated in June. Reuters reports:
Inflation fell unexpectedly in June and the trade gap widened, pointing to more weakness in the economy and providing support to those in the Bank of England who want to keep interest rates at a record low...
The Office for National Statistics said consumer price inflation fell to 4.2 percent in June from a 2-1/2 year high of 4.5 percent in May, after the first drop in prices for a month of June since 2003...
The goods trade deficit widened unexpectedly in May to 8.48 billion pounds, casting doubt on the scale of net trade's contribution to second-quarter GDP data due later this month. Economists had forecast a deficit of 7.37 billion pounds.
This deficit came as both exports and imports hit record highs. There were hefty imports of chemicals, while British exports of silver leapt.
Also seeing a wider trade deficit in May was the US. Bloomberg reports:
The trade deficit in the U.S. widened in May to the highest level in almost three years, reflecting a surge in the cost of imported crude oil.
The gap grew 15 percent to $50.2 billion, exceeding all forecasts of 73 economists surveyed by Bloomberg News and the biggest since October 2008, Commerce Department figures showed today in Washington...
Imports rose 2.6 percent to $225.1 billion, second only to the record $231.6 billion reached in July 2008. Purchases of food and capital goods produced overseas reached records in May, the report showed...
Exports decreased 0.5 percent to $174.9 billion, also the second-highest on record and depressed by a drop in foreign demand for industrial supplies like fuel oil and cotton. Purchases of American-made capital equipment were the strongest ever.
However, a cut by Moody's on Ireland's credit rating means that investors' attention remains focused on Europe. From Reuters:
Moody's cut Ireland's credit rating to junk on Tuesday, warning that the debt-laden country would likely need a second bailout -- just the latest move amid heightening concerns about Europe's ability to address its debt crisis and prevent it from spreading...
Moody's one-notch downgrade on Ireland weighed on stocks and the euro, which hit its lowest level against the dollar in four months...
Moody's now rates Ireland Ba1, one notch below former financial market pariah Colombia and two notches below Brazil, and has kept a negative outlook, meaning further downgrades are likely in the next 12 to 18 months.
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