In the minutes of April 27-28 meeting of BoJ indicated that while the board was concerned with fluctuation in Yen’s exchange rate, it remained firm on the stance to continue with ultra-loose monetary policy.
One board member noted that Japan’s economy was “still on its way to recovery”. As a “commodity importer”, the rise in commodity prices would “lead to an outflow of income from Japan and thus exert downward pressure on the economy.” Hence, it’s “necessary” to “continue with the current powerful monetary easing and thereby firmly support the economy.”
Another member noted that “the challenge of monetary policy in Japan was not to curb inflation, as in the case of the United States and Europe, but to overcome inflation that was still too low”. A different member commented that,” with the addition of Russia’s invasion of Ukraine to the existing downside risks to the economy, the situation had further changed significantly; against this backdrop, it was not appropriate for the Bank to make any big changes to its monetary policy stance.”
Regarding Yen’s depreciation, “a few members said excessive fluctuations in the foreign exchange market over a short period of time, such as those observed recently, would raise uncertainties about the future and make it more difficult for firms to formulate their business plans”.
Some member noted, “it was necessary for the Bank to clearly communicate to the public that the aim of monetary policy conduct was to fulfill its mandate of achieving price stability, rather than to control foreign exchange rates.”
Full minutes here.
Australia PMI composite dropped to 52.6, downside risks have increased
Australia PMI Manufacturing ticked up from 55.7 to 55.8 in June. PMI Services, on the other hand, dropped from 53.2 to 52.6. PMI Composite dropped from 52.9 to 52.6, a 5-month low.
Laura Denman, Economist at S&P Global Market Intelligence said:
“Expansion across Australia’s private sector economy continued in June, according to the S&P Global Flash Australia Composite PMI. The easing of COVID-19 policies and opening of international borders has encouraged growth in demand, especially overseas. Stronger demand conditions have had a positive influence on other areas of the economy, with employment levels continuing to rise at a solid rate.
“That said, firms have taken advantage of rising demand levels and passed through higher costs to their selling prices at a substantial pace. With interest rates rising to contain rapid price pressures, as well as a fading boost to economic activity post-lockdown, downside risks to the Australian economy have increased.”
Full release here.