(25 September 2019) DAILY MARKET BRIEF 2:BoJ Easing Becomes Clearer - Market News - 25 September 2019


By Vincent Mivelaz

Things are becoming a little clearer In Japan. Not only does the release of August inflation data pointing to a
slowdown in momentum, but the release of the Bank of Japan Minutes from July monetary policy meeting also confirm that further easing should
be expected starting from October, with a few mechanisms at its disposal. Additionally, the postponement of a formal signed trade deal by
both the US and Japan, currently under legal review, should maintain uncertainties high as the economy continues to face downward
pressures. While details of the deal should be disclosed during the US – Japan summit at the UN General Assembly today, investors will be
carefully looking at the concluding joint statement and whether Washington is willing to sign a written consent that pledges not to
introduce tariffs on Japanese vehicles and auto parts nor quota. In this circumstance, the BoJ is likely to wait for the latter in order to
implement a thorough economic assessment and ultimately decide on additional stimulus.

In its July policy minutes, the BoJ confirms that it is ready to ease further in order to preempt risks that would put negative pressures
on Japan’s inflation target of 2% while it is considering the use of four policy tools in order to achieve its goals, including: a deepening
into negative rates, a cut in 10-year yield target, an increase of asset purchases and a rise of money printing. Yet the options appears
rather limited to support sustainable easing. Furthermore, the release of August headline and core inflation printed at 0.30% (prior:
0.50%) and 0.50% (prior: 0.60%) seems to confirm that a loss in momentum is confirmed, suggesting that additional easing should occur soon.
In New York, Japanese Foreign Minister Toshimitsu Motegi still hopes that the United States will deliver a promise on tariff threats to the
automotive sector, although a “sunset clause” consisting of a withdrawal from the trade agreement associated with potential US taxes on
Japanese auto should be included in the next signed pact. Despite the limited amount of information related to the deal, Japan should lower
existing 38.50% tariffs on US beef imports in stages to 9%, certainly at better conditions than in the multilateral Trans-Pacific
Partnership terms.

Currently trading at 107.32, USD/JPY is expected to head along 107.40 short-term.

BoJ easing becomes clearer



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(25 September 2019) DAILY MARKET BRIEF 2:BoJ Easing Becomes Clearer - Market News - 25 September 2019
(25 September 2019) DAILY MARKET BRIEF 2:BoJ Easing Becomes Clearer - Market News - 25 September 2019
(25 September 2019) DAILY MARKET BRIEF 2:BoJ Easing Becomes Clearer - Market News - 25 September 2019
(25 September 2019) DAILY MARKET BRIEF 2:BoJ Easing Becomes Clearer - Market News - 25 September 2019
(25 September 2019) DAILY MARKET BRIEF 2:BoJ Easing Becomes Clearer - Market News - 25 September 2019

(25 September 2019) DAILY MARKET BRIEF 2:BoJ Easing Becomes Clearer - Market News - 25 September 2019

(25 September 2019) DAILY MARKET BRIEF 2:BoJ Easing Becomes Clearer - Market News - 25 September 2019