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NIKKEI UP AMID BOJ SET TO MAINTAIN STIMULUS


NIKKEI BOJ


The Nikkei 225 added 176 points or 0.58% to 30,500 in early trade on Friday, rising for the first time in three sessions and is on course to gain 0.38% weekly, lifted by reports that foreign investors bought Japanese equities worth a net JPY 1.07 trillion, their largest weekly net purchase since November 13th, amid hopes for a new strong political leadership.

Meanwhile, BoJ's Governor Haruhiko Kuroda said the "Japanese economy will recover as the impact of COVID-19 wanes and that consumer inflation will be well below 2% in 2023. On the pandemic side, a Japan panel Thursday voiced concerns Thursday that new cases may increase after the upcoming holidays and the start of new school terms at universities.

In recent data, US retail sales unexpectedly rose in August, while initial jobless claims were up slightly more than anticipated. Locally, Japan's export growth slowed in August, while imports hit a 33-month high. M3 Inc and Nippon Yusen gained 4.68% and 3.98%, each. Governor Haruhiko Kuroda is likely to be grilled on his views on the candidates' stance at his post-meeting briefing.

The Bank of Japan is also all set to maintain its massive stimulus next week, as supply bottlenecks caused by factory shutdowns in Asia weigh on an economy already wobbling from the hit to consumption from the pandemic. The rate review comes ahead of a ruling party leadership race that may shift the administration's focus away from the current stance based on former premier Shinzo Abe's "Abenomics" reflationist policies, some analysts say.

In the meantime, The BOJ left its key short-term interest rate unchanged at -0.1% and kept the target for the 10-year Japanese government bond yield at around 0% during its July meeting by an 8-1 vote, as widely expected. In a quarterly outlook report, the central bank slashed its projected rates of the GDP for the current FY to 3.8% from earlier forecasts of 4% made in April, amid the impact of COVID-19. The board, however, maintained its view the economy was headed for a moderate recovery, revising up its growth forecast for next FY to 2.7% from 2.4% as vaccinations accelerate. Meantime, the board revised sharply higher consumer inflation forecast for the current FY to 0.6% from earlier predictions of 0.1%, due to higher energy prices.

Policymakers also released an outline of its new scheme aimed at boosting funding for activities against climate change, which will offer banks long-term loans at zero interest. The climate scheme will be launched this year and last until FY 2030.While it will stick to its view the economy will recover moderately, the BOJ is expected to offer a bleaker view on exports and output as Asian factory shutdowns caused by the pandemic force Japanese manufacturers to slash production plans. "The economy is stagnating in the current quarter, which is causing some delay in Japan's recoverys and there’s a good chance the BOJ may revise its view on output, which could remain weak for the rest of this year, according to analysts.

Added to optimism, The ruling party race likely won't lead to any change in the BOJ's near-term policy with the candidates agreeing on the need to maintain massive monetary support for now. But it could affect the long-term path toward whittling down stimulus. Frontrunner Taro Kono has cast doubt on the feasibility of clinging to the BOJ's 2% price goal. Another strong candidate, Fumio Kishida, has long called for an exit strategy from the BOJ's massive stimulus. The winner, who is assured to become next premier, may also preside long enough to affect the choice of successors to Kuroda and his deputies, whose term ends in 2023.





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