The Japanese government announced today that the Japanese economy contracted at an annualized 1.6% rate in the quarter that ended on September 30. Put that together with the much bigger June quarter drop of 7.3% (revised upwards today from 7.1%) and Japan is officially in recession. Again.
The drop in forecast inflation despite the European Central Bank’s initial steps to purchase assets in the bond markets, and thus to weaken the euro, and thus to raise growth and import some inflation hit the euro especially hard. The continued downward trend in inflation expectations leaves the financial markets convinced that the central bank will have to go even further in its program of asset purchases/euro weakening
Following hard on the heels of a surprise interest rate increase from the Banco Central do Brasil, which sparked a huge rally in Sao Paulo, today the Bank of Japan expanded its promise of purchases of Japanese Government Bonds to 80 trillion yen ($727 billion), an increase of 30 trillion yen. The Government Pension Fund will increase its allocation to stocks to 50%
A strong dollar has been driving markets to look for alternatives as dollar-portfolio positions grow. China’s yuan has been a big beneficiary but that means the People’s Bank has to pick between growth and more credit expansion
And if global currency markets found the Scottish independence vote worrying, the prospect of a 2017 referendum in the United Kingdom on continued membership in the European Union will be terrifying
The tepid demand raises the odds that the bank will have to begin a program of asset purchases sooner rather than later in order to hit its goal of expanding its balance sheet back to the $3 trillion mark.
The pound has dropped to its lowest level in nine months as the financial markets look at the possibility of an independent Scotland that still uses the pound as its currency and the Bank of England as its central bank.
Think of it as a reminder that the Federal Reserve isn’t going to rush to start raising interest rates in 2015. Today the Labor Department reported that the U.S. economy had added just 142,000 jobs in August
A weekend of bad economic news has put pressure on central banks in the EuroZone, China, and Japan to do something to stimulate economic growth just as U.S. economic growth looks stronger
