Japan's growth beats forecasts, rate hike may come sooner
Japan's economy has recorded strong growth for the July-September quarter, quelling any fears that the world's second largest economy could be slowing. Growth at an annualized rate of 2% during the period – supported by strong exports and greater investment by firms - is higher than expected. Exports rose 2.7% in the quarter, helped by the weak yen, while capital investment grew by 2.9%.
The strong growth has once again fueled the speculation on interest rate hikes. In July this year, Bank of Japan raised interest rates for the first time in six years to 0.25% riding on the longest post-war expansion. The timing of follow-up hikes has been a matter of speculation in the market. It left rates unchanged at 0.25% in October and has maintained that it would gradually adjust monetary policy based on economic and price conditions. The US Federal Reserve has kept interest rates at 5.25 percent since August. The European Central Bank's benchmark stands at 3.25 percent.
Bank of Japan Governor Toshihiko Fukui said last week the central bank needs to act "in advance" to prevent the lowest interest rates among major economies from triggering excessive capital investment. He said "we must not take a long time to adjust policy interest rates," and "waiting for inflation to build up" would cause sharp swings in the economy.
A large section of the market now believes that the central bank will raise interest rates early next year, although some see the possibility of the hike coming as early as in December. The Bank of Japan concludes a two-day policy meeting on November 16, when it is widely expected to leave rates at 0.25 percent.
Japan's economy has recorded strong growth for the July-September quarter, quelling any fears that the world's second largest economy could be slowing. Growth at an annualized rate of 2% during the period – supported by strong exports and greater investment by firms - is higher than expected. Exports rose 2.7% in the quarter, helped by the weak yen, while capital investment grew by 2.9%.
The strong growth has once again fueled the speculation on interest rate hikes. In July this year, Bank of Japan raised interest rates for the first time in six years to 0.25% riding on the longest post-war expansion. The timing of follow-up hikes has been a matter of speculation in the market. It left rates unchanged at 0.25% in October and has maintained that it would gradually adjust monetary policy based on economic and price conditions. The US Federal Reserve has kept interest rates at 5.25 percent since August. The European Central Bank's benchmark stands at 3.25 percent.
Bank of Japan Governor Toshihiko Fukui said last week the central bank needs to act "in advance" to prevent the lowest interest rates among major economies from triggering excessive capital investment. He said "we must not take a long time to adjust policy interest rates," and "waiting for inflation to build up" would cause sharp swings in the economy.
A large section of the market now believes that the central bank will raise interest rates early next year, although some see the possibility of the hike coming as early as in December. The Bank of Japan concludes a two-day policy meeting on November 16, when it is widely expected to leave rates at 0.25 percent.
Posts
No comments:
Post a Comment