Morning Brief – BoJ Speculation

The major theme during the Asian session was stock strength and a continuation of US dollar weakness after the greenback got crushed on Thursday.

Japan news was also prevalent, as there was a media report that the Bank of Japan would revises its FY2023 inflation forecast above 2% at the meeting on July 27 and 28.

If this expectation is revised away, to a level above the 2% target, this would provide support leg for holding on to ultra-loose monetary policy is removed.

Former BOJ chief economist and director Hideo Hayakawa also said he expected the Bank of Japan policy board “will make some kind of adjustment to YCC this month” and that setting the tolerance band for the 10-year yield from 0.5% either side of zero to 1% is a likely way to adjust yield control.

Also, Industrial production in Japan declined by 2.2 percent month-over-month in May 2023, compared with the flash reading of a 1.6% drop and after a final 0.7% growth a month earlier. This was the first drop in industrial output since January.

Singapore’s GDP grew by 0.7% yoy in Q2 of 2023, stronger than a final 0.4% growth in Q1 and above market expectations of a 0.6% growth, an advance estimate showed.

This was the 10th consecutive quarter of increase, amid an acceleration in the services on the back of a rebound in wholesale & retail trade, alongside a faster rise in the output of information & communications and a further increase in accommodation & food service, real estate, and other services.

The government projected GDP growth of 0.5% to 2.5% for this year. On a quarterly basis, the economy expanded 0.3% in Q2, reversing from a 0.4% fall previously while matching consensus and averting the risk of a technical recession.

Federal Reserve Board Governor Christopher Waller spoke on his economic and policy outlook before the Money Marketeers of New York University during US Eastern time evening.

He also said that the September Federal Open Market Committee (FOMC) meeting is live, but if the next two CPI readings “look like the last two, the data would suggest maybe stopping.“