BOJ Keeps Monetary Policy Steady, Chinese Manufacturing Output Expands At Fastest Rate in 5 1/2 Years

On Tuesday the Bank of Japan decided in a 7-2 vote to maintain its deposit rate at -0.1 percent and keep its target 10 yr. yield of at around zero percent with Japanese government bonds.

The BOJ reported the pace of their purchase of Japanese government bonds will continue at an annual pace of about 80 trillion yen.

Regarding asset purchases, the BOJ agreed to purchase exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) so that their amounts outstanding will increase at annual paces of about 6 trillion yen and about 90 billion yen while maintaining the amount of their outstanding CP and corporate bonds at about 2.2 trillion yen and about 3.2 trillion yen.

Strong Chinese PMI data

On Tuesday it was reported that Chinese Caixin General Manufacturing PMI expanded in October at the fastest rate since March 2011, boosted by a rebound in new order growth.

Stronger demand appears to be led by improved domestic orders because new export sales fell slightly over the month.

The Chinese PMI officially rose to 51.2 in October, up from 50.1 in September.

Inflation rose in October as well with input cost inflation growing to its fastest level since September 2011 and output charges rising the most since February 2011.

“The index readings for new orders and output for October were both much higher than in September, and those for input and output prices rose even more, indicating a return of inflationary pressure. The economy seems to be stabilizing for the moment, owing primarily to policies implemented to sustain growth” said Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group in a released statement.

“Supportive policies must be continued, or industrial output may be dragged down by a slowdown in investment” Dr. Zhengsheng Zhong added.

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Johnathan Schweitzer




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