July 2023 – Clement Tan

July 28, 2023October 15, 2023

Bank of Japan loosens yield curve control, pledging ‘greater flexibility’

By Clement Tan | July 28, 2023 | CNBC.com

Japan’s central bank on Friday loosened its yield curve control, underscoring concerns about its protracted monetary easing on financial markets and the real economy.

In a policy statement, the Bank of Japan said it will continue to allow 10-year Japanese government bond yields to fluctuate in the range of around plus and minus 0.5 percentage points from its 0% target level — though it will offer to purchase 10-year JGBs at 1% through fixed-rate operations. This move effectively expands its tolerance by a further 50 basis points.

The BOJ pledged to “conduct yield curve control with greater flexibility, regarding the upper and lower bounds of the range as references, not as rigid limits, in its market operations,” citing the need to remain nimble given “extremely high uncertainties for Japan’s economic activity and prices.”

In what was BOJ Governor Kazuo Ueda’s first major policy change since he took the helm in April, the central bank also kept its ultra-loose interest rate intact, electing to hold its short-term interest rate target at -0.1% after its July policy meeting. It also raised its median forecast for inflation to 2.5% for fiscal 2023, up from its 1.8% prediction in April.

“This is not intended as a step toward policy normalization. Rather, it’s a step aimed at enhancing the sustainability of YCC,” Ueda said at a press conference in Tokyo on Friday afternoon explaining the central bank’s decision, according to a translation provided by Reuters.

July 24, 2023October 15, 2023

China vows to ‘adjust and optimize’ property policy in ‘tortuous’ economic recovery

By Clement Tan | July 24, 2023 | CNBC.com

China’s top leaders pledged to “adjust and optimize policies in a timely manner” for its beleaguered property sector, while elevating stable employment to a strategic goal, along with other pledges to boost domestic consumption demand and resolve local debt risks.

Chaired by President Xi Jinping, the Communist Party’s top decision-making body said it would implement a “counter cyclical” policy and stick largely to a prudent monetary policy and pro-active fiscal policy, according to a readout published late Monday of a quarterly meeting of the Politburo.

The July Politburo meeting typically sets the tone for China’s economic policies for the second half of the year, with market watchers eagerly awaiting firmer guidance on policy support for faltering growth in the world’s second-largest economy.

“Currently, the economy is facing new difficulties and challenges, mainly due to insufficient domestic demand, difficulties in the operation of some enterprises, many risks and hidden dangers in key areas, and a grim and complex external environment,” Xinhua quoted the Politburo as saying.

The post-pandemic economic recovery will proceed in a “wave-like” fashion in a “tortuous” process, it added. The Chinese phrase for risk appeared at least seven times in the readout, underscoring the government’s focus on its containment.

July 12, 2023August 22, 2023

Thailand’s Parliament is about to pick a new prime minister — and a generation’s hopes are at stake

Clement Tan | July 12, 2023 | CNBC.com

Thailand’s Parliament will vote for a new prime minister on Thursday, and the country’s young and urban are about to find out whether their backing of a progressive opposition party at May’s elections will translate into genuine power.

Not too long ago, they were basking in the euphoria of the party’s stunning victory, priming themselves for democratic change and reform. Two months on, they are instead confronted with the sight of 79-year-old Wan Muhamad Noor Matha — very much considered a member of the old guard — as the “new” speaker of Thailand’s House of Representatives.

The young voters had propelled the Move Forward Party — led by the Harvard-educated, 42-year-old Pita Limjaroenrat — to an unprecedented majority of the seats in Parliament after nine years of military rule, but this was too slim for the party to push forward its own candidates, forcing it into a coalition with seven other parties.

Move Forward had campaigned on an ambitious structural reform agenda targeting the country’s monarchy, monopolies and military. These aims essentially extended the goals of student protests more than two years ago that were triggered by the dissolution of a political party — Move Forward’s predecessor entity — which was highly critical of outgoing Prime Minister Prayut Chan-o-cha, the former military general who seized power in a 2014 coup and made changes to the Thai Constitution in 2017.

Its slim majority has made its agenda vulnerable to the machinations of the institutions it is seeking to reform, along with the interlocking patronage networks that remain despite the ouster of several influential business families in this election. The installation of Wan Noor as a compromise candidate after second-placed party Pheu Thai had objected to Move Forward’s choice, was just the beginning.