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Japan names university academic as next central bank governor

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Economics professor Kazuo Ueda has been nominated as the Bank of Japan’s (BOJ) next governor, tasked with navigating a way forward after a decade of extraordinary monetary easing.

The respected economist, described as careful and cautious, was a surprise pick for the change of guard after the outgoing governor’s deputy reportedly turned down the job.

The position will likely be tough going, with Ueda facing pressure to join international peers in tightening while avoiding panic by suddenly unwinding the bank’s decade-old monetary policy.

In another example of the headwinds facing Japan’s economy, data released Tuesday morning showed that gross domestic product (GDP) expanded just 0.2 percent in the last quarter of 2022, a smaller rebound than expected despite the long-awaited reopening of the country to tourists.

Ueda was nominated on Tuesday by Prime Minister Fumio Kishida, according to a government document handed to reporters, a decision that must be approved by legislators.

But that is expected to be largely a formality given that Kishida’s ruling coalition commands a healthy parliamentary majority.

A former BOJ policy board member, Ueda will take the reins from Governor Haruhiko Kuroda, the central bank’s longest-serving leader and the architect of its ultra-loose policies.

Since Kuroda became governor in 2013, his attempts to boost Japan’s moribund economy have ranged from a negative interest rate to spending vast sums on government bonds.

In the past year, he has held firm, even as other central banks hiked rates to tackle inflation, with the resulting policy gap causing the yen to slump against the dollar.

Kuroda, 78, is due to step down on April 8 when his second term ends.

He leaves Ueda, 71, the challenge of working out the bank’s next steps, said Saori N Katada, an international relations professor at the University of Southern California.

“This is probably the hardest job at the worst time to take up. Professor Ueda is very brave to accept it,” she told the AFP news agency.

Japan’s easy-money policies have become “extreme … and no one knows how to get out of it”, as sudden policy pivots could “jeopardise fiscal sustainability”, Katada said.

“In the next five years, though, the BOJ has to change course” because rising inflation, the weak yen and high government spending are unsustainable.

The yen tumbled from about 115 against the dollar in February 2022 to a three-decade low of 151 in October.

The Japanese currency has since recovered to about 132 against the dollar and briefly strengthened when Japanese media outlets first reported Ueda would be nominated instead of Kuroda’s dovish deputy Masayoshi Amamiya.

Amamiya, who reportedly turned down the job, had been seen as a continuity candidate likely to keep the BOJ’s stimulus policies.

But that does not mean Ueda — who has a PhD in economics from the Massachusetts Institute of Technology and served on the BOJ’s policy board between 1998 and 2005 — should be viewed as a hawk, analysts said.

“The current BOJ policy is appropriate, and I think it’s important to maintain monetary easing policy for now,” Ueda told reporters on Friday.

Katada described him as “one of the most respected macroeconomists in Japan” and a good communicator who is “relatively cautious”.

Kazuo Momma, executive economist at Mizuho Research and Technologies and a former assistant governor at the central bank, told AFP that Ueda had “never been hawkish with regard to the BOJ’s monetary policy”.

The bank’s ultra-loose monetary policy dates to the era of former Prime Minister Shinzo Abe, whose “Abenomics” plan aimed to stimulate growth and banish the deflation that plagued Japan’s economy from the end of the 1980s boom.

Inflation hit a multi-decade high of 4 percent in Japan in December — above the BOJ’s longstanding 2-percent target — fuelled partly by soaring energy bills.

But because the trend has not been driven by demand or steady wage increases, the BOJ has said it sees no reason to abandon its dovish policies.

So Ueda “will assess very carefully whether the 2-percent inflation target will be achieved in any reasonable time horizon, and take a cautious position in terms of possible policy changes going forward”, Momma said.

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Trump and Musk promise economic 'hardship' — and voters are noticing – MSNBC

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Trump and Musk promise economic ‘hardship’ — and voters are noticing  MSNBC

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Economy stalled in August, Q3 growth looks to fall short of Bank of Canada estimates

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OTTAWA – The Canadian economy was flat in August as high interest rates continued to weigh on consumers and businesses, while a preliminary estimate suggests it grew at an annualized rate of one per cent in the third quarter.

Statistics Canada’s gross domestic product report Thursday says growth in services-producing industries in August were offset by declines in goods-producing industries.

The manufacturing sector was the largest drag on the economy, followed by utilities, wholesale and trade and transportation and warehousing.

The report noted shutdowns at Canada’s two largest railways contributed to a decline in transportation and warehousing.

A preliminary estimate for September suggests real gross domestic product grew by 0.3 per cent.

Statistics Canada’s estimate for the third quarter is weaker than the Bank of Canada’s projection of 1.5 per cent annualized growth.

The latest economic figures suggest ongoing weakness in the Canadian economy, giving the central bank room to continue cutting interest rates.

But the size of that cut is still uncertain, with lots more data to come on inflation and the economy before the Bank of Canada’s next rate decision on Dec. 11.

“We don’t think this will ring any alarm bells for the (Bank of Canada) but it puts more emphasis on their fears around a weakening economy,” TD economist Marc Ercolao wrote.

The central bank has acknowledged repeatedly the economy is weak and that growth needs to pick back up.

Last week, the Bank of Canada delivered a half-percentage point interest rate cut in response to inflation returning to its two per cent target.

Governor Tiff Macklem wouldn’t say whether the central bank will follow up with another jumbo cut in December and instead said the central bank will take interest rate decisions one a time based on incoming economic data.

The central bank is expecting economic growth to rebound next year as rate cuts filter through the economy.

This report by The Canadian Press was first published Oct. 31, 2024

The Canadian Press. All rights reserved.

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StatCan latest wealth survey shows stark disparity between homeowners, renters

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TORONTO – Statistics Canada‘s latest financial security survey shows a stark disparity between the wealth of homeowners and renters, even as it fails to capture the true scale what’s owned by Canada’s richest families.

The survey, conducted only every few years, shows home-owning families whose main earner was 55 to 64, and who had an employer-sponsored pension, had a median net worth of $1.4 million in 2023. Renters without a pension plan in the age group had a median net worth of $11,900.

Home ownership was the main factor in the difference, as those who owned their home but didn’t have a pension had a median net worth of $914,000, while those with a pension but did not own had a median net worth of $359,000.

The data released Tuesday also shows Canadians of all income brackets are trying to get into real estate, said Dan Skilleter, director of policy at economic inclusion non-profit Social Capital Partners.

“The most striking numbers they have in here are about just the growth of real estate as an asset class,” he said.

“So it’s clear everyone’s been getting signals about how important that is, and I think that is dysfunctional, and has been leading to an unsustainable situation where real estate has become an essential stepping-stone to really have any financial security in Canada.”

The picture in the report was similar for families whose main earner was under 35, as the median net worth of those who own their principal residence was $457,100, compared with $44,000 for those who don’t.

The gap for young families is even larger than at first glance though, as Statistics Canada notes that of that $44,000 net worth, an increasing amount is due to renters owning real estate that is not their principal residence.

It noted that of renters without pensions, 15 per cent had a net worth above $150,000 in 2023, compared with five per cent in 2019, as more buy into real estate.

Overall, the survey found the median net worth of Canadian households was $519,700, up 57 per cent from 2019 when it was last conducted.

The median wealth of households under 35 was $159,100, up from $56,400 in 2019, while the 55 to 64 category was the richest at $873,400, up from $797,000 four years earlier.

The survey involved a 45-minute questionnaire sent to a sampling of almost 40,000 homes to provide a detailed view of what families own and what debts they have.

“It’s really the only survey we have where the government gets to peer into the full financial story of families,” Skilleter said.

The survey, however, has a significant blind spot for Canada’s wealthiest. Statistics Canada divides the survey in tiers to make sure various household categories are represented, but the highest tier is the wealthiest five per cent in Canada, meaning anyone above about $2.4 million for the 2019 survey.

The broad top category means the top one per cent, and 0.1 per cent, are hardly captured, Skilleter said.

“What’s not part of the survey is to take a broader look at the Canadian economy and see: is wealth concentration in general getting worse or getting better,” he said.

“And much to my dismay, they can’t even take a stab at answering that question, because they don’t set up their survey to even have a good chance of getting a single billionaire or 100 millionaire to take the survey.”

The richest family in the 2012 version of the survey had a net worth of $23.7 million, and $27.3 million in the 2016 report, while Credit Suisse estimates there are more than 5,500 Canadians with a net worth of more than $50 million, including 120 with a net worth of more than $500 million, Skilleter noted in an April report.

Statistics Canada said the share of wealth held by the top one per cent will be understated in this data source. Skilleter notes that the U.S. specifically carves out a tier for billionaires to make sure they’re represented in the results of its wealth survey, which helps to show the economic inequality in that country.

Canada has looked more equal based on the data from the survey, but it can be misleading.

Data from the 2019 survey was used to estimate Canada’s top one per cent held about 13.7 per cent of wealth, and the 0.1 per cent held 2.8 per cent. But combining the survey with outside data like the Forbes rich list, the Parliamentary Budget Officer estimated that the top one per cent held 24.8 per cent, and the top 0.1 per cent held 11.2 per cent of overall wealth.

“We’re not even being made aware of the ways in which ownership of capital is dramatically increasing the fortunes of some,” Skilleter said.

“That would give rise to a more frank conversation about the different ways that public policy…could intervene and make people’s lives better.”

This report by The Canadian Press was first published Oct. 29, 2024.

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