TOKYO (Reuters) – Japan’s new leader Yoshihide Suga will struggle to push through structural reforms as they would be too painful for an economy hit by the coronavirus crisis, said an executive of PIMCO, one of the world’s largest investment firms.
Tomoya Masanao, head of the Pacific Investment Management Co’s (PIMCO) Japan arm, also said the Bank of Japan’s ultra-loose monetary policy will allow the government to continue ramping up spending, but not without huge costs.
Since adopting in 2016 a policy capping borrowing costs, the BOJ’s policy is essentially financing public debt and is integrated into the government’s debt-management strategy, Masanao said.
“It’s impossible for the BOJ to make an independent decision on exiting ultra-easy policy. Any move toward an exit would need to take into account the impact on long-term interest rates and fiscal policy,” he told Reuters on Wednesday.
California-based PIMCO, a unit of German insurer Allianz , managed 12.84 trillion yen ($121.90 billion) in assets for Japanese clients as of June 2020.
Suga, who was elected as new prime minister on Wednesday, has vowed to break barriers that hamper competition and pursue reforms to revitalise the world’s third-largest economy.
If successful, Suga would provide the missing third arrow of his predecessor Shinzo Abe’s “Abenomics” policies that consisted of bold fiscal, monetary easing and structural reforms.
But Masanao said he was doubtful Suga can push through painful reforms, when there is little fiscal and monetary ammunition left to support an economy hit by COVID-19.
“Abenomics succeeded in boosting growth and jobs, which was why Abe stayed in power for so long. But he didn’t use the political capital to push through reforms,” Masanao said.
“Suga also has a structural reform agenda. But the point is you need to first reflate the economy to undertake real reforms, which are by nature deflationary at least in the short run.”
Japan deployed two huge spending packages, accompanied by monetary easing steps by the BOJ, to cushion the blow from the pandemic that pushed the economy into deep recession.
By successfully capping borrowing costs at zero, the BOJ will likely allow the government to keep spending massively without causing an unwelcome spike in inflation, Masanao said.
But maintaining huge fiscal and monetary support for too long could distort market pricing and hurt Japan’s productivity by hampering reallocation of resources to growth areas, he said.
“The unintended consequences of prolonged ultra-loose policy are huge, most notably by distorting asset prices,” Masanao said. “It’s eliminating the chance of proper market pricing.”
With interest rates sliding across the world, Pimco is neutral on Japanese government bonds (JGBs) in its global portfolio, he said.
Pimco is also “somewhat under-weight” on super-long JGBs as the BOJ is seen allowing the longer end of the curve to move more flexibly and help steepen the yield curve, Masanao said.
(Reporting by Leika Kihara and Takahiko Wada; Editing by Muralikumar Anantharaman)
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
