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BOJ Stands Pat Even as It Delays Timing of Inflation Goal

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Haruhiko Kuroda
  • BOJ Stands Pat Even as It Delays Timing of Inflation Goal

The Bank of Japan kept its monetary policy unchanged while delaying the projected timing for reaching its inflation goal beyond Haruhiko Kuroda’s term.

Kuroda led his board in voting to maintain its targets for controlling short-term and long-term rates and its asset-purchase programs, decisions widely expected by economists after the BOJ re-set its monetary program in September following a comprehensive policy review.

In its quarterly economic-outlook report also released Tuesday, the BOJ shifted the projected timing for reaching its inflation target of 2 percent. It said consumer prices excluding fresh food would “increase toward 2 percent” in the second half a period that runs through March 2019, suggesting inflation may not approach the target until the spring of that year, long after Kuroda’s current term ends.

It had delayed the projected timing several times during Kuroda’s tenure, with the most recent target being the fiscal year ending in March 2018.

Kuroda said later Tuesday that it was regrettable the BOJ hadn’t reached 2 percent inflation within two years, its goal when he took the helm of the central bank in 2013. He declined to comment on his possible reappointment as governor, saying it was a matter for the government.

“As for the appointment of the BOJ governor, the cabinet will decide with the approval of both houses of parliament,” he said during an afternoon news conference.

In the outlook report, the BOJ also said “risks to both economic activity and prices are skewed to the downside,” language not included in their previous release in July. This shift “suggests that the bank retains an easing bias,” Capital Economics economist Marcel Thieliant wrote.

The yen weakened 0.1 percent against the U.S dollar and traded at 104.94 at 12:14 p.m. The Topix index had dropped 0.3 percent in morning trading.

The BOJ kept its target for the 10-year government bond yields at around zero percent, and left the policy rate on a portion of commercial bank reserves at minus 0.1 percent. The bank also said it will continue buying Japanese government bonds at a annual pace of about 80 trillion yen ($764 billion), and maintained its previous plans for purchases of other assets, such as exchange-traded funds.

Board members on Tuesday also updated their economic projections. The median estimates compared with the previous ones, released in July, were as follows:

  • Inflation forecast for fiscal 2016 cut to -0.1 percent from 0.1 percent
  • Inflation forecast for fiscal 2017 cut to 1.5 percent from 1.7 percent.
  • Inflation forecast for fiscal 2018 cut to 1.7 percent from 1.9 percent.
  • GDP projection for fiscal 2016 unchanged at 1 percent.
  • GDP projection for fiscal 2017 unchanged at 1.3 percent.
  • GDP projection for fiscal 2018 unchanged at 0.9 percent.

The new projections follow the results of the BOJ’s comprehensive review, which concluded that households’ and companies’ inflation expectations hadn’t evolved as the central bankers had anticipated. Instead of reacting to the BOJ’s historic monetary stimulus by building in expectations of faster inflation, Japanese have instead been strongly influenced by the many years of past price declines.

Kuroda and other board members, including Deputy Governor Kikuo Iwata, had signaled in recent weeks that getting to 2 percent inflation will take more time.

Takeshi Minami, chief economist at Norinchukin Research Institute, said the BOJ remained optimistic about inflation in fiscal 2017 even after cutting the forecast, noting that the central bank had shifted to a long-term strategy.

“They are choosing to let the current monetary easing bring positive effects to the economy gradually, rather than forcing something to stimulate it,” Minami said. “In a sense, the BOJ is back to the Shirakawa regime. Shirakawa’s BOJ took the stance of saying to the government that they are doing enough monetary easing,” he said, referring to Kuroda’s predecessor Masaaki Shirakawa.

Kuroda will have the opportunity to expand on today’s policy decision at a press briefing this afternoon in Tokyo.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Markets

SEC To Ban Unregistered CMOs From Operating By Month End

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The Securities and Exchange Commission (SEC) says it will stop operations of Capital Market Operators (CMOs) that are yet to renew their registration on May 31, 2021.

This was contained in a circular signed by the management of SEC in Abuja on Monday.

On March 23, SEC had informed the general public and CMOs on the reintroduction of the periodic renewal of registration by operators.

The commission noted that the reintroduction of the registration renewal was due to the need to have a reliable data bank of all the CMOs registered and active in the country’s capital market.

“To provide updated information on operators in the Nigerian Capital Market for reference and other official purposes by local and foreign investors, other regulatory agencies and the general public, to increasingly reduce incidences of unethical practices by CMOs such as may affect investors’ confidence and impact negatively on the Nigerian Capital Market and to strengthen supervision and monitoring of CMOs by the Commission,” SEC explained.

According to the circular, the commission said CMOs yet to renew their registration at the expiration of late filing on May 31, would not be eligible to operate in the capital market.

It explained that CMOs were required to have completed the renewal process on or before April 30, however, the commission said late filing for renewal of registration would only be entertained from May 1 to May 31.

SEC also said that asides from barring the CMOs who failed to comply accordingly, their names would be published on its website and national dailies.

It added that names of eligible CMOs would be communicated to the relevant securities exchanges and trade associations.

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Crude Oil

A Threat to Revenue As Nigeria’s Largest Importer of Crude, India slash Imports By $39.5B

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Crude oil

Nigeria’s revenue earning capacity has come under threat following the reduction of importation of crude oil by India.

India, Nigeria’s largest crude oil importer, reduced crude oil imports by $39.5bn in April, compared to the same time the previous year, data from India’s Petroleum Planning & Analysis Cell showed.

According to the Indian High Commission in Nigeria, India’s crude oil imports from Nigeria in 2020 amounted to $10.03bn.

This represented 17 percent of Nigeria’s total crude exports for the year according to the Nigerian National Petroleum Corporation, as quoted by OilPrice.com.

As Nigeria’s largest importer of crude oil, lockdowns in India’s major cities from the COVID-19 surge in April had ripple effects on Nigeria’s oil sales.

The NNPC was prompted to drop the official standard price of its main export streams, Bonny Light, Brass River, Erha, and Qua Iboe, by 61-62 cents per barrel below its April 2021 prices. They traded at $0.9, $0.8, $0.65, $0.97 per barrel respectively, below dated Brent, the international benchmark, as Oilprice.com showed.

India had been buying the not-too-light and not-too-heavy Nigerian crudes that suited its refiners.

Reuters reported that the Indian Oil Corporation’s owned refineries were operating at 95 percent capacity in April, down from 100 percent at the same time the previous month.

An official at the IOC was quoted as saying, “If cases continue to rise and curbs are intensified, we may see cuts in refinery runs and lower demand after a month.” Hundreds of seafarers risked being stuck at sea beyond the expiry of their contracts, a large independent crude ship owner reportedly told Bloomberg.

India reportedly bought more American and Canadian oil at the expense of Africa and the Middle East, reducing purchases from members of the Organisation of the Petroleum Exporting Countries to around 2.86 million barrels per day.

This squeezed the group’s share of imports to 72 percent from around 80 percent previously, as India’s refiners were diversifying purchases to boost margins, according to Reuters.

India also plans to increase local crude oil production and reduce import expenses as its population swells, according to Bloomberg.

A deregulation plan by the Narendra Modi-led government to boost national production to 40 million tonnes of crude oil by 2023/2024, an increase of almost eight million tonnes, had already been initiated.

According to Business Today, an Indian paper, the country currently imports 82 percent of its oil needs, which amounted to $87bn in 2019.

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Energy

Invest Africa and DLA Piper Partner to Support ESG Best Practice in African Renewable Energy Projects

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Invest Africa - Investors King

The global law firm, DLA Piper, has partnered with Invest Africa, the leading trade and investment platform for African markets, to support the development of ESG best practice in African renewable energy projects.

Clear Environmental, Social and Governance (ESG) targets and measurements have become an increasingly important part of fundraising as investors seek to align their portfolios with sustainable growth. For a continent boasting ample natural resources, this presents a significant opportunity for Africa’s green energy sector. However, renewable does not always equal sustainable and developing and articulating ESG metrics can pose a significant challenge to projects as they prepare investment rounds.

The project will assemble experts from the worlds of impact investment, development finance and law. Across a series of online meetings, participants will discuss strategies to improve ESG practices in African renewable projects from both a fundraising and operational perspective.

Amongst those speaking in the inaugural session on Thursday 13th May are Cathy Oxby, Chief Commercial Officer, Africa GreencoDr. Valeria Biurrun-Zaumm, Senior Investment Manager, DEGOrli Arav, Managing Director – Facility For Energy Inclusion (FEI) – Lion’s Head Global PartnersBeatrice Nyabira, Partner, DLA Piper Africa, Kenya (IKM Advocates) and Natasha Luther-Jones, Partner, Global Co-Chair of Energy and Natural Resources, International Co-Head, Sustainability and ESG, DLA Piper.

Veronica Bolton-Smith, COO of Invest Africa said, “Africa is particularly vulnerable to the impact of climate change despite contributing very little to global emissions. As the price of renewables fall, they will form an ever more important part of Africa’s electrification. In this context, it is essential that projects be given the tools to apply best practice in ESG not only from an environmental perspective but also in terms of good governance, fair working conditions and contribution to social inclusion. I look forward to working closely with DLA Piper on this important topic.”

Natasha Luther-Jones, Global Co-Chair Energy and Natural Resources and International Co-Head Sustainability and ESG at DLA Piper also commented, “Climate change is one of the biggest challenges companies, and people, face today and when we look at its reduction – whether that be in how we power our devices, what we eat or how we dress, where we live or how we work – all roads come back to the need to increase the amount of accessible, and affordable, clean energy. However, renewable energy companies are not automatically sustainable as sustainability is a focus on all ESG factors, not just environmental. We know the need for renewable energy is only going to continue to rise, and therefore so will the number and size of renewable energy companies. The additional challenge is to make sure they are truly sustainable organisations and that’s what we’re excited about discussing during the webinar.”

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