The Bank of Japan kept its main monetary stimulus target unchanged Friday while outlining operational changes for its purchases of government bonds, exchange-traded funds and real estate investment trusts.
Friday’s decision to continue expanding the monetary base at an annual pace of 80 trillion yen ($650 billion) was forecast by all but one of 42 economists surveyed by Bloomberg. With analysts almost evenly split on whether the central bank will add to its asset-purchase program next year or stand pat, attention turns to Governor Haruhiko Kuroda’s briefing later this afternoon in Tokyo.
The aim of the changes for JGB maturities, ETF purchases and Japanese real estate investment trusts will be in focus, along with his views on the Federal Reserve’s interest-rate hike, the oil market rout and recent economic indicators. Kuroda said earlier this month that price trends were improving, while repeating he wouldn’t hesitate to adjust monetary policy if needed.
“The BOJ extended the duration of JGBs to show they are not going to taper their stimulus for now,” said Junko Nishioka, chief economist for Japan at Sumitomo Mitsui Banking Corp. in Tokyo. “Now that they adjusted their policy in December, they will wait and see how things will develop.” Nishioka added that she no longer forecasts further easing in January.
The Topic index of stocks jumped as much as 2 percent after the BOJ’s announcement, before falling to trade down 0.6 percent at 1:27 p.m. in Tokyo. The yen fell to 123.56 against the dollar, before recovering to trade 0.4 percent stronger.
Bond Buying Changes
The bank extended the average maturities of Japanese government bonds it buys to seven to 12 years from seven to 10 years currently. This change was opposed by three board members, Takahide Kiuchi, Koji Ishida and Takehiro Sato.
In addition to the annual purchase of 3 trillion yen worth of exchange-traded funds, the bank established a new program to buy 300 billion yen in ETFs. The new program will target companies investing “proactively in physical and human capital” and start from April 2016 with ETFs tracking the JPX-Nikkei Index 400.
These changes passed by a 6-3 vote, opposed by Sato, Ishida and Kiuchi, the only board member to also vote against the main monetary base target.
The bank will increase the maximum amount of real-estate investment trusts it can buy to 10 percent of each issue, from five percent currently.
Data since the last policy meeting in November show that Japan avoided a midyear recession, and people familiar with discussions at the central bank told Bloomberg the economy has been gradually gathering momentum in line with the BOJ’s expectations.
Oil Price Drop
Still, the renewed slide in crude oil and the risk that it could suppress prices in the long term means that BOJ officials are closely watching gauges of inflation expectations, the people said.
The Dubai measure for crude oil is trading around $32 per barrel, compared with the low end of BOJ assumptions for its latest price forecasts of $50 per barrel.
Economy Minister Akira Amari has indicated there is no need for the BOJ to rush to achieve its 2 percent inflation target given the current impact of energy costs, even with the BOJ’s preferred price gauge falling since August.
The Federal Reserve’s first increase in interest rates since 2006 this week underscores the difference in policy between the two central banks, and the renewed pressure this may bring to bear on the yen to weaken against the dollar.
The Japanese currency has lost about 30 percent of its value against the dollar since Prime Minister Shinzo Abe took office in 2012 with a plan to reflate the economy.
Even so, exports haven’t responded. While the value of shipments overseas has jumped 20 percent since November 2012 to last month, volumes are only 1.1 percent higher.
Both Abe and Kuroda have urged companies to invest more, but there has been little sign of them using their cash reserves, which reached another record last quarter.
More Retirees Quit Pension Scheme, Collects N28.46 Billion
114,837 Retirees Quit Pension Scheme, Collects N28.46 Billion
Thousands of retirees whose employers did not adequately fund their Retirement Savings Accounts and retired with balances below N550,000 have collected their contributions and quit the Contributory Pension Scheme (CPS).
A total of 114,837 employees who retired after attaining the age of 50 and had less than N550,000 in their CPS account had collected their contributions and left the scheme as of the end of June 2020.
This includes contributors from the state, federal and private sectors.
In the quarterly report released on Friday by the PenCom, these retirees withdrew a total sum of N28.46 billion since the inception of the scheme till June.
The report showed about 6,561 of the total retirees that left the program were from the Federal Government sector while 3,879 and 104,397 were from the state and private sectors, respectively.
The report also showed that some of those who collected their contributions included foreign nationals who retired and returned to their countries of origin.
A further breakdown showed as of the end of third quarter of 2019, a total of 109,284 retirees with similar low balances withdrew N27.09 billion. While by the final quarter of 2019, 2,241 retirees withdrew about N569.27 million.
In the first quarter and second quarter of 2020, about 2,227 and 1,085 retirees withdrawn N531.95 million and N274.09 million, respectively. Bringing the total from inception to N28.46 billion.
PenCom stated in its Q2 report on en-bloc payments that, “The commission granted approval for the payment of the entire RSA balances of the categories of retirees whose RSA balances were N550,000 or below and considered insufficient to procure a programmed withdrawal or annuity of a reasonable amount over an expected life span.
“Approval was also granted for payment of RSA balances to foreign nationals who decided to return to their home countries after making contributions under the CPS.
“Accordingly, the sum of N274.78m was paid to 1,085 retirees, which comprised 140 from the public sector retirees (FGN and state) and 1,085 from the private sector retirees during the second quarter.”
Central Bank to Promote Zero Balance Account Opening to Drive Financial Inclusion
Banks Now Accept Zero Balance Account Opening to Deepen Financial Inclusion
In an effort to boost financial inclusion in the country, the Central Bank of Nigeria has said it would start promoting zero balance account opening to encourage and lure the unbanked into the banking system.
The apex bank disclosed this in its report titled ‘Monetary, credit, foreign trade and exchange policy guidelines for fiscal years 2020/2021’.
The report read in part, “As part of its effort towards promoting greater financial inclusion in the country, the bank shall continue to encourage banks to intensify deposit mobilisation during the 2020/2021 fiscal years.
“Accordingly, banks shall allow zero balances for opening new bank accounts and simplify their account opening processes, while adhering to Know-Your-Customer requirements.
“Banks are also encouraged to develop new products that would provide greater access to credit.”
The apex bank said the Shared Agency Network Expansion Facility, launched to deepen provision of financial services in under-served and unserved locations and drive financial inclusion through agent banking, would continue in the 2020/2021 fiscal years.
Banks, mobile money operators and super-agents would also continue to render returns in the prescribed formats and frequency to the CBN.
Investors Oversubscribed for FGN Bonds by N205.87 Billion in October
FG October Bonds Oversubscribed by N205.87 Billion
The Debt Management Office (DMO) has said investors oversubscribed for the Federal Government’s October bonds by N205.87 billion.
The DMO stated this after concluding the monthly FGN bonds auction on Wednesday.
Two instruments of 12.5 per cent FGN March 2035 re-opening 15-year bond and 9.8 per cent FGN July 2045 re-opening 25-year bond were auctioned.
The two bonds of N15bn each with a total auction figure of N30bn received a subscription of N235.87bn.
The 15-year tenor and 25-year tenor bonds received 99 and 67 bids but recorded 21 and 26 successful bids respectively.
The amounts allotted for each of the bids were N20bn and N25bn respectively.
According to the DMO, successful bids for the 15-year tenor bond and 25-year tenor bonds were allotted at the marginal rates of 4.97 per cent and six per cent respectively.
However, it added, the original coupon rates of 12.5 per cent for the 12.5 per cent FGN March 2035 bond and the 9.8 per cent for the 9.8 per cent FGN July 2045 bonds would be maintained.
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