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BOJ Holds Stimulus With Little Change in Inflation Outlook

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  • BOJ Holds Stimulus With Little Change in Inflation Outlook

The Bank of Japan kept stimulus unchanged and left its inflation forecasts largely untouched as it waits to see the impacts of a recent decline in the yen and the policies of Donald Trump’s administration.

Governor Haruhiko Kuroda and his board will continue to buy bonds and other securities at the same pace while keeping unchanged the two policy rates controlling the yield curve, as forecast by all economists surveyed by Bloomberg. Forecasts for gross domestic product were raised, reflecting improvements in overseas economies and the weaker currency.

Even though Japan is still far from the BOJ’s 2 percent inflation target, the yen’s recent fall against the dollar has reduced pressure on the central bank to do more because the currency will increase inflationary pressures and make exporters more competitive. Since the yield-curve control policy was introduced last September, expectations for additional stimulus have collapsed.

An increasing number of economists now think the bank may start tightening policy sometime this year. Kuroda said in a briefing after the policy decision that it’s too early to discuss an exit strategy and that the BOJ is only halfway to its inflation goal.

“The BOJ sees downside risks, such as political risks in the U.S. and Europe,” said Atsushi Takeda, an economist at Itochu Corp. in Tokyo. “There will probably be no additional easing for some time, unless political risks and financial risks materialize, leading to a rapid gain in the yen.” Takeda said the revisions to economic growth also reflect changes to the way the government calculates the data.

Thanks to the weaker yen and higher oil prices, Japan’s core inflation index has bottomed out and is rising to near zero. Even so, most economists think that the bank’s forecasts are too optimistic, and almost no-one surveyed thinks the BOJ will reach the 2 percent inflation target as quickly as it claims.

“The BOJ is paying the most attention to what comes out of Trump, though it doesn’t say this directly,” said Maiko Noguchi, an economist at Daiwa Securities. “What the BOJ really wants to see is strong wage gains helping inflation pick up, but they are not talking much about it because there’s not much hope for wages.”

Protectionism could slow the global economy, but it seems unlikely to spread around the world, Kuroda said at the briefing. The details of new economic policies in the U.S. aren’t clear yet and the BOJ will monitor developments closely, he said.

The currency traded at 113.67 versus the dollar at 4:44 p.m. in Tokyo, having weakened about 8 percent since the last time the BOJ released its forecasts on Nov. 1, with much of that drop coming since the election of Trump.

A weak yen helps boost corporate profits and that could lead to more investment and wage growth, though these flow-on effects have been disappointing so far.

Kuroda repeated that the BOJ isn’t targeting a level for the yen.

“The main thing for currencies is that they move in a fashion consistent with economic fundamentals, not that a currency goes way up or down,” Kuroda said. “If a nation thinks a rate is out of line with fundamentals there might be a debate.”

Investors also have their eyes on the Federal Reserve, which is due to meet later this week. While no change is expected at this gathering, U.S. rates are poised to rise this year, further weakening the yen while also adding to strains on the BOJ’s efforts to manage the yield curve in Japan.

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.

Forex

Naira Remains Flat Against US Dollar, Euro

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Naira Exchange Rate Remains Flat Against US Dollar and Euro on Black Market

The Naira remained unchanged on Tuesday despite the curfews and social unrest that grounded the nation’s economy.

Naira traded at N463 against the United States dollar on the black market on Tuesday morning, the same rate it exchanged on Thursday.

Against the European common currency, the Nigerian Naira exchanged at N540 to a single Euro.

However, the local currency dipped slightly against the British Pounds as it exchanged at N595 to a British Pound, representing a N3 decline from N592 it traded on Friday.

Social unrest amid weak economic fundamentals continued to weigh on Nigeria’s local currency, especially with Foreign Direct Investment expected to drop in the final quarter of the year through the first quarter of 2021.

This coupled with weak foreign reserves and a drop in global demand for crude oil is expected to compound Nigeria’s economic woes.

Lagos State governor, Babajide Sanwo-Olu, has said Nigeria’s commercial capital needs at least N1 trillion to fix the destruction and vandalisation that trailed the #EndSARS protest in the state. An amount equivalent to the state’s annual budget.

Experts, who spoke on the situation, said it would hurt the nation’s output and may plunge fourth-quarter GDP by as much as 6.9 percent. These rising uncertainties amid the second wave of COVID-19 and possible lockdown in key trading partners could further plunge Naira value against global counterparts in the fourth quarter of the year.

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Transparent Exchange Rate Can Boost Nigeria’s Forex Inflow

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Transparent Exchange Rate Can Improve Nigeria’s Diaspora Forex Inflow

Experts that gathered at a virtual summit organised by Ecobank Nigeria with a theme, ‘Financial Services & Remittance Solutions for Nigerians in Diaspora: Leveraging Ecobank’s Pan-African offering’, have said Nigeria can boost foreign exchange inflow through proper engagement and a transparent exchange rate.

Mr. Patrick Akinwuntan, Managing Director of Ecobank Nigeria, in his opening speech, said growing evidence has shown that diaspora remittances were positively impacting economies of various nations in the world.

Akinwuntan put the total annual remittances to Nigeria at around $20 billion per year, saying it boosts the nation’s foreign exchange earnings.

Speaking on how these remittances can be sustained, he said constant engagement with Nigerians abroad is imperative and it is the reason Ecobank is leveraging its digital technology through Rapidtransfer App and Ecobank mobile App to ensure affordable and easy transfer of funds by Nigerians abroad to their home country.

“Our dedicated Rapidtransfer, mobile remittance app is a game-changer for the market. It enables Africans and indeed Nigerians wherever they are to easily and instantly send money to bank accounts, mobile wallets and cash collection in – and across – 33 African countries.

“Historically, the cost of sending cross-border remittances to Africa has been far too high at about 6%-7%. Similarly, the process to send funds has long been inefficient and burdensome, with customers typically needing to go physically to an agent sometimes late in the night or in poor weather with attendant discomfort and risks.

“The Rapidtransfer app remittance solution is a quick, easy and reliable digital solution that removes all of these issues. It is indeed a game-changer for Nigerians and all Africans with its sustainable and standout affordability,” he said.

Speaking on transaction charges, the Ecobank Managing Director said transfer fee range from zero to about 3 percent as compared to 6 – 7 percent charge elsewhere.

He added that the bank’s instant transfer and transparent exchange rate is a unique factor its competitors do not possess.

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Naira to Dollar Rate Today: Naira Exchanges at N463 to Dollar on Black Market

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Naira to Dollar Rate on Black Market Today Stood at N463

The Nigerian Naira to dollar rate slid slightly against the United States dollar on Tuesday on the black market as social unrest continues to weigh on the nation’s economic outlook.

The local currency lost N1 against the US dollar to N463 while against the British pound it remains pressured at N592.

This decline continues against the European Union’s common currency, the Euro. The Naira traded at N540 to a single Euro on the black market.

Naira to dollar rate plunged amid rising economic uncertainties and unclear policy path caused by both COVID-19 and government limited fiscal buffers to cushion the negative impacts of the virus on Africa’s largest economy.

This coupled with the ongoing social unrest by the Nigerian youths to force decorum across the Nigerian Police Force and call global attention to decades of systemic intimidation and harassment of innocent citizens.

The Nigerian Stock Exchange has been closing flat since Thursday and continued this week, suggesting that investors are concerns and wary of eventualities as they look to safeguard their investments.

Again, the projected third-quarter recession, low foreign revenue generation, weak consumer spending and the rising cost of living are some of the factors hurting the Nigerian Naira outlook.

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