Confidence amongst large Japanese manufacturers continued to deteriorate, according to the Bank of Japan’s quarterly Tankan survey. Sentiment – particularly amongst exporters – continued to be hampered by concerns over the global economic slowdown and by the trade war between the US and China.
- The BoJ said it would expand stimulus proactively if necessary
- Australia’s central bank cut interest rates for a second consecutive month
- The Bank of Korea implemented a surprise interest-rate reduction
To view the series of market updates through July, click here
Confidence amongst large Japanese manufacturers continued to deteriorate, according to the Bank of Japan’s (BoJ’s) quarterly Tankan survey. Sentiment – particularly amongst exporters – continued to be hampered by concerns over the global economic slowdown and by the trade war between the US and China.
“Japan’s exports continued their decline”
BoJ policymakers left monetary policy unchanged at their July meeting and intend to maintain interest rates at their “current extremely low levels” until at least spring 2020. However, the BoJ adjusted its monetary policy statement to include a pledge to expand its monetary stimulus without hesitation if necessary.
Japan’s exports continued their decline during June, posting their seventh consecutive month of year-on-year falls. Exports dropped at an annualised rate of 6.6% in June, while imports declined by 5.2%. Shipments to China fell by 10.1% during the month. The Nikkei 225 Index rose by 1.2% over July; the Topix Index climbed by 0.9%, and the TSE Second Section Index rose by 2.1%.
Having cut interest rates for the first time since 2016 during June, the Reserve Bank of Australia (RBA) implemented a second cut in July, reducing its key interest rate by 0.25 percentage points to 1%. Although the country’s economy expanded at a “below-trend” rate of only 1.8% year on year during the first quarter of 2019, RBA Governor Philip Lowe remains relatively sanguine about Australia’s prospects, underpinned by an increase in infrastructure investment and a rebound in activity in the resources sector. The outlook for consumption remains the principal domestic uncertainty, curbed by a “protracted” period of weak income growth and falling house prices. The ASX All Ordinaries Index rose by 2.9%.
The Bank of Korea (BoK) announced a surprise reduction in its key interest rate during July. The cut reduced base rate by 0.25 percentage points to 1.5%. The decision was prompted by a weaker domestic backdrop, slower export activity, and a broader slowdown in global economic growth that has been exacerbated by trade tensions. Looking ahead, policymakers believe that global growth and global financial markets will continue to be affected by protectionism and by factors such as evolving monetary policy in leading nations. Meanwhile, relations between South Korea and Japan deteriorated during the month as the two countries clashed over Japan’s plans to impose trade restrictions on South Korea’s technological goods. The Kospi Index fell by 5% over July.
A version of this and other market briefings are available to use in our newsletter builder feature. Click here
