Bank of Japan Governor Haruhiko Kuroda’s bid to end 15 years of persistent deflation is threatened by the failure of counterparts in the Europe and U.S. to reach their own financial worth targets. Citigroup Inc.’s Inflation Surprise Index for Group of 10 economies sagged down to negative 21.80 in October, the weakest since April 1998 and indicating data fell short of analyst forecast. A BOJ board member was monitoring whether domestic consumer financial values could keep surging with disinflation overseas, minutes of the October 3-4 policy meeting released last week show. ECB, Fed The ECB lowered the benchmark rate on November 7 to a record 0.25 percent, with ECB President Mario Draghi saying the currency bloc may “experience a prolonged period of low inflation.” The Federal Open Market Committee, headed by Chairman Ben S. Bernanke, refrained from reducing monthly bond purchases on Sept. 18, as policy makers recognized inflation below its 2 percent target could pose risks to the economy. Inflation Outlook That would follow a slowdown in annual inflation excluding fresh food to 0.7 percent in September, compared with August’s 0.8 percent, which was the most since November 2008. The central bank forecast on November 1 that the core rate will quicken to 1.9 percent in the year starting April 2015 after stripping out the effect of a planned sales-tax increase. Foreigner Selling The 10-year yield rose 1 1/2 basis points, or 0.015 percentage point, to 0.6 percent today. Foreign investors sold a net 2.13 trillion yen in JGBs in September, the most since March, according to Ministry of Finance data released today. Falling Wages Wages in Japan after adjusting for inflation slid 1.4 percent in September from a year earlier, marking a 10th drop in the past 12 months, according to labor ministry statistics. Toyota Motor Corp. President Akio Toyoda told reporters on November 7 that it’s reasonable for corporate managers to raise salaries when profit gains, Kyodo News agency reported. Companies listed on the Topix index of Japanese shares are forecast to post double-digit growth in earnings per share in the next two years, according to analyst estimates compiled by Bloomberg. The economic slowdown overseas has reduced interest rates relative to Japan’s, a factor that may discourage Japanese money managers from investing abroad. The extra yield that investors can get by holding global government bonds over Japanese debt fell to 1.32 percentage points from about a two-year high of 1.49 on Sept. 10, according to Bank of America Merrill Lynch index data. “We’ve seen a confirmation of the prolonged period of disinflation in Europe and the U.S., just like in Japan,” said Kenji Sakaguchi, the chief investment officer at Prudential Investment Management Japan Co., which manages the equivalent of $140 billion. “The era of low rates will continue in developed countries.”
