Here's my summary of the key news overnight to keep you up-to-date over these holidays.
We start this week with the NZD very strong against the AUD. Today we are at NZ$1 = 95.7 AUc which is almost equal to its all-time post-float high in December 2005. Parity is closer.
Over the Christmas break, Japan’s government approved stimulus spending worth NZ$37 bln aimed at helping the country’s lagging regions and households. Included were steps like subsidies and merchandise vouchers, but analysts are sceptical about how much these actions can actually spur growth.
It seems that a lot now hinges on how successful the government is in getting its large companies to raise wages. That will be a real challenge because earnings (adjusted for inflation) dropped 4.3% from a year earlier in November. It's the steepest decline since the 2009 global crisis and marks the 17th month of falls.
And, for the first time since records were collected in 1955, Japan's population is drawing down its savings and the savings rate, calculated as savings divided by disposable income plus pension payments, was negative 1.3%. It's a dramatic change from when the Japanese saved nearly a quarter of their income (23.1%) when the savings rate peaked in 1975.
In Switzerland, the Basel Committee on Banking Supervision has released a consultation paper setting out options for a "capital floor" on the risk-weighted capital of banks that are allowed to set their own capital, based on internal risk modeling. It also advocates a simple "leverage ratio" to work in conjunction with the risk weighted floor.
In China, industrial profits dropped 4.2% in November to NZ$140 bln (676.12 billion yuan), official data showed on Saturday, the biggest annual decline since August 2012 as their economy slipped in the second half of 2014. Despite last month's drop, profits for January-November were 5.3% higher than in the first 11 months of 2013, according to the Chinese National Bureau of Statistics data. They said November's profit drop was caused by declining sales and a long-running slide in producer pricing power.
In the oil markets, prices are falling again. The benchmark US price is back up at US$55/barrel and the Brent benchmark is just under US$60/barrel.
Gold on the other hand is higher at just on US$1,194/oz.
UST benchmark 10yr bond yields have continued their recent rise and are now up to 2.25% today. New Zealand swap rates rose on Christmas eve and may do so again today. They are now up to 3.87%
The NZ dollar starts today at 77.5 USc, we are at 95.7 AUc, and the TWI is at 78.9.
The easiest place to stay up with event risk over the holiday period is by following our Economic Calendar here »
Daily exchange rates
Select chart tabs
1 Comments
David, How much do you think Japan's problems are related to normal predicable flow-on from having such an elderly population (40+%). Clearly having a higher percentage of older people is going to result in less early stage investment and less inflation from the ratio of buyers setting up homes, as well as already fully owning major assets. Likewise that is going to have a deflationary affect as the edlerly wages won't be increasing or expecting to increase like people in the "looking forward" rather than the "remembering the past" stage of life, expect.
I wondering just how much of their effects are from the banks and government expecting "business as usual" and the economies behaviour to stay like it says in the education books (Japanese love their books and educated experts) despite having a massive different shaped economic "engine".
It just seems like a lot of the media report issues are fairly obvious predictions. (less borrowing to build, more withdraw .... is a surplus money devaluation event... and it looks like they're trying to print to keep up money supply which would normally be arising from investment returns ... so they're creating inflation to counter the economic deflation (caused by effectively too much money and not enough demand).... I really can't see that plan working out terribly well for them....
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.