Carney Faces Grilling
Japan is still hogging the headlines at the moment as yesterday Bank of Japan’s chief Haruhiko Kuroda stepped forward to give his take on the current state of the Japanese economy and what was being done to bring some sense of normality to the situation. Interestingly, he was much more relaxed than Finance Minister Aso who had seemed perturbed about the speed of Yen depreciation. Kuroda highlights included 2% inflation now being the global standard and Japan is only halfway there; Japan’s export volume growth is flat but is rising; weak Yen has a positive effect on the economy; FX stability is not the role of the Bank of Japan.
Europe is often compared to Japan when worrying about the possibility of deflation. However, this possibility is currently being downplayed and yesterday it was up to ECB Council Member Noyer to continue this rhetoric. It seems like the ECB have been talking about the possibility of using unconventional measures to arrest the slump since time began and yesterday was no different. Interestingly, Japanese-style deflation is not seen as a huge risk due to the employment differences between Japan and the Eurozone. In Japan, there is high wage flexibility whereas in the Eurozone wages are much more rigid which provides protection against deflation risk.
It’s going to be a big and quite possibly rather stressful day for Mark Carney and a select group of Bank of England officials today as they speak before Parliament’s Treasury Select Committee. The latest quarterly inflation report will be probed as well as the investigation into rigging of the forex market.
We have mortgage approvals out of the UK today and a raft of data from the US including GDP, Personal Consumption Expenditures and Consumer Confidence.