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LGT Navigator: Bank of Japan raises inflation forecast but maintains ultra-loose policy

January 18, 2022

While US stock markets remained closed for the holiday, Europe's equity markets started the new week on a positive note thanks to positive stimulus from the Chinese central bank's monetary easing. This morning, the Bank of Japan reaffirmed its expansionary monetary policy, but revised its inflation forecast upward and was slightly more optimistic in its growth outlook.

Bank of Japan raises inflation forecast but maintains ultra-loose policy

As expected, the Bank of Japan left key interest rates unchanged at -0.1% today and confirmed its ultra-expansive monetary policy stance. On the other hand, Japan's central bank assumes that the commodity-related price increase will widen and thus Japan could sustainably overcome deflation. The BoJ now expects consumer price inflation of +1.1% for the fiscal year starting in April (previous forecast +0.9%). In addition, the central bank raised its inflation forecast for 2023 slightly from +1.0% to +1.1%. Overall, the risks to price developments were “balanced.” In October, the central bank had described price risks as being on the downside. In the economic outlook, the BoJ raised its growth forecast for the next fiscal year and now expects GDP growth of +3.8% instead of +2.9%.

On the Tokyo Stock Exchange, the Bank of Japan's announcement was received neutrally and did not set any new impulses. Other equity markets in the Far East also traded without a clear trend on Tuesday.

Europe's stock markets started the week on a positive note, with the EuroStoxx 50 up around +0.7% on Monday, after the benchmark index had fallen by around one percent on Friday. However, given the holiday in the US, stock market turnover remained relatively thin and lacked fresh impetus.

OECD leading indicator signals slowdown in growth trend in industrialized countries

In its report presented yesterday, the Organization for Economic Co-operation and Development (OECD) indicates that the momentum of the economic upswing could flatten out in some leading industrialized countries after the corona crisis. The eurozone, Great Britain, Japan, and Canada were mentioned. In the USA, on the other hand, a stable growth trend is expected, but below the long-term trend. In the emerging markets, the OECD's leading indicators also point to a slowdown, and China's economy has fallen behind the long-term trend.

Italy's inflation rate at highest level in 13 years

In Italy, the cost of living rose +4.2% for the year in December. The consumer price inflation rate thus reached its highest level since mid-2008, rising +0.5% from the previous month.

Cyber-attacks are the biggest threat to companies according to Allianz

According to a recent study by AGCS, an industrial insurer belonging to the German insurance group Allianz, attacks by hackers represent the greatest risk for companies. Other risks cited were: Business interruptions, natural disasters, and pandemics. In what it calls its “risk barometer,” AGCS surveyed 2,650 companies in 89 countries late last year. Estimates suggest that cybercrime caused about six trillion dollars in damage worldwide last year and could rise above ten trillion dollars by 2025.

Economic Indicators January 18

MEZ Country Indicator Last period
08:00 UK Unemployment Rate (December) 4.2%
08:30 SZ Producer Prices (December, y/y) +5.8%
08:30 SZ World Economic Forum
11:00 GE ZEW Investors' Economic Outlook Germany +29.9
11:00 EZ ZEW Investors' Economic Outlook Eurozone +26.8
13:00 OPEC Monthly Report
14:30 US NY Fed Empire State Manufacturing (January) +31.9
16:00 US NAHB-Real Estate index (December) +84.0


Earnings Calender January 18

Country Company Period
SZ Lindt & Spruengli  Annual Sales
US Goldman Sachs Q4 
AUS BHP Group Q1 Production


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