Japan: Focus is on fiscal efforts - BBH

Research Team at BBH, notes that the Japan’s flash July manufacturing PMI firmed to 49.0 from 48.1 and the improvement leaves it below the 50 boom/bust level for the fifth month.

Key Quotes

“The yen is trading within yesterday’s ranges.  The dollar did not recover from the drop spurred by the month-old interview with the BOJ’s Kuroda in which he rejected the kind of helicopter money that has been bandied about.

As we have noted, the BOJ, like other major central banks, is barred from buying securities directly from the government.  Although there is some suspicion that the law will be changed, there does not seem to be any movement in that direction, and surely not before next week’s BOJ meeting. 

Many investors do not have much confidence in next week’s outlook or in how the market will respond.  Meanwhile the focus is on fiscal efforts, and reports of the size of the package have increased to JPY30 trillion (~$280 bln).  We caution that much of these elevated figures are not what Japanese economists would call fresh water, but rather recycled funds and loans.”