BoJ Ueda Speech and Poor PMI Data Send NIKKEI225 Lower

Contrary to the global stock market rally today, the index is in the red after comments from Ueda and worse than expected PMI data.

The Jibun Bank Composite PMI showed expanding activity at 52.5 but fell short of analysts’ expectations of 53.2. While the Manufacturing PMI also printed lower than analysts’ expectations at 49.6, the Services PMI was higher than analysts’ expectations at 53.9.

Overall, the data was positive showing that economic activity is expanding with a number over 50. However, the speech from the BoJ governor Ueda left a more bearish sentiment for stock investors.

The global stock market is up during today’s London session. The DAX is up 0.35% and the NAS100 is up 0.22%. While the NIKKEI225 is down 0.50%. Ueda did state that the central bank was in no rush to raise rates.

Mentioning that there was time to scrutinize the market and oversea economic conditions while setting monetary policy. However, he did repeat previous comments to raise interest rates if underlying inflation reaches the 2% target.

He also showed caution in the BoJ’s approach citing risks from volatile markets and uncertainty in the U.S. economy.

“We need to scrutinise market moves and overseas economic developments behind them in setting monetary policy. We can afford to spend time doing this,”

The remarks reiterate the central bank’s shift from focusing on inflation risk to concerns of a slowing global economy and strong yen. Both of the latter factors can hinder Japan’s export-reliant economy.

Yen Exchange Rate a Concern

The comments are in line with Ueda’s speech post the August BoJ meeting, where the board left rates unchanged at 0.25%. The tightening cycle for Japan comes as major central banks around the world are cutting interest rates.

This scissor effect may cause unwanted spikes in the value of the yen, and Japan’s ability to trade internationally.

“For the time being, we will monitor with utmost vigilance financial market developments,”

I’m sure this comment above refers to the stock market, but I also believe the central bank governor also has the forex market in mind and the exchange rate of the yen.