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[Quick Facts]

1. BOJ may raise short-term rates from -0.1% to zero next spring.

2. The Japanese government adopts a new economic policy.

3. The UAW strike ends.

4. BOE keeps rates unchanged but is still open to further rate hikes.

5. All three central banks leave rates unchanged, policy rates at or near peak.

6. U.S. continuing jobless claims increase for the sixth consecutive week.

[News Details]

BOJ may raise short-term rates from -0.1% to zero next spring

The Bank of Japan's next priority is to end its negative interest rate policy and raise short-term interest rates to zero from the current -0.1%, according to sources. Exiting negative rates would be more important than ending its control over bond yields, as it would mean raising the policy rate which the central bank directly controls, and mark a shift to a more neutral policy stance. Many BOJ policymakers believe a rate hike could happen around spring next year when it will become clear whether annual pay talks will lead to a significant increase. With the cost of a spike in market rates seen as too high, the most likely scenario of an exit would be for the BOJ to end YCC and negative rates - but retain a loose pledge to intervene in the market if bond yields rise abruptly, the sources say.

The Japanese government adopts a new economic policy

The Japanese government passed a new economic policy at its interim cabinet meeting, which included temporary income tax cuts, grants in aid, and the extension of energy price subsidies, totalling more than 17 trillion yen, in order to cope with domestic inflation and other economic problems.

In addition, the Japanese government plans to compile a supplementary budget for the current year of 13.1 trillion yen as an important support for the new economic policy. The total size is about 37.4 trillion yen.

The UAW strike ends

Detroit's Big Three automakers finally ended the six-week UAW strike earlier this week at a huge cost. Interestingly, the nationwide auto strike seems to have had the unexpected effect of "making an example" in the industry.

Toyota Motor Corp. announced on Wednesday that it would give most workers at its U.S. auto plants a 9% pay raise and shorten the time workers take to get maximum pay. It's a sign that the UAW's victory in Detroit is starting to have a ripple effect in the rest of the auto industry.

The six-week strike finally ended on Monday after GM reached a tentative labour agreement with the UAW, which had reached similar deals with Ford and Stellantis, Chrysler's parent company.

The tentative agreement includes a general wage increase of 25% over four years. The maximum hourly wage for workers will reach around $42 after accounting for the increased cost of living. The agreement will go to union members for a vote in the coming weeks.

BOE keeps rates unchanged but is still open to further rate hikes

On Thursday local time, the Bank of England (BOE) voted 6-3 in favour of keeping interest rates unchanged at 5.25%, with three members voting for a 25 basis point hike. This was the second consecutive meeting in which the benchmark rate was left unchanged. At the last meeting in September, four members voted in favour of raising rates.

In its policy statement, the Monetary Policy Committee expects that monetary policy may need to remain restrictive for an extended period, and further monetary policy tightening will be needed if there is evidence of persistent inflationary pressures.

The BOE expects a 50% chance that the UK economy will fall into recession over the forecast period, with GDP expected to grow by 0.5% in 2023 (compared with 0.5% in August's forecast), the economy to stagnate in 2024 (compared with a 0.5% increase in August's forecast) and to grow by 0.25% in 2025 (compared with 0.25% in August's forecast).

BOE Governor Andrew Bailey said that despite progress on inflation, there was "absolutely no reason for complacency" as inflation was still too high. He will be watching closely to see if further rate hikes are necessary, but even if not, it's still too early to consider a rate cut.

Bailey's speech was almost the same as that of the Fed's Chairman Powell, but Bailey appeared to be "full of sincerity" compared to Powell's vague and even contradictory remarks. Bailey clearly indicated that interest rates would be likely to be maintained at the level of 5.25% in the next year, and he would not consider a rate cut in the near term.

All three central banks leave rates unchanged, policy rates at or near peak

After the Bank of England decided to leave rates unchanged on Thursday, the world's three major central banks all hold rates steady at high levels, and the duration of high rates will depend on inflation, U.S. economic growth, the economic slowdown in Europe and the United Kingdom, as well as whether the bond market can withstand higher costs of borrowing.

The era of simultaneous rate rises by the major central banks has now been declared over by officials. Both Fed Chairman Jerome Powell and BOE Governor Andrew Bailey said this week that their top priority remains getting inflation back down to the 2% target and that they are open to raising rates again if price pressures are stubborn.

Interest rates are at or near their peaks in the U.K., U.S. and Eurozone, where monetary policy authorities describe their monetary policy stance as tight. Investors are coming around to the view that the high-interest rate scenario will remain in place until at least the middle of next year.

The exception remains the Bank of Japan, which is still struggling to shake off decades of too-low inflation. For now, central bank officials in Europe, the U.K. and the U.S. have all said they won't consider cutting rates until price pressures are under control. Though U.S. inflation of 3.4% is most close to the target among the three regions, there is still a long way to go in lowering inflation.

U.S. continuing jobless claims increase for the sixth consecutive week

U.S. continuing jobless claims rose for a sixth straight week last week, signalling that the unemployed are starting to have a harder time finding new jobs. Data from the Department of Labour showed that continuing jobless claims rose to about 1.82 million in the week ended 21 October, the highest level since April. At the same time, initial jobless claims rose to 217,000. The four-week average of initial jobless claims also rose. This report highlights how even a slight hiring pullback can impact workers. While companies are still adding jobs at a healthy pace and the unemployment rate remains low, the pace of hiring is slowing, causing some job seekers to take a longer time to find jobs.

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