Bank of Japan Governor Kazuo Ueda has said that many central bank governors from the Group of Seven (G-7) rich nations believe that the effects of past interest rate hikes have yet to fully show on their economies and inflation. As such, many of them wanted to guide monetary policy, taking this point into account. Ueda commented on Japan, saying that the economy was recovering, although consumer inflation, which now stands above 3%, will begin to slow towards the middle of the current fiscal year, which ends in March 2024. Ueda said that he told the G7 meeting that Japan is maintaining an ultra-loose monetary policy to sustainably and stably achieve the BOJ’s 2% inflation target.
The G-7’s group of finance ministers and central bank governors have recently agreed to set a minimum global corporate tax rate of at least 15% in a bid to clamp down on tax avoidance by multinational companies. While digital giants such as Amazon and Google look to be covered by the new proposals, financial services could potentially be exempt, which could spare London’s City from the measure. However, experts have warned that it may upend the competition between low-tax financial centres such as Luxembourg and Dublin and higher-tax London.
Central banks, especially the US Federal Reserve, have been watching economic indicators such as inflation and employment figures closely as they consider when to start scaling back pandemic-era stimulus measures. San Francisco Federal Reserve President Mary Daly recently said that the US economy is on track to meet the central bank’s employment and inflation goals sooner than anticipated, suggesting that the Fed should consider tapering its bond-buying programme later this year.
The US Federal Reserve is not the only central bank having to consider tapering stimulus in the coming months, with the Bank of England also facing similar pressures. Earlier this month, the BoE’s Deputy Governor Dave Ramsden said that the “recovery in the UK economy is well under way” and that recent inflation data had come in “ahead of the central trajectory in the May monetary policy report.” However, with the lifting of lockdown restrictions in the UK and the current uncertainty surrounding the Delta variant of Covid, the Bank of England may still hold off on tapering stimulus in the immediate future.
Meanwhile, the European Central Bank (ECB) is making progress towards its 2% inflation target, with the eurozone economy expected to grow by 4.6% this year, according to the latest projections by the European Commission. However, pushing inflation up to its target remains a challenge, with a significant amount of slack in the economy following the pandemic. Inflation has also been impacted by supply-chain disruptions and rising prices in certain sectors, most notably energy.
Finally, the Bank of Japan announced on Friday that it would hold its interest rate policy steady, cautious of the ongoing impact of the Covid-19 pandemic on the country’s economic recovery. The bank announced that it sees a moderate improvement trend in Japan’s economy, but said that there were uncertainties surrounding business sentiment as the pandemic continues to affect activities. The BOJ said it would continue to support the economy through measures such as the funding of low-interest-rate loans and exchange-traded funds.