BoJ Policy Outlook Shifts, US and European Officials Release Mixed Signals

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Summary:

Japan's economy shrinks for the first time in six quarters; The US Government exempts agricultural products from the "Reciprocal Tariffs" list......

[Quick Facts]

1. Japan's Finance Minister: Stimulus package to exceed $110 billion.

2. Japan's economy shrinks for the first time in six quarters, adding uncertainty to BoJ's rate hike path.

3. Iran's Foreign Minister claims uranium enrichment activities have been fully halted nationwide.

4. Lane: Risks of slowing inflation should not be ignored; the risk of a December rate cut can not be underestimated.

5. The US Government exempts agricultural products from the "Reciprocal Tariffs" list.

6. Miran: Data supports rate cuts; Fed should lean more dovish.

7. Logan: Hard to support December rate cuts.

8. Schmid: May oppose rate cut again at December meeting.

9. Greer: The US and Switzerland reach a Trade Deal, cutting tariffs on Swiss goods to 15%.

[News Details]

Japan's Finance Minister: Stimulus package to exceed $110 billion

According to a report by Nikkei on Sunday, Japanese Finance Minister Satsuki Katayama stated after meeting with Prime Minister Shigeru Ishiba that the country’s economic stimulus package would exceed JP¥17 trillion (approximately US$110 billion). Since taking office in October, Sanae has pledged to formulate a large-scale spending plan to mitigate the economic impact of rising living costs and boost investment in growth areas such as AI and semiconductors. The stimulus package is expected to be finalized after approval at a cabinet meeting on November 21st.

Japan's economy shrinks for the first time in six quarters, adding uncertainty to BoJ's rate hike path

Based on the preliminary data released on Monday, Japan's real GDP contracted 0.4% quarter-on-quarter in Q3, equivalent to an annualized decline of 1.8%, marking the first negative growth in six quarters. The data revealed that external demand was the primary drag, reducing GDP by 0.2 percentage points, reflecting the impact of higher US tariffs on Japanese exports. Meanwhile, housing investment plunged 9.4%, another major negative factor, though economists attributed this to temporary regulatory changes and expect a gradual recovery.

This economic contraction is likely to reinforce the Bank of Japan's rationale for delaying further rate hikes. Markets believe weak economic data will support the central bank's stance of maintaining current policies until next year, further complicating the timeline for future rate increases. At a critical juncture where the BoJ is preparing to exit its ultra-loose monetary policy, this economic downturn provides more room for caution in policy adjustments and introduces new uncertainty into the central bank's normalization process.

Iran's Foreign Minister claims uranium enrichment activities have been fully halted nationwide

According to the Associated Press, Iranian Foreign Minister Abbas Araghchi stated on Sunday that authorities in Tehran have stopped all uranium enrichment activities across the country. Responding to reporters' questions, Araghchi made the most direct remarks to date on Iran's nuclear program. In June, Israel and the US bombed Iran's uranium enrichment facilities. Araghchi said there are no undeclared uranium enrichment activities in Iran, and all facilities are under IAEA safeguards. Currently, uranium enrichment is not being conducted because the relevant facilities were attacked.

Lane: Risks of slowing inflation should not be ignored; the risk of a December rate cut can not be underestimated

In a speech on the 16th, European Central Bank Governing Council member Philip Lane stated that the eurozone economy has shown resilience, with slow but sustained growth. He said the risk of slowing inflation should not be ignored, highlighting that a further interest rate cut in December is a possibility that "cannot be underestimated."

The Finnish central bank governor pointed to low energy prices, a stronger euro, and declining wage and service inflation as factors that could push overall inflation significantly below the ECB's 2% target. The risk of another rate cut in December should not be underestimated.

The US Government exempts agricultural products from the "Reciprocal Tariffs" list

The White House announced the latest executive order signed by President Trump, further adjusting the scope of the "reciprocal tariffs," excluding certain agricultural products from the additional tariffs previously imposed under the Reciprocal Tariffs Executive Order. The order noted that, based on assessments of domestic demand and production capacity for related products, as well as the latest recommendations from government agencies, Trump deemed it necessary to revise the tariff list to address the "national emergency" declared in the original order. The updated tariff exemption list and potential adjustments for "allied partners" will take effect at 00:01 EST on November 13th, 2025. The order also mandates revisions to the Harmonized Tariff Schedule and stipulates the handling of potential tariff refunds.

Miran: Data supports rate cuts; Fed should lean more dovish

Federal Reserve Governor Stephen Miran stated in a speech on Friday that recent economic data support the case for Fed rate cuts. Since the September FOMC meeting, he said, all the data points to a dovish stance— inflation data is better than expected, and labor market data is weaker. On the question of further rate cuts, all of this should push the Fed toward a more dovish position, not the opposite.

Logan: Hard to support December rate cuts

Dallas Fed President Lorie Logan said in a Friday speech that she is concerned about persistently high and potentially rising inflation, which may take too long to return to the Fed’s 2% target. Unless there is compelling evidence that inflation is falling faster than she expects or that the labor market is cooling more sharply than its current gradual pace, she finds it hard to support another rate cut. Before seeing solid evidence that inflation is steadily moving toward the 2% target, she believes a moderately restrictive policy stance remains appropriate.

Schmid: May oppose rate cut again at December meeting

Kansas City Fed President Jeffrey Schmid said on Friday that his concerns about "too hot" inflation go well beyond the narrow effects of tariffs alone. He argued that the current cooling in the US labor market stems primarily from structural changes, not issues that lower interest rates can resolve. Further rate cuts could undermine the Fed's efforts to achieve its 2% inflation target. This suggests he may oppose a rate cut at the December meeting.

Greer: The US and Switzerland reach a Trade Deal, cutting tariffs on Swiss goods to 15%

U.S. Trade Representative Jamieson Greer said, "We've essentially reached a deal with Switzerland." Duties will be reduced to 15%, and details will be announced by the White House on Friday. He added that Switzerland might be next; the U.S. actually reached an agreement with Switzerland, and the details will be published on the White House website today. He told reporters that US tariffs on Swiss goods will drop from 39% to 15%, while Switzerland has committed to investing $200 billion in the US. Greer said, "They're going to send a lot of manufacturing here to the United States — pharmaceuticals, gold smelting, railway equipment — so we’re really excited about that deal and what it means for American manufacturing." He added that Switzerland has also pledged to purchase more Boeing aircraft.

[Today's Focus]

UTC+8 16:15 ECB Vice President Luis de Guindos Speaks

UTC+8 21:20 BoE Monetary Policy Committee Member Catherine Mann Speaks

UTC+8 21:30 Canada October CPI

UTC+8 22:45 ECB Chief Economist Philip Lane Speaks

UTC+8 23:00 US August Construction Spending MoM

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