These are stories Report on Business is following Monday, April 27, 2015.
Poloz as optimist
Ignore for a moment the fact that Stephen Poloz referred to first-quarter economic growth as "atrocious." To JPMorgan Chase & Co., the Bank of Canada governor is nonetheless our "Optimist-in-Chief."
The Wall Street giant has tracked the 15 central bank policy statements since Mr. Poloz succeeded Mark Carney as Bank of Canada chief in mid-2013, and found him to be on the optimistic side when it comes to the way forward.
"Every one of these briefs have discussed the much-heralded rebalancing of growth drivers away from the overleveraged consumer and frothy housing market, and towards a more sustainable growth path based upon exports and [capital spending]," said Kevin Hebner, chief foreign exchange strategist at JPMorgan in New York.
And yet, Mr. Hebner said in a recent report, that rebalancing remains "elusive."
In a section of his report titled "Governor Poloz as Optimist-in-Chief," Mr. Hebner said that the first eight statements under the central bank chief "presented the logic for the desired rotation, Poloz's quixotic quest," followed by suggestions that there had been few signs of this.
The next three policy announcements "adopted a more constructive tone on the rebalancing process, but emphasized that 'this pickup will need to be sustained.'"
And, unfortunately, of course, it wasn't sustained because oil prices plunged and the U.S. economy took a breather.
Then, in this year's first statement, the Bank of Canada rightly noted the uncertainty in the economy from the oil shock.
The followed to "endorsed a more constructive outlook," highlighting that the rebalancing was under way.
But Mr. Hebner cited a separate report from Export Development Canada, which projected an increase in exports this year of just 1 per cent.
The Bank of Canada has a much brighter outlook on that front.
"As Governor Poloz approaches his second anniversary, it is difficult not to admire his enduring persistence and resolute optimism," Mr. Hebner said.
"Unfortunately, however, the empirical evidence is at best mixed," he added, citing the recent loss in "momentum" on the export front.
The central bank would not comment.
Like Mr. Poloz, other economists do see a pickup as the weaker Canadian dollar feeds through to the export sector, making their products less expensive in the key U.S. market.
But don't take to mean boom times.
"With no U.S. tailwind, a deep cut in energy industry outlays, and the added anti-bonus of a brutal winter, Canada's [first-quarter] growth will be lucky to stay above Zero and we expect only a mild pick-up in Q2 (to 1.5 per cent)," Bank of Montreal chief economist Douglas Porter said in a recent report after Mr. Poloz issued a more upbeat assessment last week.
"While Mr. Poloz is likely correct that the worst of the oil shock is behind us, that doesn't mean we are going to see a quick reversal from the downdraft."
- David Parkinson: Poloz paints rosy picture of U.S. - and that's good for Canada
- 'Loonie makes like Lazarus': Why the Canadian dollar is on such a roll
- Inflated housing, deflated loonie: Tourist ads we'd love to see
- Poloz says Canada oil-shock effects to turn positive in second half
Fitch dings Japan
Abenomics took another hit today as Fitch Ratings took Japan down a notch.
The ratings agency said it cut Japan to A from A+ as it cited the country's fiscal challenges.
"Fitch's downgrade reflects the fact that the Japanese government did not include sufficient structural fiscal measures in its budget for the fiscal year April 2015-March 2016 (FY15) to replace a deferred consumption tax increase," the agency said.
"The agency had placed Japan's [issuer default ratings] on Rating Watch Negative on 9 December 2014 following the government's decision to delay the scheduled consumption tax increase that was the centrepiece of its medium-term fiscal consolidation effort. At that time, Fitch said the ratings would be downgraded in the absence of broadly equivalent fiscal measures to replace the deferred consumption tax increase in the FY15 budget."
The Fitch downgrade is yet another challenge for Prime Minister Shinzo Abe and his economic program.
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