After receiving cabinet approval yesterday, the Japanese government revealed $45 billion in additional spending as part of the more than $260 billion fiscal stimulus package Prime Minister Shinzo Abe announced last week. The money is earmarked for projects ranging from infrastructure improvements and programs designed to help small and mid-sized businesses. Other programs will include direct cash handouts to low-income households. Separately, in a presentation for media outlets earlier today, Bank of Japan governor Haruhiko Kuroda assured investors that the current policy review scheduled for release on September 21 is unlikely to result in any change in the current pace of quantitative easing. Coming on the heels of the Bank of Japan announcement not to cut rates last week that disappointed markets, the reiterated commitment to expand the monetary base may come as a relief. For now, it appears that political leaders and policymakers in Japan remain committed to the pursuit of 2 percent inflation despite macroeconomic headwinds.
Australia slashes rates. The Reserve Bank of Australia announced yesterday that the benchmark cash rate has been reduced to a record low of 1.5 percent as had been widely anticipated by markets. In the accompanying statement, policymakers at the central bank justified the 25-basis-point cut on the back of deflationary pressures and a slack labor market. The release also touched on the Australian housing market. After years of rapid appreciation, the Reserve Bank of Australia stated that the current level of housing price appreciation is currently moderate.
Commerzbank abandons full-year guidance. Germanys second-largest bank, Commerzbank, published second-quarter results that included a 32 percent year-over-year decline in net income that had been previously revealed in a preliminary announcement. Critically, the lender abandoned full-year earnings guidance as European Central Bank low interest rates and deposit charges put pressure on profit margins. Commerzbank declined sharply in trading in Frankfurt following the release. European bank stocks sold off in trading today in response, with the Stoxx bank subindex off by nearly 4 percent.
Honda beats estimates. Second calendar-quarter financial results released today by Honda Motor Co. included net income that significantly outperformed consensus analyst targets for the period. Stronger-than-anticipated sales in critical U.S. and China markets were primary catalysts for the better-than-forecast results. Net income came in at $1.7 billion, or $0.94 per-share.
Mitsubishi blames failures on flawed culture. Mitsubishi Motors Corp. yesterday announced results of an internal investigation into the fuel efficiency scandal that has ensnared not only its Japanese automaker but also its competitors. The investigation concluded that internal infighting and a lack of communication led to the fraudulent practices. After the initial revelations, several senior executives departed the company and rival Nissan Motor Co. acquired a 34 percent stake in the firm.