US mortgages

Almost one in 10 US homeowners with mortgages was delinquent, with at least one payment behind in the Q3 of 2009, the Mortgage Bankers Association said on Thursday  -- that's about five million households.

Thursday's data underlined the level of stress on the housing market.

“Despite the recession ending in mid-summer, the decline in mortgage performance continues.  Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks, not percentage point increases in GDP.  Over the last year, we have seen the ranks of the unemployed increase by about 5.5 million people, increasing the number of seriously delinquent loans by almost 2 million loans and increasing the rate of new foreclosures from 1.07% to 1.42%,” said Jay Brinkmann, MBA’s chief economist.

Bank of Japan and deflation

The Bank of Japan (BoJ) announced today a decision to hold its benchmark interest rate unchanged at 0.1% saying it will "provide steady support for economy to return to a sustainable growth path with price stability."

The BoJ said: "Japan's economy is picking up mainly due to various policy measures taken at home and abroad, although the momentum of self-sustaining recovery in domestic private demand remains weak."

In the previous month, the bank has said the economy was"starting to pick up."

It said it expects"the pace of improvement of the economy is likely to remain moderate until around the middle of fiscal 2010."

However, both Deputy Prime Minister Naoto Kan and Finance Minister Hirohisa Fujii said that the economy was in deflation, leading to concerns that the recovery may slide into reverse.

Consumer prices fell an an annual rate of 2.3% in September

The BoJ said:"With regard to prices, there is a possibility that inflation will rise more than expected due to a rise in commodity prices brought about by higher growth rates in emerging and commodity-exporting economies. On the other hand, there is a risk that the rate of inflation might decline due, for example, to a decline in medium to long-term inflation expectations."

Davy chief economist comments: "The Bank of Japan continued the four main central banks' commitment to loose monetary policy. It kept its overnight rate at 0.1% and maintained its stance on its plans for the immediate future. On the economy, it is more confident that growth will accelerate in H2 2010. Like the Bank of England, ECB and Fed, it is unlikely to withdraw any stimulus until Q2 2010 at the very earliest.

The key line on the monetary policy outlook was left more or less unchanged: 'the Bank will aim to maintain the extremely accommodative financial environment'. Note that the previous October 30th statement in turn had been a little stronger than the one released on October 14th by including a similar line. Going back to the penultimate meeting five week ago, the commitment had been as follows: 'the Bank, paying attention for the time being to the downside risks to economic activity and prices, will continue to exert its utmost efforts'.

The bank is quite sanguine on the economy. For now, it notes that the recovery is not quite self-sustaining yet, and it sees only moderate improvement until mid-2010. But it believes that activity will strengthen thereafter. Taken together with the commitments from Asian politicians in the last fortnight, it suggests that monetary and fiscal conditions will remain pretty helpful in the region for some time yet."

"A lot of the profits of companies that we've seen are partly artificial because governments have put in so much liquidity in the system and produced all kinds of plans," Philippe Gijsels from Fortis Global Markets said Friday. "Maybe the earnings estimates for next year are probably too optimistic." He is "wary" on the markets: