Spanish Credit Rating Downgraded

Standard & Poor's cut Spain's credit rating by 2 notches to BBB+ from A due to the country's budget deficits and dismal economic outlook. S&P's is the first of the 3 major rating agencies to take away Spain's A credit rating. This aroused concerns about worsening of the Eurozone crisis although the IMF successfully increased the global funding to US$ 430B.

The Bank of Japan eased monetary policy again in April by increasing the size of its Asset Purchase Program. Policymakers announce to increase its JGB buying by around 10 trillion yen, extend the duration of JGBs targeted to 3 years from the current 2 years, and would increase the size of its ETF buying by 0.2 trillion yen and its J-REIT buying by 0.01 trillion yen. Moreover, the central bank reduced the size of its fixed rate market operations by 5 trillion yen as a result of taking into account recent episodes of under-subscription.

On the dataflow, Japan's inflation remained mild with the core national CPI gaining +0.2% y/yin March from +0.1% a month ago. The leading Tokyo core CPI fell -0.5% y/y in April following a -0.3% contraction in the prior month. Growth in industrial production was disappointing with a +1.0% gain in March, compared with consensus of a +2.3% rise, despite an improvement from the -1.6% dip a month ago.

The US economic growth probably eased to +2.5% q/q in 1Q12, from +3.0% in the last quarter of 2011. The University of Michigan Confidence Index might have been revised higher, by +0.2 point, to 75.9 n April.