Aurelia Butler

TOKYO (Reuters) – A prime potential candidate for Japan’s next prime minister endorsed the Bank of Japan’s policy of gradually raising interest rates, saying its normalisation of monetary policy could push down prices and boost industrial competitiveness.”The Bank of Japan (BOJ) is on the right policy track to gradually align with a world with positive interest rates,” ruling party heavyweight Shigeru Ishiba told Reuters in an interview.”The negative aspects of rate hikes, such as a stock market rout, have been the focus right now, but we must recognise their merits, as higher interest rates can lower costs of imports and make industry more competitive,” he said.Japan’s ruling Liberal Democratic Party (LDP) is set to hold a leadership election in September.Ishiba, a four-time candidate for the party’s president, has yet to officially announce his intention to run in the latest race, but regularly ranks high in voter surveys on future prime ministers.He made the remarks after the BOJ’s decision last week to raise interest rates and its readiness for further hikes roiled financial markets.Japan’s Nikkei stock average on Monday plunged in the worst sell-off since October 1987 on the prospect of higher rates and U.S. recession fears but recouped most of the loss on Tuesday.”Japan’s economy is largely driven by domestic demand,” with exports accounting for just a fifth of its gross domestic product, Ishiba said.”Even though some export-oriented companies are benefiting from the weak yen, there is no doubt a majority of people are more affected by higher prices stemming from the weak currency.”Ishiba said the general consensus on the ideal range for the yen is 110-140 per dollar, but he declined to comment on his own views on desirable currency levels. The yen traded around 144 to the dollar early Wednesday.He also noted that higher interest rates would help market mechanisms work properly in the economy by promoting a shift of capital to companies with strong growth and boosting Japan’s industrial competitiveness as a result.Ishiba has long been a critic of former BOJ governor Haruhiko Kuroda’s radical monetary stimulus, which was part of former premier Shinzo Abe’s “Abenomics” policies to prop up growth.The BOJ should explain to the public the merits of higher interest rates, Ishiba said, as Japan convenes a special parliament session later this month to discuss the latest market rout, where BOJ Governor Kazuo Ueda is likely to attend.It will take time for benefits to materialise, he said. “There will be a time lag, for example, for the yen to start firming and import prices to go down.”He declined to comment how far the BOJ should raise rates, stressing that politics should not weigh into the central bank’s monetary policy. More

LONDON (Reuters) – Britain needs to spend an extra 50 billion pounds ($64 billion) a year on public investment to boost productivity and long-run growth, largely funded by public borrowing, the National Institute of Economic and Social Research said on Wednesday.NIESR forecasts Britain’s economy will only grow by 1.1% this year and does not expect annual growth to exceed 1.3% in between now and 2029 – well short of a 2.5% goal suggested by Prime Minister Keir Starmer in the election campaign which took Labour to power at last month’s election.Asked if Labour had a chance of meeting this goal, NIESR Deputy Director Stephen Millard said no.Labour finance minister Rachel Reeves has set a more formal target of achieving the fastest growth in economic output per head among the Group of Seven advanced economies for two consecutive years. Millard said this looked slightly more achievable.”We have some catching up to do with other G7 countries, so there is some room for us to grow faster. Do we have the capacity to do it? That’s the $64 million question,” he said.In a quarterly report on Britain’s economy, NIESR, one of Britain’s leading economic think tanks, said public investment needed to be doubled to 5% of national income to fund transport, housing, education and skills and boost productivity.Growth in output per head in Britain has lagged behind other advanced economies since the 2008-09 financial crisis.To support this increased investment – which would be well above that in most other rich countries – the government should no longer include borrowing to fund investment in its self-imposed fiscal rule, NIESR said.That sits at odds with Reeves’ public focus on fiscal prudence.In a statement last week to parliament, Reeves said the former Conservative government had left the economy in a far worse state than she expected and she scrapped some smaller investment projects – a move Millard called “quite concerning”.However, NIESR Director Jagjit Chadha did query whether the British state had the capacity to spend extra investment wisely.”Reluctantly I think we probably do not. And so we stick to the fiscal rules … pat ourselves on the back for being careful guardians of the public purse and continue to fail in addressing our deep set and persistent failures,” he wrote.($1 = 0.7870 pounds) More

(Reuters) -Rivian on Tuesday stuck to its forecast that production would not rise this year and said deliveries in the third quarter would be slightly lower, as the EV maker races to rebuild inventory after a factory shutdown in April designed to cut costs.Shares of the company, which also said it would halt production for over a month next year as it prepares to launch a smaller vehicle in 2026, fell nearly 6% in volatile trading after the bell. Rivian (NASDAQ:RIVN), which makes the R1S SUV and R1T pickups, is seen as one of the few electric vehicle makers with potential to navigate a sharp slowdown in EV demand. But a drastic reduction in cost and the rollout of its more affordable SUV are seen crucial to its success.With the three-week factory retooling, Rivian introduced a new generation of its R1 vehicles with advanced features and a simpler manufacturing process and introduced offers on leases to boost sales of the older-generation vehicles. While that helped Rivian beat second-quarter revenue estimates, the company is now dealing with a depleted inventory base and expecting a slight fall in deliveries in the current quarter, CEO RJ Scaringe told Reuters.Rivian has largely built its dual motor vehicles and was ramping up production of other variations for customers who want vehicles delivered immediately, he said. Cost reduction from the factory retooling will be realized largely in the second half of the year, Scaringe said, reaffirming the company’s target of turning its first profit in the last three months of the year.Tuesday’s results followed Volkswagen (ETR:VOWG_p) Group’s $5 billion investment in Rivian last month as part of a new joint venture to share expertise in EV architecture and software development that will help sustain the U.S. EV maker’s cash balance until it starts selling the R2 SUVs.Rivian still loses thousands of dollars for every vehicle it makes – the company said its loss amounted to 39% of a vehicle’s sales price, greater than the LSEG estimates of 34%.”Gross margins will really take off as they get volume as they are making a lot more money on the R1 platform now, whereas with the first-generation there was no way they were going to get to profitability,” said investor Vitaly Golomb, managing partner at Mavka Capital.Rival Lucid (NASDAQ:LCID) said on Monday its largest shareholder will inject up to $1.5 billion in the maker of Air luxury electric sedans as it looks to roll out its much-awaited seven-seater SUV, the Gravity, later this year. More

Illumina has seen sluggish demand for its tools and services, used to develop therapies and vaccines, from key markets such as China and cautious spending from its customers such as biotechnology companies, amid high interest rates.”Consumable sales remained solid as customers continued to increase their sequencing activity, but instrument demand has softened in a constrained funding environment,” CEO Jacob Thaysen said.The company expects its Core Illumina revenue to decline 2% to 3%, compared to the previous year. Earlier, it had expected full-year revenue from the segment to be flat.On an adjusted basis, it expects a per-share profit of $3.80 to $3.95 for its core segment for 2024. Analysts expect full-year adjusted profit of $3.91 per share for the whole company.Of Illumina’s two reportable segments, Core Illumina and Grail , the latter was spun off on June 24.It decided last December to divest cancer diagnostic tests maker Grail after the companies ran afoul of U.S. and European antitrust enforcers for more than two years and faced fierce opposition from activist investor Carl Icahn.San Diego, California-based Illumina’s quarterly revenue was $1.11 billion in the second quarter, compared to analysts’ estimate of $1.08 billion.On an adjusted basis, it earned 36 cents per share of profit during the quarter ended June 30, while analysts’ on average expected 90 cents per share.The company had flagged that it would take a goodwill impairment charge of $1.47 billion in the second quarter related to the Grail spin-off. More

Discussions focused on policies that could be supported by an IMF program, it said in a statement, such as those which could strengthen public finances, boost bank reserve buffers, improve governance and transparency and mitigate risks from the country’s investment in Bitcoin.The IMF and El Salvador have reached “preliminary understandings” on improving the nation’s primary balance, the IMF said, to around 3.5% of gross domestic product (GDP) over a three-year period.The country also plans to gradually strengthen its reserve buffers by reducing reliance on domestic financing and instead receiving support from the IMF and other development banks, the fund said.On Bitcoin, the IMF said that many potential risks “have not yet materialized,” but that there was a joint recognition that El Salvador needed to enhance transparency and mitigate risks from the project.Salvadoran President Nayib Bukele made bitcoin a legal tender and has touted plans for “Bitcoin City,” a tax-free crypto haven powered by geothermal energy from a volcano. More

(Reuters) – A look at the day ahead in Asian markets. Investors in Asia will be hoping that the recovery in global sentiment and risk assets on Tuesday extends into Wednesday, although the rebound in U.S. bond yields and the dollar may cool some of that optimism.Nothing epitomized ‘Turnaround Tuesday’ more than the whoosh in Japanese stocks – a day after tumbling 12% in their second biggest fall on record, stocks rallied 10% for their third biggest rise on record.In some ways, however, day-to-day swings of that magnitude based on not a lot of fresh or major market-moving news are red flags. They’re typical of more protracted and volatile downturns, and many investors are retaining a cautious stance.That said, any respite is welcome. Implied yen volatility remains elevated but eased off on Tuesday, and Wall Street and MSCI’s emerging, Asian and world stock indices all gained more than 1%.Fears of impending U.S. recession will have been allayed further too, as the Atlanta Fed’s GDPNow growth tracker estimate for third quarter GDP growth was raised to 2.9% from 2.6%. Little wonder that U.S. bond yields and the dollar rose. That’s a twin dynamic that is rarely positive for emerging markets, but if it is part of a broader market recovery and cooling off in volatility then investors may be more forgiving.Emerging market participants will also note that the steep fall in U.S. yields in recent weeks has more than offset the decline in stock prices. So much so that emerging market financial conditions are now the loosest since January, according to Goldman Sachs.Wednesday’s calendar in Asia includes Chinese trade figures for July, the latest FX reserves holdings from China, Japan and Hong Kong, and earnings reports from Singapore’s top bank DBS and Japan’s SoftBank (TYO:9984) Group. China’s trade data will be under even particular scrutiny given the ratcheting up of U.S. trade and tariff tensions. Export growth is seen quickening, a potential silver lining to the world’s second-largest economy still struggling under a property sector bust, weak consumer demand and the threat of deflation. Monthly changes in countries’ FX reserves holdings rarely have an immediate impact on financial markets, but anyone with an interest in the dollar’s reserve status will cast an eye towards the latest updates from Beijing, Tokyo and Hong Kong. That’s nearly $5 trillion of reserves, 40% of the global total. China holds the world’s largest stash, with $3.22 trillion, and Japan is the largest overseas holder of U.S. Treasuries, with $1.13 trillion. Several leading policymakers in the Asia and Pacific region are scheduled to speak on Wednesday, including Reserve Bank of Australia assistant governor Sarah Hunter, Bank of Japan deputy governor Uchida Shinichi and Bank of Thailand governor Sethaput Suthiwartnarueput. Here are key developments that could provide more direction to Asian markets on Wednesday:- China trade (July)- China, Japan, Hong Kong FX reserves (July)- Softbank (OTC:SFTBY) earnings (Q1) More

Days of havoc in global markets have analysts rushing to calculate the size of a global carry trade in which investors have borrowed money from economies with low interest rates, such as Japan or Switzerland, to fund investments in higher-yielding assets elsewhere.The strategy, which kept money flowing into global risk assets for years, was shaken after the Bank of Japan raised interest rates last week, forcing some investors to abandon the trade as the yen surged higher. The resulting unwind sparked huge losses in global stock markets and saw Japan’s Nikkei notch its worst day since 1987.”I’d guess the carry trade is only about 50% unwound,” wrote James Malcolm, a UBS Japan macro strategist based in London, in a Tuesday note to clients. Malcolm estimates the dollar-yen carry trade grew to at least $500 billion at its peak. He calculated that some $200 billion of the carry trade has been unwound over the last two to three weeks. “How much the carry trade could unwind depends not so much on the level of the interest rate differential but the change in the interest rate differential,” he said. Comparing the current move with the carry trade unwind of 1998 suggests more unwinds could be ahead, he said.Shaun Osborne of Scotiabank echoed that sentiment, noting that two gauges of the carry trade – the Bloomberg G10 Carry Index and the Bloomberg GSAM FX Carry Index – had shed around 5%, only half of what they lost in three notable carry trade unwinds in the past. “The adjustment in carry positioning over the past few weeks has been rapid but it may have further to run,” he said in a Tuesday note.Hedge funds and other speculative investors, whose positioning is captured in a weekly report by the Commodity Futures Trading Commission, have only reduced their short yen positions by about 50%, Osborne said. The latest report was released last week.The report “is a small window on FX positioning but the data along with the (so far) relatively limited correction in carry trade index returns suggest that there is more room for the carry trade to unwind in the short run,” he said. “That would suggest more volatility in risk assets ahead and more strength in the JPY ahead.” More

Holding the benchmark rate was backed by 12 of 22 analysts polled, while the 10 others forecast a 25 basis point cut.In late June, the central bank’s board voted to keep the rate at 11% after cutting it in March for the first time since launching its monetary tightening cycle in 2021. But the bank has signaled that a slowing inflation rate could pave the way for future cuts.Since then, Mexico’s consumer price index has shown upward pressure on inflation. Prices monitored by the index shot up during the first half of July to their highest rate in nearly a year, even as core inflation has slowed and currently hovers close to the central bank’s target of 3%, plus or minus one percentage point.This week, Mexico’s peso currency weakened to its lowest level in more than two years versus the U.S. dollar, due largely to volatility in global markets, a development seen by most analysts supporting a potential decision to leave the benchmark rate unchanged.The central bank will publish its monetary policy statement on Thursday at 1:00 p.m. local time (1900 GMT), shortly after official data on July’s full-month inflation rate is set to be released.Poll data: More