Aurelia Butler

TOKYO (Reuters) – Japanese financial institutions’ profitability has decreased significantly in the past 25 years, making them vulnerable to potential losses from any sharp rises in interest rates, the central bank said on Thursday.While many companies increased long-term, fixed-rate loans to take advantage of Japan’s ultra-low interest rates, some have suffered sluggish profits, the BOJ said in a report.Banks’ lending to such low-profit firms may turn sour as interest rates begin to rise, the BOJ said in the report, which looked into the impact prolonged monetary easing had on Japan’s banking system.”Financial institutions’ profitability has decreased sharply in the past 25 years,” with some regional lenders becoming more vulnerable to stress, the report said.”If interest rates rise sharply in a short period of time, financial institutions could incur latent losses on their securities holdings,” which in turn could discourage them from lending, it said.The report was compiled as part of a comprehensive review the BOJ is conducting on the pros and cons of past monetary easing steps.The assessment underscores the BOJ’s focus on how prospects of rising interest rates could affect Japan’s banking sector, which have weathered a long period of ultra-low rates.Since deploying a massive asset-buying programme in 2013, the BOJ has kept interest rates ultra-low through a radical stimulus programme to fire up inflation to its 2% target.While the ultra-loose policy helped companies by pushing down borrowing costs, it eroded financial institutions’ profits by crushing the margin they earn through lending.In a landmark shift away from the radical monetary stimulus, the BOJ ended eight years of negative interest rates in March. It has also hinted of further hikes in the short-term policy rate from current levels around zero.Upon becoming BOJ governor in April last year, Kazuo Ueda announced plans for a long-term review to scrutinise the effects and side-effects of the central bank’s radical stimulus. More

Standard DigitalWeekend Print + Standard Digitalwasnow $85 per monthBilled Quarterly at $199. Complete digital access plus the FT newspaper delivered Monday-Saturday.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print editionWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisGlobal news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts10 monthly gift articles to shareGlobal news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print editionEverything in PrintWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisPlusEverything in Premium DigitalEverything in Standard DigitalGlobal news & analysisExpert opinionSpecial featuresFirstFT newsletterVideos & PodcastsFT App on Android & iOSFT Edit app10 gift articles per monthExclusive FT analysisPremium newslettersFT Digital Edition10 additional gift articles per monthMake and share highlightsFT WorkspaceMarkets data widgetSubscription ManagerWorkflow integrationsOccasional readers go freeVolume discountFT Weekend Print deliveryPlusEverything in Standard DigitalFT Weekend Print deliveryPlusEverything in Premium Digital More

U.S. stock futures traded marginally higher Thursday, with the tech-heavy Nasdaq Composite leading the way. By 08:08 ET (13:08 GMT), the Dow futures contract was 6 points, or 0.1%, higher, S&P 500 futures climbed 22 points, or 0.4%, and Nasdaq 100 futures rose by 140 points, or 0.7%.The main Wall Street indices are all on course for a winning week, with both the S&P 500 and the NASDAQ Composite reaching fresh records on Tuesday. The stock market was closed Wednesday for the Juneteenth holiday.Nvidia (NASDAQ:NVDA) has led the way, becoming the most valuable company in the world earlier this week [see below], with enthusiasm towards all things AI driving the gains.The economic data slate includes initial jobless claims figures and housing starts data later in the session, as investors look for more clues towards when the Federal Reserve will start cutting interest rates.  The Bank of England holds its latest policy meeting later Thursday, with the central bank widely expected to hold interest rates unchanged.U.K. inflation returned to its 2% target for the first time in nearly three years in May, data released on Wednesday showed, but wage growth and underlying pricing pressure remain a concern for the central bank.Bank of England Governor Andrew Bailey opened the door early last month to a rate cut, saying he was “optimistic that things are moving in the right direction”, but not quite yet.Most economists in a Reuters poll last week thought the central bank would start to cut rates in August, but markets see only a 30% chance of an August rate cut and think a first move is more likely in September or November.Earlier Thursday, the Swiss National Bank trimmed its key interest rate by 25 basis points to 1.25%, its second cut in a row.The SNB surprised markets with a cut in March, with inflation remaining within the central bank’s target of 0%-2%.Nvidia is likely to remain in the spotlight Thursday, after the chipmaker became the world’s most valuable company earlier this week, as it has been a major beneficiary of a spike in enthusiasm around the applications of artificial intelligence.It is now worth $3.34 trillion, having ended trading on Tuesday at nearly $136, making it more valuable than fellow tech giant Microsoft (NASDAQ:MSFT), having overtaken Apple (NASDAQ:AAPL) earlier this month.Analysts at Stifel lifted their price target for Nvidia’s shares to $165 from $114, citing the company’s longer-term growth prospects and profitability metrics.”We expect the majority of near-to-medium term opportunities will come from high performance computing, hyperscale and cloud data center, and enterprise and edge computing,” they argued. “While we continue to view Nvidia’s exposure to Gaming, Automotive and Professional Visualization favorably, the shift from general purpose compute to accelerated compute represents the company’s most significant revenue and profitability growth opportunity over the next several years.”But they noted several risks to the updated price target, including a “potential digestion period following several quarters of significant investment”, unforeseen tightening of U.S. trade restrictions on technology shipped to China and “general macro[economic] events.”Tesla’s sales slumped in the European Union in May, falling 34.2%, as part of a sharp drop in demand for new battery-electric cars in the region.Demand for EVs in Europe has cooled in recent months, after rising strongly for several years, while competition to produce more affordable models has grown.To shield domestic automakers from an influx of cheap EV imports, the European Commission said last week it would impose provisional duties of up to 38.1% on China-made EVs starting July.This prompted Tesla (NASDAQ:TSLA), a U.S. electric carmaker, to state that it was likely to increase the price of its China-made Model 3 when the EU measures come into effect. Total EV sales in the European Union dropped 12% in May from a year earlier, data from the European Automobile Manufacturers Association showed on Thursday.This drop was led by a sharp 30% reduction in Germany, the bloc’s largest electric vehicle market, after the country ended late last year subsidies for buying EVs. Crude prices were stable Thursday, ahead of the release of the official U.S. inventory data.By 04:10 ET, the U.S. crude futures (WTI) traded 0.1% lower at $80.61 a barrel, while the Brent contract climbed 0.1% to $85.18 per barrel.There was no WTI settlement on Wednesday due to a U.S. holiday, which kept trading largely subdued. Data released on Tuesday by the American Petroleum Institute showed U.S. crude stocks rose by just over 2 million barrels in the week ended June 14, suggesting weakening demand even during the important summer driving season.The Energy Information Administration releases the official figures later Thursday, a day later than usual due to Wednesday’s Juneteenth holiday.The continued unrest in the oil-rich Middle East has provided a degree of support for the market, with Israeli Foreign Minister Israel Katz warning of a possible “all out war” with Lebanon’s Hezbollah, even as his country continues to battle Hamas in Gaza.  More

Standard DigitalWeekend Print + Standard Digitalwasnow $85 per monthBilled Quarterly at $199. Complete digital access plus the FT newspaper delivered Monday-Saturday.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print editionWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisGlobal news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts10 monthly gift articles to shareGlobal news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print editionEverything in PrintWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisPlusEverything in Premium DigitalEverything in Standard DigitalGlobal news & analysisExpert opinionSpecial featuresFirstFT newsletterVideos & PodcastsFT App on Android & iOSFT Edit app10 gift articles per monthExclusive FT analysisPremium newslettersFT Digital Edition10 additional gift articles per monthMake and share highlightsFT WorkspaceMarkets data widgetSubscription ManagerWorkflow integrationsOccasional readers go freeVolume discountFT Weekend Print deliveryPlusEverything in Standard DigitalFT Weekend Print deliveryPlusEverything in Premium Digital More

The one-year loan prime rate (LPR) was kept at 3.45%, while the five-year LPR was unchanged at 3.95%.In a Reuters survey of 30 market participants conducted this week, 21, or 70% of all respondents, expected both rates to stay unchanged.Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages. More

MEXICO CITY (Reuters) -Tropical Storm Alberto, the first named storm of 2024 Atlantic hurricane season, has formed over the western Gulf of Mexico, the U.S. National Hurricane Center (NHC) said on Wednesday, bringing coastal flooding across the southern U.S. coast.The “very large” storm was located about 180 miles (290 km) east of Tampico, Mexico, packing maximum sustained winds of 40 mph (65 kph), the Miami-based forecaster said. Alberto is likely to dissipate over Mexico as early as Thursday night, after bringing torrential rainfall, coastal flooding and strong winds from the center along north-eastern Mexico and the south Texas coast. The NHC warned of likely “life-threatening flooding and mudslides” across north-eastern Mexico, including Monterrey, Mexico’s third-biggest city in Nuevo Leon state.”We don’t rule out that Tropical Storm Alberto could intensify to a Category 1 hurricane”, Alejandra Mendez, who heads Mexico’s SMN national meteorological service, told a news conference, citing water temperatures above 31°C (88°F).Hurricanes have sustained wind speeds of at least 119 kph.Mendez added the storm was interacting with formations in the Pacific, which will together bring rains over large parts of Central America, a region that is still facing strong rainfall that left some 11 people dead in El Salvador over the weekend, due to landslides and road accidents.The storm has gathered up humidity from both the Gulf and the Pacific Ocean, Mendez said, and should bring much-needed rain over swathes of Mexico, which has suffered from an extended drought that has drained the country’s dams.Some dams, especially in the north-eastern Tamaulipas state, are as little as 8% full. Nuevo Leon state Governor Samuel Garcia said people should avoid leaving the house when it is raining and workers were ready to address possible impacts on the electricity grid, water and sewage systems.In the United States as far as Louisiana, videos showed flooded coastal towns and water smashing into sea walls, while in Tamaulipas, videos shared on social media showed ominous gray skies as forecasters warned Alberto could bring waves as high as 20 feet (6 meters).Across the Gulf on Mexico’s Yucatan peninsula, local news outlets filmed strong winds and heavy rainfall, after authorities recorded as much as 192 millimeters in the last day.The NHC predicted “moderate coastal flooding” along much of the Texan coast through Thursday, while Mexican forecasters expect further weekend rains in the south from another formation over the Caribbean.Forecasters have warned that this year’s Atlantic hurricane season will likely be highly active due to impacts from the La Nina weather pattern and warmer ocean waters. More

TOKYO (Reuters) – Most Japanese companies see no need for their government to follow the U.S. in raising tariffs on Chinese imports, saying excessive production capacity in China’s industrial sector does not affect them, a Reuters survey showed on Thursday.U.S. President Joe Biden last month unveiled steep tariff increases on an array of Chinese goods including electric vehicles, batteries and semiconductors, criticising Beijing for generous subsidies and policies that he said help flood global markets with cheap goods.The European Union has also slapped hefty duties on EV imports and the Group of Seven major economies, which includes Japan, last week echoed concerns about what they called harmful non-market practices by China. But 61% of respondents to the survey, conducted June 5-14, said there was no need for Japan to embark on similar measures. The rest said Japan should. Around 53% said China’s excessive production capacity had little to no impact on their business.”It could lead to an escalation in measures and countermeasures against each other and economic conditions will get worse,” a manager at a chemical company wrote in the comment section of the poll.In response to the tariffs, China has accused the United States of subverting its own free trade principles and has said the G7 statement lacks factual basis.The survey of 492 companies was conducted for Reuters by Nikkei Research, with firms responding on condition of anonymity. Roughly 230 companies responded.The companies were also asked whether they think a pledge by Prime Minister Fumio Kishida to have wages consistently climb faster than inflation was attainable but only 7% did.”I’m afraid there are many mid-sized and small companies that just can’t make ends meet if they implement wage hikes that keep pace with inflation,” a manager at a wholesale company wrote.Half said the goal was not attainable while 43% said it was hard to tell.As a temporary measure to cushion the economic blow from rising inflation, Kishida’s government is cutting annual income tax by 30,000 yen ($190) and the residential tax by 10,000 yen for each taxpaying citizen who can also claim the same amount in tax breaks for dependents and a spouse with limited income. But 69% of the companies in the poll saw the measure as having little or no effect in stimulating consumer spending.On domestic politics, 54% of the companies expect Kishida to be replaced as prime minister by the end of the year in the wake of a fund-raising scandal.The ruling Liberal Democratic Party (LDP) has said more than 80 of its lawmakers received proceeds from fund-raising events that were kept off the books. Prosecutors have indicted three lawmakers.An Asahi newspaper poll conducted last week showed support for Kishida’s government fell to 22%, down 2 percentage points from a month ago and the lowest since he took office in October 2021. Former Defence Minister Shigeru Ishiba was corporate Japan’s top choice for the country’s next leader, with 24% of firms deeming him a suitable successor. Economic Security Minister Sanae Takaichi was next with 14%.A security maven, Ishiba regularly ranks high in voter surveys on future prime ministers but is less popular with fellow LDP lawmakers whose backing is necessary to win the party’s leadership election. About 80% of companies said they want the LDP and junior coalition partner Komeito to remain in power if Kishida calls a snap election this year. If the coalition government were to lose power, “I fear that political confusion might develop into economic confusion and the weakening of Japan’s competitiveness,” a manager at a food company wrote.Only 6% of the companies surveyed wanted a government led by the Constitutional Democratic Party of Japan, currently the largest opposition party.($1 = 158.05 yen) More