Aurelia Butler

TOKYO (Reuters) -Bank of Japan policymakers debated the impact a weak yen could have on prices, with some flagging the chance of raising interest rates sooner than expected if inflation overshoots, minutes of the central bank’s April policy meeting showed.A few members of the nine-person board said the central bank must respond with monetary policy if exchange rate moves, which are among the key factors affecting the economy and prices, alter its view on the outlook and risks, the minutes released on Wednesday showed.The weak-yen boost to inflation may have become bigger and more lasting than in the past, as companies are already keen to hike prices and wages, some members were quoted as saying.”There are various upside risks to inflation,” such as the fallout from a weak yen, expansionary fiscal policy and a tight labour market, one member said, according to the minutes.”Currency moves are among key factors affecting the economy and prices. If the economic and price outlook, or the risks, change, the BOJ must respond with monetary policy,” a few members were quoted as saying in the minutes.At the April meeting, the BOJ kept interest rates around zero and highlighted a growing conviction that inflation was on track to durably hit its 2% target in coming years, signalling its readiness to hike borrowing costs later this year.The minutes came in the wake of BOJ Governor Kazuo Ueda’s comments in parliament on Tuesday that the central bank could raise interest rates in July depending on economic and price data available at the time.The discussion at the April meeting highlights a shift away from the BOJ’s previous stance that the boost to inflation from a weak yen would prove temporary, and thus won’t directly affect the timing of future rate hikes.In a sign of how the board was turning increasingly hawkish, one member said the BOJ could normalise monetary policy sooner than expected if inflation overshoots due in part to a weak yen, the minutes showed.Another member also said the central bank could raise rates more than what markets currently expected, if the economy and prices move in line with its projections, the minutes showed.The BOJ exited negative rates and bond yield control in March in a landmark shift away from a decade-long, radical stimulus programme.Many economists expect the BOJ to hike interest rates to 0.25% this year, though they are divided on whether it will come in July or later in the year.A weak yen complicates the BOJ’s policy path. While it accelerates inflation by pushing up imported goods prices, the subsequent rise in living costs has weighed on consumption and cast doubt on the strength of Japan’s economy. More

Median basic pay settlements in the three months to May were 4.6% higher than a year earlier, up from 4.5% in the three months to April, which was downwardly revised from 4.9%, according to human resources data provider Brightmine.The Bank of England has been watching pay data closely ahead of Thursday’s interest rate decision for June.Before they cut interest rates, most BoE policymakers want to see signs that annual wage growth is heading back to the 3-4% range from the most recent rate of 6%.”As we head further into the year, we can see that settlement levels are sitting firmly below 5%, a level we now expect them to sit at through to the end of the year,” Sheila Attwood, senior content manager at Brightmine, said.”Employers have reacted to lower inflation by bringing down the level of settlements compared with last year, but are keeping pay rises comfortably above inflation while employees continue to feel cost of living pressures.”A BoE survey conducted in April showed employers anticipate pay growth of 4.6% over the coming year.The Brightmine survey was based on 132 pay settlements between March 1 and May 30, covering more than 533,579 employees. More

TOKYO (Reuters) – Japanese exports rose sharply in May driven by U.S.-bound shipments of cars and China-bound chip-making machinery as the weak yen helps make its goods more competitive.Shipments rose 13.5% year-on-year in value terms in May, data from the Ministry of Finance (MOF) showed on Wednesday, versus a 13.0% increase seen by analysts in a Reuters poll and an 8.3% gain in April.Imports grew 9.5%, compared with expectations for a 10.4% rise and April’s 8.3% increase.That left the trade balance at a deficit of 1.22 trillion yen, compared with an average analyst estimate of 1.31 trillion yen in deficit.In terms of volumes, however, exports struggled to pick up, reflecting slowing global demand.Export volume fell 0.9% year-on-year in May.Weakening demand could cloud policymakers’ hopes that exports will offset tepid domestic consumption.The trade data came on the heels of Reuters Tankan that showed confidence among big manufacturers fell in June. The batch of data underscores the uneven nature of economic recovery.By destination, exports to China rose 17.8% year-on-year in May, led by demand for chip-making machinery, the trade data showed.U.S.-bound shipments, Japan’s ally and key market, grew 23.9% year-on-year in May due to car exports, while those to European Union fell 10.1%.The trade data followed the Bank of Japan’s decision last week to reduce its huge bond purchases with a detailed plan to be unveiled next month, taking a step forward towards rolling back more than a decade of its stimulus programme.Still, uncertainty over the fragile economy could make future interest rate hikes far from assured.($1 = 156.2200 yen) More

TOKYO (Reuters) – Japanese manufacturers are markedly less confident about business than three months ago due to higher materials costs, the Reuters Tankan poll for June showed, though the index remained in positive territory for a fourth straight month.The results of the monthly poll – a leading indicator for the Bank of Japan’s (BOJ) closely watched tankan quarterly business survey – underscore the uneven nature of the country’s economic recovery. The next BOJ tankan will be released on July 1.The manufacturers’ sentiment index declined to +6 from +10 three months ago and from +9 in May, with firms hurt by a yen that is trading near 34-year lows and inflating costs of raw materials that resource-poor Japan needs to import from abroad.”Passing on materials costs to customers and the increase in labour costs are sapping appetite for capital expenditure and other spending,” a machinery maker manager wrote in the comment section of the poll.Some manufacturers also expressed concerns about the knock-on effects of a scandal in the auto industry where Toyota (NYSE:TM), Mazda and others have acknowledged irregularities in vehicle certification tests.”The business environment surrounding industrial machinery is clearly changing for the worse,” wrote a manager in the auto sector. “It’s unclear how the certification issue will affect our business.”That said, manufacturers overall were a bit more upbeat about the months ahead and the index is expected to rebound to +9 in September.The non-manufacturers index climbed to a three-month high of +31 in June. That was up five points from May but one point lower than three months ago. It is expected to stay at +31 in September.Expectations that rising wages and income tax cuts from June will help underpin consumer spending are likely shoring up business confidence in the service sector, economists have said.The Reuters Tankan poll was conducted June 5-14. Some 500 large non-financial companies were surveyed on condition of anonymity and roughly 230 firms responded.The indexes are calculated by subtracting the percentage of pessimistic respondents from optimistic ones. A negative figure means pessimists outnumber optimists. More

Conway said in a speech that was live-streamed that increasing spare capacity in the economy including easing in the labour market is likely to further reduce inflation pressure going forward.”Lower inflation expectations and a lower propensity for firms to make relatively large price increases will help lower inflation persistence,” he said.Conway added, however, that the processes could occur more quickly or slowly than projected.The RBNZ has undertaken its most aggressive policy-tightening since 1999, when the official cash rate was introduced, lifting it by 525 basis points since October 2021 to 5.50%. In May, it signaled a possibility it could go higher if it decides inflation and inflation expectations are not heading towards its target band of 1% to 3%.New Zealand inflation was at 4.0% in the first quarter of 2024. Conway said the central bank expects inflation to return to its target band by the end of 2024.”We face some remaining challenges and uncertainties in bringing inflation sustainably back to target,” he said.Conway added that the central bank expected to see spare capacity start emerging in the economy over 2024 after several years of the economy growing well beyond its sustainable rate.”We expect this spare capacity to feed through strongly into lower domestically generated inflation,” he said. New Zealand economic growth data for the first quarter is due out on Thursday and a Reuters poll of 13 economists sees annual growth of just 0.2%. More

(Reuters) – A look at the day ahead in Asian markets.Investors are no doubt relieved that disinflationary pressures seem to be spreading across many parts of the world, but there were a few warnings on Tuesday against complacency that they might keep in mind going into Wednesday. Australia’s central bank struck a hawkish tone in its policy statement, some U.S. Federal Reserve officials expressed similar wariness over inflation, and global oil prices extended their recent climb to the highest in seven weeks. That wasn’t enough to kill the general bullishness pervading world markets – Asian stocks posted solid gains, Nvidia (NASDAQ:NVDA) became the world’s most valuable publicly-traded company and the S&P 500 and Nasdaq hit new highs – but it’s a reminder that markets are not a one-way bet. Momentum cooled also in part to disappointing U.S. retail sales figures that suggest growth in the world’s largest economy is slowing – the dollar and Wall Street barely budged, and Treasury yields fell.Asian markets might struggle for direction on Wednesday. Trade figures from Japan and Indonesia, current account data from New Zealand, and Japan’s tankan business surveys are highlights on the regional economic calendar. The New Zealand dollar could take its cue from the Reserve Bank of New Zealand’s chief economist Paul Conway, who will deliver a speech on inflation. Swaps markets are pricing in 35 basis points of easing from the RBNZ this year and a further 90 bps to 100 bps next year. That’s significantly more than the Reserve Bank of Australia, which is only seen cutting rates 50 bps by the end of next year.The Aussie dollar was one of the best-performing G10 currencies on Tuesday after the RBA left its cash rate on hold at 4.35%, as expected, but emphasized the need to be vigilant on inflation.Japan’s yen finds back in and around the ‘intervention zone’ of 158.00 per dollar to 160.00 per dollar, where Tokyo intervened on two occasions recently to prevent it from weakening any further.The Bank of Japan will be more wary than most about the inflationary effects of the weak exchange rate and oil, which is up more than 10% in the last two weeks. Japanese lender Norinchukin Bank, meanwhile, will sell more than $63 billion of its holdings of U.S. and European government bonds during the year ending March 2025, Nikkei reported. Norinchukin will do this as part of the bank’s efforts to “drastically change its portfolio management,” Nikkei quoted the bank’s CEO as saying.It will be interesting to see what effect, if any, this has on the bonds being sold and the yen. Japan is the biggest overseas holder of U.S. Treasuries and the largest creditor nation in the world – repatriating a small part of these holdings could move world markets.Here are key developments that could provide more direction to markets on Wednesday:- Japan trade (May)- Japan tankan surveys (June)- RBNZ’s Conway speaks More

GAVIAO PEIXOTO, Brazil (Reuters) -Brazilian planemaker Embraer sees India, Saudi Arabia, the European Union and the United States as strategic markets for its defense unit as it looks to expand sales of the C-390 Millennium, the head of Embraer Defense said on Tuesday.India has an open tender to buy military planes while Saudi Arabia, looking to replace an aging fleet of Lockheed Martin (NYSE:LMT)’s C-130 Hercules, is currently in “early engagement” with Embraer, Bosco da Costa Junior told reporters at an event.”They don’t have an open tender, but they need to replace their old C-130s. We did a lot of studies and concluded that the (Embraer) C-390 could deliver additional capability in this replacement process,” Costa Junior said.A potential Saudi purchase could reach 25 units, and Embraer expects the country to make a decision in two to four years, the executive added.In addition to Embraer’s home country Brazil, nations such as Portugal, Hungary, the Netherlands, Austria, the Czech Republic and South Korea have selected the planemaker’s military transportation aircraft.Expanding its presence abroad with more C-390 sales has been a key goal of Embraer’s defense division, which also sees Sweden as a potential customer. It has partnerships with Mahindra in India and Saab in Sweden to introduce the plane.Embraer has also been “aggressive on several fronts” in the United States, Costa Junior said, including exploring opportunities for mergers or acquisitions as well as pitching the C-390 to the U.S. Marines, Air Force and special forces.”We do believe that the C-390 could add additional value to those entities in the U.S.,” the executive said. “One thing is clear to us: We would like to become a partner of the U.S. government.”Asked if any potential relationship with China could compromise connections with the U.S., Costa Junior stressed that Embraer’s defense business had no relationship or any kind of discussions with the Asian superpower.”We are 100% U.S.- and NATO-oriented,” he said. More

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