Aurelia Butler

TOKYO (Reuters) – Bank of Japan Governor Kazuo Ueda said on Tuesday the central bank’s basic stance is to allow market forces to set long-term interest rates, keeping a near-term tapering of its huge bond buying on the table.Deputy Governor Ryozo Himino also told a seminar on Tuesday that the BOJ will balance the need to allow market forces to drive long-term interest rates higher, while avoiding an abrupt spike in bond yields.The remarks heighten the chance the nine-member will debate at its June 13-14 policy meeting whether to offer clearer guidance on how the BOJ will scale down its huge bond buying.Speaking in parliament, Ueda said the BOJ has maintained its roughly 6-trillion-yen ($38.7 billion) monthly pace of bond buying to avoid causing any market disruptions from a decision in March to exit its massive stimulus programme.”Our basic stance is to allow long-term interest rates to be driven by market forces,” though the BOJ will respond to any spike in bond yields with “nimble” market operations, he said.In a seminar in Tokyo, deputy governor Himino also said it was “desirable” for markets to set long-term interest rates.”On the other hand, the BOJ has been deeply involved in the bond market up till very recently and our presence remains very large. We need to avoid causing discontinuity or any unintended moves in the market,” he said.Until ending its yield curve control policy in March, the BOJ had been buying huge amounts of government bonds to cap the 10-year bond yield around zero.With that policy ditched, Ueda had repeatedly said the BOJ will eventually scale back its huge bond buying. But he had held off on offering any clue on how soon it will start.A recent slew of hawkish comments from BOJ policymakers, and an unscheduled reduction the BOJ made to its bond-buying on May 13, have left traders on alert over the chance of further cuts.Heightening market expectations that the BOJ would decide on a full-fledged bond tapering plan at next week’s meeting have driven the benchmark 10-year Japanese government bond yield to a 13-year high of 1.1% on Thursday.($1 = 155.1100 yen) More

BOGOTA (Reuters) – A collapse in Colombia’s tax collection is setting off alarm bells for the market, which says the government will need to contend with an estimated budget shortfall of some 27 trillion pesos, about $6.9 billion, this year.Finance Minister Ricardo Bonilla has predicted fiscal adjustments in the fourth quarter, but analysts said changes will need to come sooner, lest the country miss fiscal targets or ratings agencies take notice.Tax collection fell 40.9% in April to $4.83 billion, taking the overall shortfall to about $2.85 billion in the first four months of the year compared to the target.The DIAN tax agency has already said the country will not meet targeted collection of nearly $2.6 billion from arbitrations during 2024, and a court decision allowing extractive companies to continue deducting royalties from their taxes will also hit public coffers.”The fiscal situation is worrying, both at the level of spending and of income,” said Andres Abadia, head economist for Latin America for Pantheon Macroeconomics. “The economy will have to pay for it.”The government will need to make adjustments in its mid-year fiscal plan in mid-June if it wants to avoid a crisis in investor confidence, analysts said.The finance ministry did not respond to requests for comment.Various market sources who spoke to Reuters said the government faces a dilemma when trying to react to lower-than-expected income – should it significantly reduce spending, take on more debt or both?Either decision would have fiscal effects, they said.”I think (the changes) will be insufficient,” said Camilo Perez, the director of economic studies at Banco de Bogota. He expects spending cuts and the government to increase the issuance of peso-denominated TES bonds. Many analysts also expect the government to continue debt swaps to extend expiries.More debt would mean an increase in the fiscal deficit for this year to about 5.3% of gross domestic product, only just complying with the fiscal rule, a 2011 measure that imposes policy constraints to protect public finances.A deficit of that level would create volatility, with investors uncertain about capacity to control the fiscal imbalance and higher risk premiums and financing costs, analysts said.”We have not yet completely incorporated the fiscal risk,” said Mauricio Guzman, head of investment strategy at Sura Investments, who manages a portfolio of $20.5 billion, with some $2.5 billion concentrated in Colombian public debt.”Investors will be very reluctant to take on risk until there is more fiscal clarity.”A drastic cut in spending could hit growth, in turn putting pressure on 2025 finances, said Sergio Olarte, head economist for Colombia at Scotiabank.”They will need to present a super austere budget next year or modify the fiscal rule,” he said. More

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GOYANG, South Korea (Reuters) -South Korean President Yoon Suk Yeol and the leaders of African countries agreed on Tuesday to forge deeper trade and business cooperation and launched a “critical minerals dialogue” aimed at sustainable development of the continent’s resources. Hosting a first-ever summit with the leaders of 48 African nations, Yoon said South Korea would increase development aid for Africa to $10 billion over the next six years as it looks to tap the continent’s rich mineral resources and potential as a vast export market. “The Critical Minerals Dialogue launched by South Korea and Africa will set an example for a stable supply chain through mutually beneficial cooperation and contribute to sustainable development of mineral resources around the world,” Yoon said in his closing remarks. He also pledged to offer $14 billion in export financing to promote trade and investment for South Korean companies in Africa. South Korea is one of the world’s largest energy buyers and is home to leading semiconductor producers. It is also home to the world’s fifth-largest automaker, Hyundai Motor (OTC:HYMTF) Group, which is making a push for electrification.Partnering with Africa, which has 30% of the world’s reserves of critical minerals including chrome, cobalt and manganese is crucial, Yoon’s office has said.In a joint declaration issued by South Korea, the African Union (AU) and its member nations, the leaders pledged to speed up talks for economic partnership agreements and trade and investment promotion frameworks. They also called for advancing cooperation for Africa’s food security with South Korea’s support with agricultural technology and smart farming. African leaders welcomed South Korea’s “Tech4Africa” initiative aimed at supporting the education and training of Africa’s young population.AU chair and Mauritanian President Mohamed Ould Ghazouani, at a joint news conference with Yoon, said African countries were looking to learn from Korea’s experience in developing human resources, industrialisation and digital transformation. VAST AND FAST-GROWING MARKETYoon said 33 heads of state participated in the summit. Yoon has proposed “shared growth” as a pillar of cooperation with the continent and said the leaders agreed to expand trade and investment by establishing institutional frameworks to facilitate them. By reaching out with offers to help with industrial infrastructure and digital transformation, South Korea is trying to tap into a vast and fast-growing market that is home to 1.4 billion people, the majority of whom are 25 or younger.The joint declaration said the leaders recognised the instability of global supply chains, and that future industries increasingly depended on the stable supply of mineral resources.”In this context, we agree to launch the Korea-Africa Critical Minerals Dialogue during this summit which will serve as an important institutional foundation for enhancing cooperation between Korea and Africa,” it said.Park Jong-dae, a former South Korean ambassador to South Africa and Uganda, argued Western and Chinese models of development had failed African nations, and South Korea offered a valuable alternative path.”The essence of the Korean model of development cooperation is human development, and about management, rather than about provision of assistance per se,” he said.”Korea has the experience and know-how of development … while many African countries have immense possibilities for development based on yet to be explored, untapped resources and endowment, and dynamic young population,” he said.On Wednesday, South Korean business leaders will host a business summit focused on investment, industrial development and food security.Yoon separately held talks with 25 leaders on the sidelines of the summit, his office said.Yoon agreed with the leaders of Tanzania to provide $2.5 billion concessional loans and Ethiopia for $1 billion financing to go to infrastructure, science and technology and health and urban development. Kenyan President William Ruto said South Korea would provide $485 million concessional development funding. More

TOKYO (Reuters) – Bank of Japan Deputy Governor Ryozo Himino said the central bank must be “very vigilant” to the impact the yen’s moves could have on the economy, suggesting the currency’s weakness will be among factors affecting the timing of its next interest rate hike.However, he said it was inappropriate for central banks to directly target exchange rates in setting monetary policy, as other factors needed to be considered as well.”Exchange-rate fluctuations affect economic activity in various ways. It also affects inflation in a broad-based and sustained way, beyond the direct impact on import prices,” Himino said on Tuesday.”That’s why we obviously need to be very vigilant to, and analyse very closely, the impact of exchange-rate volatility on the economy, prices and their outlook,” he said in a panel session hosted by Columbia University in Tokyo.The BOJ shouldn’t automatically respond to exchange-rate moves in setting interest rates, though, as there were “other aspects” that need to be taken into account such as the economic and price outlook, he added.A weak yen has become a headache for Prime Minister Fumio Kishida’s administration, which has seen its approval ratings slump as the currency’s decline pushed up households’ cost of living by inflating the price of importing food and fuel.BOJ Governor Kazuo Ueda has ruled out using monetary policy to directly influence exchange-rate moves, but signalled the chance of raising rates if the weak yen pushes up inflation more than expected.Many market players expect the BOJ to raise interest rates from current near-zero levels this year with some expecting a move as early as July, partly to slow the yen’s persistent decline.Asked what the central bank would do with its huge balance sheet, Himino said the BOJ would make a decision focusing on how it would affect the economy, prices and its goal of sustainably achieving its 2% inflation target.”It’s desirable for markets to set long-term interest rates. On the other hand, the BOJ has been deeply involved in the bond market up till very recently and our presence remains very large. We need to avoid causing discontinuity or any unintended moves in the market,” Himino said.The remarks underscore the tricky balancing act the BOJ faces in allowing market forces to drive long-term interest rates higher, while avoiding an abrupt spike in bond yields.In March, the BOJ ended eight years of negative interest rates and a policy capping long-term borrowing costs around zero dubbed yield curve control (YCC).The decision was partly aimed at breathing life back to a market made dormant by the BOJ’s huge presence, and allowing market forces to drive yield moves.Markets are focusing on whether the BOJ, at its next policy meeting on June 13-14, will move to a full-fledged reduction in its huge bond purchases.The 10-year government bond yield briefly jumped to 1.1% last week, the highest level since July 2011, on growing expectations of a near-term interest rate hike. More

The call is one of FINMA’s demands for increased powers after the authority came under fire over its handling of Credit Suisse’s collapse last year.”Today, the publication of enforcement proceedings is the exception,” Walter told the newspaper. “In the future, non-communication should be the exception.”Naming and shaming financial institutions would have a disciplinary effect if the companies knew punishments would be made public, said Walter, who took up his post in April.”It also shows what the supervision achieves,” he said. “The dilemma of every supervisory authority is: if something goes wrong, everyone knows. If something is prevented, no one knows.”Banks needed to be more open and give full information, he said. If cooperation was not forthcoming, the regulator could carry out more on-site inspections.”In extreme cases, you must have the option of holding individuals responsible and, if necessary, removing them,” he said. This required a co-called senior managers regime, where responsibility is assigned to individuals making it easier to trace who was at fault.The Swiss government in April listed 22 recommendations to improve the regulation of the country’s outsized financial sector, including tougher capital requirements.Switzerland’s biggest bank UBS, which took over Credit Suisse (CS) after the latter’s collapse, has already flagged concerns about the potential changes in regulation, with Chairman Colm Kelleher saying a requirement to hold additional capital was the “wrong remedy.”FINMA’s Walter said he did not want to start a “feud” with UBS’s management, but said sufficient capital was needed to reduce the risk and extent of a crisis in future.”The distribution of capital within the bank is also important, which is crucial in the stabilization or resolution phase. The CS crisis has shown this,” Walter told the paper.”Capital requirements increase with increasing size. However, this does not solve the problem of capital distribution: we want the parent company to have enough buffer so that it does not become a bottleneck in a crisis.” More

1. U.S. futures dipU.S. stock futures hovered below the flatline on Tuesday following choppy trading in the previous session.By 03:30 ET (07:30 GMT), the Dow futures contract had shed 76 points or 0.2%, S&P 500 futures had fallen by 14 points or 0.3%, and Nasdaq 100 futures had dipped by 69 points or 0.4%.The main averages on Wall Street posted a mixed close on Monday, in a session marked by a glitch in the New York Stock Exchange that led to heavy volatility in the shares of Warren Buffett’s Berkshire Hathaway (NYSE:BRKa), miner Barrick Gold (NYSE:GOLD), and the halting of trading in at least 60 stocks. The 30-stock Dow Jones Industrial Average dropped by 0.3%, while the benchmark S&P 500 gained 0.1% and the tech-heavy Nasdaq Composite added 0.6%.Tech stocks delivered a late rally, while shares in energy firms faltered. U.S. Treasury yields touched two-week lows after manufacturing data showed activity in the sector had slowed for the second consecutive month, pointing to possible weakening in wider economic growth.Traders also increased their bets that the Federal Reserve will choose to begin ratcheting down interest rates from more than two-decade highs in September, according to CME Group’s (NASDAQ:CME) closely-monitored FedWatch Tool. In a note, analysts at ING said the manufacturing figures, along with separate numbers suggesting a decline in construction industry spending, “[indicate] that monetary policy is restrictive and is acting as a brake on economic activity.”2. U.S. job openings data aheadInvestors will have the chance to parse through new U.S. job openings data on Tuesday, as they attempt to piece together the picture of labor demand in the world’s largest economy.Economists expect the Labor Department’s Job Openings and Labor Turnover Survey — also known as the JOLTS report — to have slipped to 8.37 million in April, down from a three-year low of 8.488 million in the preceding month.A decline could be a sign of easing labor market conditions in the U.S. — a trend that may boost hopes for Fed rate reductions later this year. In theory, a cooldown in demand for workers could defuse some upward pressure on wages and, by extension, inflation.Fed policymakers are tipped to keep borrowing costs on hold at a range of 5.25% to 5.50% at a meeting next week. Several officials have said in a recent days they would like to see more evidence price gains are reliably decelerating to their target level before rolling out potential rate cuts.3. GameStop shares surgeShares in GameStop rose by more than 8% in extended hours trading, as stock influencer Keith Gill appeared to hold on to gains in his holdings of the videogame retailer following a sharp rally on Monday.GameStop, which was the focal point of a rally in so-called “meme stocks” in 2021, advanced by 21% on Monday. The jump came after Gill, who is known online as “DeepF——-Value” and “Roaring Kitty”, posted a screenshot on social media site Reddit which showed he had made a $116 million bet on the company.After the closing bell on Monday, Gill posted another screenshot indicating that he held on to his stake of 5 million GameStop shares, or roughly 1.8% of its publicly available stock, and 120,000 call options.Several media sources have said they have been unable to independently verify the validity of the screenshots. Meanwhile, E-Trade, the investment platform Gill uses, is holding internal talks over whether to ban him from the service due to concerns over market manipulation, the Wall Street Journal reported.4. Illumina to spin off Grail cancer testing unitShares in Illumina (NASDAQ:ILMN) edged slightly higher in after-hours trading following a decision by the gene sequencing firm to spin off its Grail cancer testing division.California-based Illumina said its board had approved a spin out of Grail. The move is expected to take place on June 24, with the unit being listed on the Nasdaq as “GRAL.””Today’s announcement marks a milestone for Illumina and signals an important step forward for the company, since the divestiture of Grail is one of our 2024 priorities,” Illumina Chief Executive Jacob Thaysen said in a statement.Last year, U.S. trade regulators ordered Illumina to divest Grail, arguing its $8 billion purchase of the business would dent competition in the market for possibly life-saving cancer testing.European Commission antitrust authorities had also previously slapped a 432 million euro fine on Illumina for implementing the Grail merger without the bloc’s permission.5. Oil extends declinesCrude prices fell Tuesday, extending losses from the previous session, after a group of major producers signaled an increase in supply later this year.By 03:29 ET, the U.S. crude futures (WTI) traded 1.6% lower at $73.03 per barrel, while the Brent contract dropped 1.4% to $77.27 per barrel. Both contracts slid over 3% on Monday, and were at their lowest level since early-February.The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, on Sunday agreed to extend most of their oil output cuts into 2025 but left room for voluntary cuts from eight members to be gradually unwound.Sentiment was also hit by weak purchasing managers’ index data from both the U.S. and China, the two biggest economies in the world. More

HANOI (Reuters) – Vietnam’s central bank lent another $1.2 billion to ailing Saigon Joint Stock Commercial Bank over the last two months, according to a bank document seen by Reuters, taking the total to $24.5 billion as part of its efforts to rescue depositors.The massive bailout of Saigon Joint Stock Commercial Bank’s (SCB) depositors has so far cost the central bank the equivalent of 6% of Vietnam’s 2023 gross domestic product in special loans.Reuters reported in April that the central bank had mounted an “unprecedented” rescue of SCB, a lender engulfed in the nation’s biggest financial fraud, which a source at that time said would collapse without the funding.As of May 29, the central bank had lent SCB 622.7 trillion dong ($24.5 billion), according to the document prepared by SCB that detailed daily injections into the bank to keep track of the funds and their use, up from 592.7 trillion dong ($23.3 billion) as of April 2.SCB used the central bank funds to help it settle withdrawals and payments of 626.9 trillion dong since October 2022 when the lender was put under central bank supervision, the document showed. At that time, it had deposits of 669 trillion dong. The State Bank of Vietnam and SCB, previously one of the country’s largest commercial lenders by deposits, did not reply to Reuters’ requests for comment. The State Bank of Vietnam confirmed in April it was providing financial support to SCB. The run on SCB was triggered by the October 2022 arrest of real estate tycoon Truong My Lan, who in April was sentenced to death after being found guilty of masterminding a huge fraud at the bank.Judges concluded that she siphoned off $12.5 billion in loans from SCB to shell companies while effectively controlling the bank through proxies. She pleaded not guilty and has appealed the ruling.Under Vietnam’s official deposit guarantee scheme, only about $5,000 is covered per depositor per bank, but as of early April, the central bank’s cash injections into SCB amounted to about a quarter of Vietnam’s foreign exchange reserves.The central bank has not said how it has funded its large-scale lending to SCB, but money supply rose by about $82 billion between September 2022, the month before SCB’s bailout began, and February 2024, the latest public data showed.That is a 15% increase, compared to GDP growth of nearly 6% in roughly the same period, according to Reuters’ analysis of data from the central bank and Vietnam’s statistics office.The Southeast Asian country’s foreign reserves, meanwhile, have remained largely stable, although the central bank has sold dollars in recent weeks to prop up its currency.RESTRUCTURING ROADMAPSCB’s woes occurred as Vietnam’s banking sector was facing heightened risks from prolonged turmoil in the country’s real estate industry, triggering concerns about broader risks to the financial system.In April, the State Bank of Vietnam said it was continuing to support SCB under a roadmap for its restructuring – a move that ratings agency Fitch said last month was a positive sign of the central bank’s commitment to help significant lenders.While the SCB’s woes showed shortcomings in Vietnam’s financial supervision, Fitch added, the unprecedented rescue efforts had not created new contagion risks in the country’s banking system.But the increase in money supply came at a time when the Vietnamese dong weakened and contributed to a pick-up in inflation, which in May exceeded 4.4%, the highest since January 2023. ($1 = 25,432.0000 dong) More