Aurelia Butler

TOKYO (Reuters) -Bank of Japan Governor Kazuo Ueda said the central bank could “respond with monetary policy” if yen declines affect the country’s inflation and wages in ways that are hard to ignore, the Asahi newspaper reported on Friday.Ueda also said inflation will likely accelerate “from summer towards autumn” as this year’s bumper pay raises in annual wage negotiations push up prices, according to the paper, signalling the chance of another interest rate hike later this year.”We ended our massive stimulus programme because we saw prospects for trend inflation to approach 2% come into sight. If we become more confident about such prospects, that will be one reason to move interest rates,” Ueda was quoted as saying.When asked whether the BOJ could raise interest rates this year, Ueda said it was “dependent on data” and how much progress Japan makes toward sustainably achieving the bank’s 2% inflation target, according to Asahi’s interview that was conducted on Wednesday.The remarks highlight the BOJ’s conviction that rising wages and inflation will help make the case for hiking short-term interest rates from the current 0-0.1% level later this year.While declining to comment specifically on the yen’s recent declines, Ueda signalled that such moves could also serve as a reason to raise interest rates if they push up inflation via higher import costs.”If exchange-rate developments appear to have an impact on Japan’s wage-inflation cycle in a way that’s hard to dismiss, that would be a reason to respond with monetary policy,” Ueda was quoted as saying by Asahi.The yen has been on a downtrend despite the BOJ’s decision last month to end eight years of negative interest rates, as traders interpreted its dovish language as signalling that the next rate hike will be some time away.Japanese authorities have signalled intervening in the market to prop up the yen after the currency hit a 34-year low of 151.975 to the dollar last week.”Just two weeks after taking steps towards normalising monetary policy, governor Ueda has already shown interest on the next move,” said Yasunari Ueno, chief market economist at Mizuho Securities.”With the dollar rising above 151 yen, the BOJ may have seen the need to move in lockstep with the government in sending a message” warning against excessive yen declines, he said.A weak yen has become a source of headache for Japanese policymakers as it inflates the cost of importing raw material and fuel, thereby hurting households and retailers.Rising living costs have been among factors that are weighing on consumption, with some analysts projecting Japan’s economy to have contracted in the first quarter.While Ueda said there was a chance of a contraction, the slump will likely prove temporary as wage gains accelerate and push up households’ real income, according to Asahi.”There’s no need to change our judgment that Japan’s economy is recovering moderately as a trend,” Ueda was quoted as saying.The BOJ ended eight years of negative interest rates and other remnants of its unorthodox policy last month, making a historic shift away from its focus on reflating growth with decades of massive monetary stimulus.It now sets a short-term interest rate target of 0-0.1%.More than half of economists polled by Reuters after the BOJ’s March decision expect the central bank to hike rates again this year, with the October-December quarter the most popular bet on the timing. More

TOKYO (Reuters) -Japanese authorities will likely intervene in the currency market if the yen breaks out of a range it has been in for years and falls well below 152 per dollar, former top currency diplomat Tatsuo Yamazaki said on Thursday.Once the dollar climbs above 152 yen, the pair’s rise could accelerate and offer an opportunity for authorities to intervene, Yamazaki told Reuters in an interview.”If authorities leave such dollar/yen rises unattended, they would put their credibility at stake,” he said.The fact Japanese authorities have described recent yen declines as driven by some “speculative moves” suggest the authorities are seriously contemplating whether to step in or not, said Yamazaki, who oversaw Japan’s 35 trillion yen intervention campaign to weaken the currency in 2003 through 2004.Tokyo likely wouldn’t face much heat for intervening in the market to prop up the yen as doing so would not put the country’s exports at a competitive advantage against that of other countries, he said.The yen has been on a downtrend despite the Bank of Japan’s decision last month to end eight years of negative interest rates, as traders interpreted its dovish language as signalling that the next rate hike would still be some time away.Markets remain on alert for the chance of intervention by Tokyo as the dollar hovers near the 34-year high of 151.975 hit on Wednesday of last week.When the dollar hit that high Finance Minister Shunichi Suzuki said authorities were ready to take “decisive steps” to counter speculators in the strongest hint that yen-buying intervention could be imminent.Yamazaki said the BOJ’s lack of confidence in the policy outlook, which is reflected in Governor Kazuo Ueda’s dovish message, was likely giving speculators an excuse to sell the yen.The BOJ governor should have said more clearly that the bank will raise interest rates at least once more this year, to keep yen bears at bay, Yamazaki said. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Oil prices rose above $90 a barrel and US stocks tumbled as flaring tensions in the Middle East sent tremors through markets. Brent crude oil futures rose 1.5 per cent on Thursday to settle at $90.65 a barrel — the highest closing price since October — as traders weighed the potential for Iran’s backlash after a suspected Israeli attack on its consulate in Damascus. Wall Street’s blue-chip S&P 500 stock index closed 1.2 per cent lower, its sharpest daily decline since the middle of February, while the tech-heavy Nasdaq Composite fell 1.4 per cent. Fears that the war between Israel and Hamas might descend into a broader conflagration had simultaneously sparked a rush for assets considered less risky than stocks, according to Steve Englander, head of macro strategy at Standard Chartered in New York.“It’s a classic rush for safe-haven assets,” he said, noting that prices for US Treasuries, which are widely considered risk-free, had climbed as stocks sold off. “Even the Japanese yen is doing OK, and it takes a lot for the yen to do well these days,” Englander added, referring to the country’s under-pressure currency.His thoughts were echoed by Peter Tchir, head of macro strategy at Academy Securities. “There was a flight to safety after headlines about an escalation in the Middle East. Crude spiked and investors rushed into Treasury bonds.” The stock market decline coincided with a speech by Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, who suggested that US interest rates may not fall as widely expected this year. If US inflation continued to move “sideways, then that would make me question whether we need to do those rate cuts at all”, he said.But analysts were unsure about the influence of Kashkari’s comments on the market given that he does not have a vote on the Fed’s interest rate policy panel this year. The US dollar index, which tends to move with rate expectations, was unchanged on the day.“[Kashkari’s] comments wouldn’t lead to a rally in bonds,” said Subadra Rajappa, head of US rates strategy at Société Générale, adding that Thursday’s moves “are more to do with geopolitical tensions and caution ahead of tomorrow’s US jobs report”. Oil prices have blown through analysts’ median forecast of $83 a barrel for this quarter, according to Bloomberg data, as global petroleum demand grows when the Saudi Arabia-led Opec+ alliance is constraining supply. Giovanni Staunovo, a commodity analyst at Swiss bank UBS, said: “We believe the latest price increase has been driven by renewed geopolitical tensions in the Middle East, but fundamentals like better than expected demand and lower oil production have also helped.”The surge in oil prices complicates central banks’ efforts to tamp down rising prices. It comes a day after Federal Reserve chair Jay Powell said the bank’s battle with inflation was “not yet done”. Staunovo said: “Higher energy prices could become a concern for financial markets if it would further delay the start of interest rates cut by key central banks.” The US Department of Energy on Wednesday said it was cancelling its latest plans to purchase oil to refill the nation’s emergency crude stockpile amid the rise in prices. The Strategic Petroleum Reserve has been drawn down in recent years to offset shortfalls sparked by Russia’s full-scale invasion of Ukraine.The rise in crude prices has contributed to increasing petrol prices ahead of the summer driving season that begins next month. The uptick has become a mounting source of concern in the White House as November’s presidential election looms. Washington recently warned Ukraine to call off strikes on Russian oil refineries over fears it could fuel the oil price rally. More

(Reuters) – A look at the day ahead in Asian markets.A late and steep reversal on Wall Street on Thursday, sparked by comments from a U.S. Fed official that interest rates may not be cut this year, appears to be souring the mood across Asia on Friday, despite a decline in the dollar and U.S. bond yields. The S&P 500 had been well in the green for most of Thursday but ended up clocking its biggest loss in nearly two months after Minneapolis Fed president Neel Kashkari’s remarks. Asian stocks, however, have been pretty resilient lately. They may have lagged benchmark U.S., Japanese and world indices on the upside this year, but it’s been two months since the MSCI Asia ex-Japan index last fell three days in a row.Geopolitics may also be weighing on stocks and supporting bonds. President Joe Biden on Thursday threatened to change Washington’s policy towards Israel if it fails to protect aid workers and civilians in Gaza.There are several potentially market-moving events in Friday’s regional calendar, including inflation data from the Philippines and Thailand, Australian trade, Japanese household consumption, and the Reserve Bank of India’s policy meeting.U.S. Treasury Secretary Janet Yellen is also in China for a series of meetings with top Chinese economic officials over the coming days, with trade tensions at the heart of them.Yellen is expected to say that the flood of Chinese goods onto global markets is too much for the world to absorb, and stress that this is unhealthy for China too. It remains to be seen how receptive Beijing is to her concerns. China’s exchange rate continues to attract attention. Offshore dollar/yuan has traded above the upper limit of the central bank’s daily band for 10 days, while onshore dollar/yuan is creeping up towards it. The gap that widened sharply 10 days ago is narrowing, but is still noticeable. An eerie calm has descended on the yen, with traders still on Japanese intervention alert. Bank of Japan Governor Kazuo Ueda signaled that the central bank could raise rates again if exchange-rate moves push up inflation, the Asahi newspaper reported.The main calendar event in Asia on Friday is the Reserve Bank of India’s policy decision. All 56 economists in a Reuters poll expect the repo rate to be kept unchanged at 6.50%.There is less consensus on when the first cut will come, with nine of 52 saying next quarter, 24 picking the third quarter, 17 saying the fourth quarter and the rest expecting it at a later time. .Meanwhile Indian prime minister Narendra Modi, confident of winning a national election starting this month, has set an ambitious target of roughly doubling the economy and exports this decade, according to a government document seen by Reuters.Here are key developments that could provide more direction to markets on Friday:- India central bank policy meeting- Thailand inflation (March)- The Philippines inflation (March) (By Jamie McGeever) More

RICHMOND, Virginia (Reuters) – Richmond Federal Reserve President Thomas Barkin said he is focused intently on the persistent breadth of inflation across goods and services, and feels slower price increases need to be more widespread before he is comfortable cutting interest rates.Barkin, who is a voter this year on Fed interest rate policy, described in an interview on Thursday with Reuters how he will be parsing upcoming data as the central bank approaches a critical choice on starting rate cuts. Investors expect that first reduction may come in June, but it could get pushed to later in the year if key reports in the weeks ahead show insufficient progress on taming inflation.Barkin as a practice does not provide details about his rate projections, but outlined his concerns regarding recent inflation data – particularly his worry that enough firms still retain adequate pricing power to keep topline inflation numbers elevated. Before the pandemic, he said, about a quarter of goods and services tended to see price increases above 3%. “Now, we have 55% of the basket over three, and 55% of the basket over three it is just hard to reconcile in your mind with the kind of progress you’d want to make” in returning overall inflation to the central bank’s 2% target, Barkin said.At the end of 2023 “the quality of the numbers at the end of the year were so good…it was easy to talk yourself into a forward lean,” as the Fed shifted its stance to lay the foundation for eventual rate cuts, Barkin said.Higher-than-expected inflation in January and February, however, tempered optimism he described as “transcendent” at the start of the year.Fed officials on balance still expect to lower interest rates this year from the current 5.25%-to-5.50% level they’ve been at since July. But like Barkin many policymakers in recent days have expressed concern at the surprising stubbornness of inflation so far this year.NO TIMEFRAMEWhile Barkin noted changes in seasonal spending patterns and other factors may have distorted price data to start the year, he also said next week’s release of the Consumer Price Index for March will be important in assessing if the start of the year was simply a “bump” in the return to price stability.”You get another month that looks like January or February, that takes you in a very different direction of how forward leaning you are,” Barkin said. “You could continue to imagine a path where…we’re through two bumpy months, and we’re going to go back to the last half of last year. But I think it’s also easy to imagine other paths,” Barkin said. “I am open to rate cuts when the inflation data comes in in a way that…gives me that confidence. I don’t have a timeframe for that.”But he said his conversations with local businesses did raise questions. Local restaurants and retailers, he said, acknowledged they did not have the pricing power they enjoyed during the reopening from the pandemic, but were also finding ways to segment price hikes for different products targeted to low, middle and higher income consumers.The “net,” he said, is less inflation than the last two years, but still more than was common before the pandemic.”I’m still seeing, not everywhere but in more places than I am comfortable with, that sort of thinking about pricing,” Barkin said. “I do think we’re on the backside of the heavy inflation and I do think the disinflation process is continuing,” he said. “How fast that is, is a question for the data.” More

NEW YORK (Reuters) -A U.S. judge ordered British billionaire Joe Lewis on Thursday to pay a $5 million fine and serve three years of probation for sharing illegal stock tips, allowing an investment firm’s 87-year-old founder to avoid prison after prosecutors and his attorneys urged leniency.U.S. District Judge Jessica Clarke in Manhattan sentenced Lewis, who pleaded guilty in January to one count of conspiracy and two counts of securities fraud.Lewis, founder of the Tavistock Group, sat flanked by his lawyers as the sentence was imposed, wearing a gray suit and an eye patch. He told the judge he was ashamed of what he had done.”I am here today because I made a terrible mistake,” he said.The judge agreed that Lewis could leave the U.S. on his private aircraft on Thursday night, though his yacht, the Aviva (LON:AV), will be held until his fine is paid.”Mr. Lewis is grateful that the court has imposed a probationary sentence that considers his age and health issues,” Mark Herr, a spokesperson for Lewis, said after the hearing.Prosecutors said Lewis, whose family trust controls a majority of London’s Tottenham Hotspur soccer team, passed inside information on his portfolio companies to two of his private pilots as well as friends, personal assistants and romantic partners.Those tips enabled the recipients of the information to reap millions of dollars in profit, according to prosecutors. Lewis in January entered a plea deal with prosecutors agreeing to a $50 million fine of his Bahamas company, Broad Bay. Under the agreement, Lewis’ fine will be included in the total.He also agreed to resign board seats at U.S. companies and relinquish majority ownership of Boxer Capital, the biotech-focused fund where prosecutors say he got tips.The London native, who lives in the Bahamas, traveled to New York to face the charges immediately after learning of his indictment, his attorneys said in court papers.Lewis has since remained in the country, posting $300 million bail secured by his yacht and a private aircraft.His decision not to fight extradition, coupled with his significant health issues, had led prosecutors to recommend leniency for Lewis, whose doctors have said prison could be lethal.Lewis is worth $6.2 billion, according to Forbes magazine.Prosecutors have said he collected inside information about four companies in which he had invested, and tipped friends and associates between 2019 and 2021.According to prosecutors, the companies included cancer therapy developer Mirati Therapeutics (NASDAQ:MRTX) and BCTG Acquisition, a blank-check company that Boxer Capital sponsored and which took biotech company Tango Therapeutics public in a merger in 2021.The two pilots were also accused in the case of making millions of dollars in illegal profits from Lewis’ tips. One of them, Patrick O’Connor, pleaded guilty and is scheduled to be sentenced in May. The second pilot, Bryan Waugh, has denied wrongdoing and said the charges should be dismissed because he is only accused of trading on stock recommendations, not inside information. More

BENGALURU (Reuters) – New Zealand’s central bank will leave its key interest rate unchanged for a sixth consecutive meeting on Wednesday and wait until the third quarter before cutting it, as it navigates between still-elevated inflation and recession, a Reuters poll showed.While the Reserve Bank of New Zealand’s (RBNZ) own estimates show inflation is on track to reach its 1%-3% target next quarter, the timing for when policymakers will start reducing rates is hanging on a knife’s edge.With aggressive rate hikes amounting to 525 basis points from October 2021 to May 2023 having tipped the economy into a double-dip recession, the central bank has little room to take rates higher to address any spike in inflation.All 29 economists in the March 28-April 4 poll expected the RBNZ to leave its official cash rate (OCR) unchanged at 5.50% on April 10.While slightly more than half – 15 of 29 respondents – expected the first cut to come by the end of the third quarter, including one who expected it to occur this quarter, the other 14 forecast the cash rate to remain unchanged until the fourth quarter or later.”We suspect Q2 (inflation) data, due in mid-July, will give the committee enough confidence it has done its job. As inflation risks continue to recede, we expect the Bank to start cutting rates in August,” said Abhijit Surya, an economist at Capital Economics.”We’re more convinced than ever that the RBNZ’s next move will be down, not up.” All major local banks expected the first cut later than the poll consensus and market expectations, with the earliest move seen by Bank of New Zealand, ASB Bank, and Kiwibank in the fourth quarter, followed by Westpac in the first quarter of 2025. ANZ expected the first cut in the second quarter 2025.Among economists who answered an additional question, just over half – 12 of 23 – said the first rate cut would come in August, in line with market expectations.One respondent expected it in May and seven were looking to the fourth quarter. The remaining three said the easing will begin in 2025.The RBNZ’s own projections showed the first reduction in rates coming next year. The central bank has said it needs to keep policy restrictive for some time to ensure inflation expectations become fully anchored again.Median forecasts showed the cash rate down 50 basis points at 5.00% by the end of this year. The U.S. Federal Reserve is expected to cut its key policy rate by 75 basis points.”Inflation has fallen quite a lot more quickly (in the U.S.) than it has here … that explains the reason why the Reserve Bank has been much more cautious with respect to talking about interest rate cuts than the U.S. Federal Reserve,” said Kelly Eckhold, chief economist at Westpac.”The implication of that is that potentially if New Zealand interest rates hold up for longer relative to the United States, there could be some potential for the New Zealand dollar exchange rate to strengthen.” More