Aurelia Butler

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Central banking is the archetypal technocratic profession. Interest rate setters must be led by data, and guard against irrational decision-making. That is particularly hard right now. The US Federal Reserve, European Central Bank and Bank of England are widely thought to be at their peak rates, having held policy for months. But with the disinflation process now occurring in fits and starts, there is an understandable queasiness over when to begin easing it.One overriding fear is that of a “second wave” of inflation. If rates are cut and price growth surges back — as it did in the US in the 1970s — that would undermine central bankers credibility. Many already blame them for being too slow to raise rates in the first place. Some central bank watchers suggest there may also be a “fear of going first” — with monetary policy committees preferring to wait until the Fed begins easing in the world’s largest economy.Rate-setters need to be as clear-eyed as possible. With core inflation still around 3 to 5 per cent in the US, UK and eurozone, there is still work to do. But with the highly restrictive stance of monetary policy, and growing signs of cooling in labour markets, the risk of over-tightening has been picking up. This means central bankers may need to start cuts sooner than they currently convey, particularly as rate changes take effect with a lag. After pushing an “almost ready, but not yet” message, the Fed will most likely keep its policy unchanged at its meeting next week. Markets have pencilled in June for the first cut. With annual headline inflation remaining stubbornly above 3 per cent this year — and increasing in February — caution may be justified. But forward-looking inflationary indicators are weakening. Data this week showed a continued fall in small businesses’ hiring intentions — a solid predictor of wage growth and jobless claims. The purchasing managers’ index survey of output prices has also been strongly tracking US inflation, and implies easing pressures ahead.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.With core inflation running at 5.1 per cent, the BoE, which meets next week too, is even more cautious. But data this week showed wage growth is slowing. The Office for Budget Responsibility’s latest forecast also shows quarterly inflation falling to the 2 per cent target in the second quarter of 2024 — around one year sooner than it expected in November. Nonetheless, few expect the bank to begin easing before the summer.The case to begin cutting is perhaps strongest in the eurozone. The ECB downgraded growth in the bloc to only 0.6 per cent this year. Its latest inflation forecast, released at its meeting on March 7, shows inflation back to target by mid-2025. But ECB President Christine Lagarde indicated June would be most likely for its first cut. The ECB will meet only once before then.A series of data quirks has made reading the runes harder. In the US, economists have raised concerns over how housing costs are measured. They accounted for roughly two-thirds of the annual increase in core inflation last month. The February personal consumption expenditures inflation data — which is the Fed’s preferred measure — is not due until after the Fed meets. The ECB will also likely wait for first quarter wage data, which will only be available in May. In the UK, problems with the official labour force survey mean job market data need to be taken with a pinch of salt too.Central bankers need to give markets a well-signalled plan of how they will ease policy. They will want to avoid having financial markets digest chunkier 50 basis point or 75bp cuts down the line, which smack of panic. But how smooth the journey back to a more neutral stance turns out to be will in part be determined by how savvy central bankers are in making the dreaded first step. More

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Hutchins will serve in this role until the earlier of the appointment of a permanent CEO or Sept. 30, the company said in a regulatory filing.He was named president of the company in 2020 and is a member of its senior operating committee. He joined Freddie Mac in 2013 and has worked for financial services companies such as UBS and Salomon Brothers in his career spanning 30 years.Hutchins will take on the role from Michael DeVito on March 16. DeVito served for nearly three years.The company is looking for a new CEO at a time when it “navigates a challenging market to Make Home Possible for borrowers and renters across the nation”, it said.U.S. mortgage rates rose for a fourth straight week, Freddie Mac reported last month, reaching a two-month high, and again becoming a factor eroding buyer traffic as tight inventory and home price gains limited affordability among prospective home buyers. More

TOKYO/SYDNEY/HONG KONG (Reuters) – Japan Inc’s pursuit of overseas deals is set to accelerate as the country’s corporate giants come under pressure to boost capital efficiency and the central bank moves towards ditching policies that depressed the currency.A growing number of Bank of Japan policymakers are warming to the idea of rising interest rates when they meet March 18-19, and while rate increases are widely expected to be incremental, the change would boost the yen and deal prospects, bankers and lawyers said.A stronger yen, which has gained about 1% against the dollar so far this month, would make overseas targets cheaper for potential acquirers in Japan, from sectors ranging from financials to technology.”An increase in interest rates in Japan may be positive for the yen … and make it easier for Japanese companies that are currently more domestically focused to do outbound deals,” said Natsuko Ogawa, a Melbourne-based Ashurst partner. For those companies with significant global operations, any change in Japanese interest rates would likely have “limited impact” on their ability to finance those transactions, said Ogawa, who specialises in Japanese cross-border deals.Nearly $17 billion worth of overseas acquisitions by Japanese companies have been announced this year, according to LSEG, in the strongest start to a year for outbound activity since 2019.The momentum this year comes on the back of an 81% jump in outbound deal value last year to $58 billion, as companies looked to tap alternate revenue streams to soften the impact of a deflationary domestic economy.Japan’s outbound M&A boom set a sharp contrast with activities in the rest of the Asia Pacific region, where deal values fell 26% in 2023 and 16% so far this year, according to LSEG, mainly due to a sharp slowdown in China. Accelerating an overseas buying spree by Japanese firms is also a recent push from regulators and activist shareholders for better capital efficiency, including the Tokyo exchange’s call last year for companies to come up with specific action plans.”Pressure from behind to make use of cash or return it to shareholders is growing ever stronger,” Yuzo Otsuka, head of Japan M&A Advisory at Barclays, said. “Companies now feel that they have no time to waste and need to move forward for growth.”ACCESS TO FINANCING The U.S. has been the biggest target nation for Japanese companies, followed by Australia.Major outbound deals in recent months include Nippon Steel’s $15 billion acquisition of U.S. Steel, and Renesas Electronics’ $5.9 billion deal for electronics designer Altium.U.S. President Joe Biden has raised concerns over Nippon Steel’s takeover of the 122-year-old U.S. steelmaker, raising the spectre of political risks to Japanese companies’ outbound drive.Bankers, however, said political reactions to the Nippon Steel deal were not affecting deal appetite. They said that such opposition was unique to the steel sector where nationalistic sentiment was always strong.In response to the strong deals momentum, some advisory firms are boosting headcounts.Law firm Freshfields has recently hired four M&A lawyers in Japan and is recruiting more to join its Tokyo-based practice, said its head of Japan, Takeshi Nakao. A further five entry-level associates were also due to join in the next year.”I do think that Japanese bidders are more valued than they were a few years ago,” Noah Carr, partner at Freshfields, said. “One, because there’s less competition. Two, because Japanese buyers are just more reliable, they have better access to financing, they’ve got the money to spend, they can manage regulatory approvals – and they are capable of taking sophisticated commercial views on terms.”Mizuho Securities has expanded its M&A team by 10% over the last three years.There are, however, some risks to the outbound pursuits. Bain & Company Partner and Japan Chairman Shintaro Okuno said Japanese buyers are often seen as overly optimistic about expected synergies when others are turning cautious about geopolitical risks such as the war in Ukraine and the U.S. presidential elections.”The Tokyo bourse’s capital efficiency call could also prompt some firms to jump on overseas M&As as an easy option to spend excess cash, but that could result in overpaying and eventually booking impairment losses,” Okuno said. More

TOKYO (Reuters -Japan’s biggest companies agreed to raise wages by 5.28% for 2024, the heftiest pay hikes in 33 years, the country’s largest union group said on Friday, reinforcing views that the county’s central bank will soon shift away from a decade-long stimulus programme.The much-stronger-than-expected increase comes as the Bank of Japan looks close to ending eight years of negative interest rate policy. BOJ officials have stressed the timing of a pivot would depend on the outcome of this year’s annual wage negotiations.Policymakers hope that big pay rises will boost household spending and produce more durable growth in the broader economy, which narrowly avoided slipping into recession late last year.Workers at major firms had asked for annual increases of 5.85%, topping the 5% mark for the first time in 30 years, according to trade union group Rengo.”We estimate that this year’s wage hikes could reach 5.3%. If that is realised, real wages would turn positive in April-June 2024,” said Moe Nakahama, an economist at Itochu Economic Research Institute.Rengo, which represents about 7 million workers, many at large companies, had set its eyes on hikes of more than 3% in base pay — a key barometer of wage strength as it provides the basis for bonuses, severance and pensions.Analysts had expected a rise of more than 4%, after last year’s 3.6%, itself a three-decade high.Rengo chief Tomoko Yoshino told a press conference that rising income inequality, inflation and a labour crunch were among the factors behind the big increase, adding part-time workers would see pay hikes of 6% this fiscal year.Yoshino said the country was at a critical stage in a shift towards economic revival.The government is counting on such wage hikes to trickle down to smaller and medium-sized firms, which account for a whopping 99.7% of all enterprises and about 70% of the country’s workforce, but many lack the pricing power to pass higher costs on to their customers.Wage talks for most smaller companies are expected to conclude by the end of March, and any increments are likely to come in lower than those agreed by major firms.Among smaller delivery companies, for example, only 57% are planning any wage hikes in the fiscal year from April, according to a Japan Chamber of Commerce survey published last month. Even though Japanese companies have been raising pay, the increases have largely failed to keep up with inflation. Real wages, which are adjusted for inflation, have now fallen for 22 straight months.LABOUR SHORTAGESAt the labour negotiations, one strong showing emerged after another, led by Toyota Motor (NYSE:TM), the bellwether of annual talks, which unveiled its biggest pay increase in 25 years.The bumper wage hikes are likely to boost expectations the central bank will end negative interest rates as early as its next policy setting meeting on March 18-19.Japanese businesses are facing a chronic labour shortage due to an ageing and dwindling pool of workers.Prime Minister Fumio Kishida is pushing companies to raise wages to help Japan shake off years of deflation and put an end to meagre wage growth that has kept well behind the average for the OECD grouping of rich countries.The annual pay negotiations – called “shunto” or “spring labour offensive” – are one of the defining features of Japanese business, where relations between labour and management tend to be more collaborative than in some other countries. More

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WASHINGTON (Reuters) – U.S. lawmakers are refusing to release millions of dollars in funding that Washington views as critical to help tackle spiraling violence in Haiti, in another potential stumbling block for the international force.Representatives Michael McCaul, Republican chairman of the House of Representatives Foreign Affairs Committee, and Senator Jim Risch, the top Republican on Senate Foreign Relations, have both put “holds” on $40 million requested by the U.S. State Department, warning the administration they need “a lot more details” before it gets more funding.Congressional aides said the money being held could prevent deployment of the Kenyan police force to Haiti, unless another country stepped up to fill in the gap. The $40 million would cover costs essential to the mission.The State Department is engaging with Congress on approval for the funds, a senior State Department official said.”We think it’s critical for deployment,” the official said, speaking on condition of anonymity.Gang violence has spiraled in Haiti, fueling a humanitarian crisis, cutting off food supplies and forcing hundreds of thousands from their homes. Prime Minister Ariel Henry pledged on Monday to resign as soon as a transition council and temporary leader were chosen.Countries have been slow to offer support and doubts have grown after Kenya – which had pledged to lead it – announced it was pausing the deployment after Henry announced he would resign.Kenya’s government pledged 1,000 officers to lead an international security force last July, but the initiative has been tied up in court challenges and Kenya has asked to be paid upfront.US PLEDGE INCREASED TO $300 MILLIONThe U.S. is the largest backer for the force, and U.S. Secretary of State Antony Blinken announced at talks on Monday in Jamaica that the U.S. was upping its pledge to $300 million.”Given the long history of U.S. involvement in Haiti with few successful results, the administration owes Congress a lot more details in a more timely manner before it gets more funding,” Risch and McCaul said in a joint statement.The lawmakers said President Joe Biden’s administration had only sent them a “rough plan” to address the crisis. They have concerns over whether Kenyan courts would allow the deployment and whether the force could get to Port-au-Prince.The first State Department official said 68 briefings had been held with Congress on the situation in Haiti and the force, adding that $50 million in funds, including what is being held, would go toward equipment for the force, training, personnel kits and uniforms.Of that, $10 million that has been released has already been obligated, including to reimburse Kenya for training, the official said.The Department of Defense’s contribution of $200 million, which would support logistics, supplies and services to contributing countries, is already approved by Congress, a Pentagon spokesperson said.A second senior State Department official said the U.S. has also been encouraging other nations to make contributions, but the challenge is “unprecedented global crises,” including Russia’s invasion of Ukraine and the humanitarian situation in Gaza.Keith Mines, vice president for Latin America at the U.S. Institute of Peace, said he would be surprised if Kenya can send its police before receiving funds. “I don’t think they can go at all until the funding is there,” Mines said. More