Aurelia Butler

“The consequences we, at the European Central Bank, should draw is probably to cut rates in the spring and I remind you that in France and Europe this is a season that lasts from April to June 21,” he told France Info TV.He also reiterated that the inflation rate in France should fall to 2% next year. The Bank of France had trimmed its French economic growth forecasts for 2024 on Tuesday, forecasting growth of 0.8% for this year, down from an estimate of 0.9% growth in December.ECB chief Christine Lagarde earlier this month hinted strongly that a long-awaited rate cut would be more likely to happen at the central bank’s meeting in early June, rather than in April. More

“A combination of stubbornly weak activity, a further softening in labour market indicators, alongside in-line wage and services inflation numbers will now more likely than not push the MPC (Monetary Policy Committee) to begin cutting by the end of Q2,” Citi economists said in a note dated March 12. The Wall Street brokerage maintained the quantum of reductions at 125 basis points (bps) for the year, but did not mention how many rate cuts it expects the BoE to deliver in 2024.Official data on Tuesday showed British wages, excluding bonuses, grew at their slowest pace in the final quarter of 2023, since October 2022, while the unemployment rate edged up unexpectedly, likely easing the central bank’s inflation worries.Citi economists said wage growth seems broadly in-line with the BoE’s expectations for the private sector, while service sector inflation is expected to fall short of the central bank’s expectation by 10-20 bps over the next two releases, before it potentially starts cutting rates in June.The brokerage added that an August cut, however, remains “plausible if inflation data for the second quarter prove more resilient”.The BoE said it expects falling energy prices to push inflation back to its 2% target in the second quarter before rising services prices and wage costs lift inflation towards 3% later this year.”The big picture of UK remains as one of large supply shocks, fading inflationary second round effects, accelerating monetary transmission, weak growth and fading fiscal stimulus” implying a softening labor market, Citi said. More

TOKYO (Reuters) -The Bank of Japan will debate ending its negative interest rate policy next week if Friday’s preliminary survey on big firms’ wage talks outcome yield strong results, sources said, marking a landmark shift away from its decade-long stimulus programme.While investors are increasingly pricing in the chance of a March policy shift, any such decision could affect global financial markets by altering Japan’s status as a lone supplier of massive cheap money, analysts say.This year’s annual wage talks kicked off in full force on Wednesday with Toyota Motor (NYSE:TM) agreeing to give factory workers their biggest pay increase in 25 years, heightening expectations that other companies will follow suit with bumper wage increases.Such early signs of a strong outcome in this year’s annual wage talks have heightened the chances that the BOJ will phase out its massive monetary stimulus, three sources familiar with its thinking said.The central bank is likely to scrutinise a preliminary survey on the wage talks’ outcome, to be released by union umbrella Rengo on Friday, in deciding whether conditions to phase out stimulus have fallen into place, the sources said.”There seems to be enough factors that justify a March policy shift,” one of the sources said. “In the end, it will be a judgement call by the nine board members,” the source said, speaking on condition of anonymity due to the sensitivity of the matter.An end to negative interest rate, which has been in place since 2016, would mark a landmark shift away from the BOJ’s massive stimulus programme and Japan’s first interest rate hike since 2007.A March policy shift, however, is hardly a done deal as some in the nine-member board are worried over recent weak signs in consumption that highlight the fragile nature of Japan’s economic recovery, they said.The BOJ may put off the decision until April if policymakers feel they need to scrutinise more data such as the “tankan” business sentiment survey due on April 1, and the bank’s quarterly report on regional Japanese economies, they said.Many market players expect the BOJ to end negative rates either at its next two-day meeting concluding on Tuesday, or a subsequent meeting on April 25-26.Upon ending negative rates, the BOJ will also ditch its bond yield control and dismantle a framework created to purchase risky assets such as exchange-traded funds (ETF), they said.BOJ Governor Kazuo Ueda signalled on Wednesday the bank’s readiness to phase out stimulus as soon as next week, pointing to “fairly high pay demands” made by labour unions.”The outcome of this year’s annual wage negotiation is critical” in deciding on the timing of an exit from massive stimulus, Ueda told parliament.”We’re seeing many companies make offers, including today. We hope to reach an appropriate decision looking comprehensively at these results,” as well as other data, he added. More

BEIJING/HONG KONG (Reuters) – Chased by debt collectors over a mortgage delinquency in a southern Chinese city, former finance worker Lei Xiaoyu no longer answers her phone as she tries to delay the inevitable.”It’s my only house and I don’t want it foreclosed. But what can I do?” said the 38-year-old, who in late 2022 lost her job and stopped repaying the mortgage and credit card debt she took to buy a 1.3 million yuan ($181,139) home in Huizhou.”I feel like I wasted my youth,” she said, regretting the purchase seven years ago.The number of Chinese in Lei’s situation is small, but rising fast, as growth in the world’s second-largest economy remains patchy and fragile due to a property sector crisis, mounting local government debt and fears of deflation.Rising mortgage delinquencies could have negative spillovers on both property prices and consumer confidence, analysts say, further complicating China’s efforts to boost household demand and bring its economy on a more solid footing.The number of foreclosed homes in China rose 43% year-on-year in 2023 to 389,000, said China Index Academy, a major independent real estate research firm. More than 50,000 other units were foreclosed in January, up 64.4% year-on-year, the firm said.”It has a certain shrinking effect on consumption and also serves as a warning that excessive investment (in property) should be avoided,” Hwabao Trust economist Nie Wen said.Lei is in no mood to spend money.She made about 40,000 yuan last year selling goods via livestreaming, not enough to make any of the 4,200 yuan monthly mortgage payments and barely enough for basic living expenses.”All the clothes I wear are from five years ago, but I’ve gained weight and many no longer fit me. My friend gave me one of her old coats. I haven’t travelled since 2017,” said Lei.Not being able to support her mother who lives on a 3,000 yuan monthly pension upsets her the most.MORE AUCTIONS COMINGData from China Index Academy showed a total of 99,000 foreclosed units were sold at auctions in 2023 for a combined 150 billion yuan.Duan Chenglong, a manager at Beijing Xiangpaipai Information Service, a firm that specialises in foreclosures, says those auctions were the result of debt disputes two- to three-years old, meaning the trend is likely to pick up pace.”The post-pandemic economic environment hasn’t been good, with many defaulting on their mortgages, including due to job issues,” said Duan. “There is still a gap between the volume of properties being auctioned and the amount of distressed assets.”More auctions in the future will distract would-be buyers from the regular market, which could weigh on prices for both new and second-hand homes, Duan said.In some cities in China, some auctions of foreclosed homes have repeatedly failed.The ratio of mortgage-related non performing loans in the Chinese banking sector is estimated at only 0.4%, meaning lenders can tolerate writing off some of these assets. But the failures highlight the excess housing supply built up during the boom years of the property sector, which accounted for about a quarter of economic activity at its peak in 2021.Xin, a 30-year-old single mother from Zhumadian, in the central Henan province, lost her flat after she mortgaged it to start a child entertainment business, which failed within weeks due to COVID-19 lockdowns in 2020.The property, valued in 2019 at 310,000 yuan, was auctioned twice in the past year for the 170,000 yuan Xin owes to the bank, but failed to attract any bids. “Who would buy it? There are more than 10 flats up for auction in the same building,” said Xin, who only gave her surname, citing privacy reasons.($1 = 7.1768 Chinese yuan renminbi) More

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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Japanese companies including Honda, Nippon Steel and ANA Holdings have granted workers their biggest pay rise in more than three decades, underlining the inflationary trend and bolstering the case for the Bank of Japan to begin raising interest rates.Galvanised by the sharp rise in living costs and a deepening labour shortage, the country’s trade unions have negotiated an increase in wages that is certain to exceed the rate of inflation, marking a milestone in a country where real wages have stagnated since the late 1990s.With the shunto spring wage negotiations mostly concluding on Wednesday, economists expect large companies to give their unionised workers an average wage increase of more than 4 per cent, compared with 3.6 per cent last year. That would be the biggest rise since 1992.Toyota on Wednesday said it had fully accepted its labour union’s request for a monthly pay increase of up to ¥28,440 ($193), the largest amount since comparable figures were first made available in 1999.“We wanted to firmly cover for the impact from rising prices,” said Takanori Azuma, Toyota’s chief human resources officer, adding that the increases in monthly salary and bonus payments were at a record level.Nippon Steel agreed to an 11.8 per cent increase in base salary, exceeding its trade union’s request for the biggest jump in monthly pay since 1979. On Monday, ANA gave its workers an average wage increase of 5.6 per cent, the highest for the airline since 1991. Honda last month agreed to a 5.6 per cent annual pay bump, the highest since 1989. NEC granted a 4.3 per cent rise in base pay, the highest ever since the current wage negotiation system began in 1998, while Mitsubishi Heavy Industries agreed to an 8.3 per cent annual pay hike, its highest since 2005. The pay negotiations have been closely followed by investors this year as robust wage growth is crucial for the Bank of Japan to gain enough confidence to begin unwinding its ultra-loose monetary policy measures. Despite recent weak economic data, analysts said the strong shunto results should allow the central bank to end its negative interest rate policy as soon as next week or April.Combined with strong government pressure, the sharp rise in prices caused by the war in Ukraine and the global energy crisis had already led to large gains in wages during last year’s negotiations. But trade unions had failed to secure pay rises that would cover accelerating inflation while the gains did not spread evenly to small and medium-sized enterprises, which employ about 70 per cent of Japan’s workforce.“It was extremely hard to demand higher wages when prices were not going up,” said Akihiko Matsuura, president of UA Zensen, one of the country’s largest trade unions with more than 1.8mn members in retail, food, chemicals and other sectors. “We need to bring 30 years of wage stagnation to an end.” You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.The union, which represents mostly workers at small and medium-sized businesses, has called for a 6 per cent total wage increase, including 4 per cent in base salary. Ahead of Wednesday, retailer Aeon agreed with the union to raise the hourly wage for roughly 400,000 of its part-time employees by an average of 7 per cent this spring in a sign that wage increases were trickling down to society at large.“The big test is next year as to whether companies will fully respond to the demands of unions even when prices will not rise very much,” said Matsuura. Headline inflation averaged 3.2 per cent last year but has slowed to 2.2 per cent in January on the back of a decline in the imported cost of energy.But even as inflation pressure declines, companies are still likely to face demands to raise wages as they struggle to find younger workers, further empowering the unions. Japanese workers rarely take to the streets to demand higher wages or better working conditions, but several strikes have occurred this year as companies have failed to meet the demands of unions.“Looking back, we feel that labour unions have been too reasonable,” said Katsuhiro Yasukochi, chair of the Japanese Association of Metal, Machinery and Manufacturing Workers, which consists of about 390,000 workers mostly employed by smaller businesses.Yasukochi said he expected its members to be granted a wage increase of well over 4 per cent, which would be the highest since the union was formed in 1999. The outcome of wage talks for smaller businesses are expected in the coming months.“The labour shortage will never be resolved,” he said. “We have entered an era where company managers who cannot raise wages will be removed from the market.” More

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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Nigeria has been hit by a wave of violent unrest over food as its economic and security crisis deepens, raising fears of widespread hunger and a breakdown in law and order in Africa’s most populous nation. Assaults on grain warehouses have been reported across the country in recent weeks after the cost of living reached levels not seen since the mid-1990s and the food inflation rate jumped above 35 per cent at the start of the year. The government has been forced to deploy security forces to warehouses in Abuja after an incident on the outskirts of the capital this month, in which an angry crowd descended on a storage facility in the city and emptied it of grain, badly damaging the building in the process. The looting continued for more than two hours before police restored order.The assault followed a stampede last month at the Lagos regional headquarters of Nigeria’s customs service as it sold off bags of rice confiscated from smugglers at a quarter of the market price. The chaos left seven people dead, including a member of the ruling All Progressives Congress party.The IMF estimates that 8 per cent of Nigeria’s nearly 200mn people are food insecure, and this month urged the government to tackle the issue as an “immediate policy priority”. The African Development Bank warned in last month’s Africa Macroeconomic Performance report that a failure to address rising food costs threatened social unrest. “People are rebelling against a perceived break in the social contract between the state and society,” said Afolabi Adekaiyaoja, an analyst at the Abuja-based Centre for Democracy and Development think-tank. “This could descend into uncontrolled chaos if not carefully managed.”The World Bank last month blamed “persistent insecurity and armed conflict” for the situation, which it said would leave seven states in northern Nigeria at “crisis food security levels” this year. Long-running structural issues in Nigeria have kept food costs high for much of the past decade. Productivity is low, with agriculture dominated by subsistence farmers. But the insecurity in the country’s north, a region beset by Islamist insurgents and criminal gangs kidnapping for ransom, has had a severe impact on production and prices. More than 500 people, including almost 300 schoolchildren, have been kidnapped in three different incidents across northern Nigeria in recent weeks. Gangs have driven some farmers off their fields, while others are forced to pay criminals for access to their own land, according to a report by Lagos consultancy SBM Intelligence. Failure to comply can be deadly. “Those who resist . . . face severe consequences, including abduction, murder or confiscation of their produce,” said the report. Last year’s decisions by President Bola Tinubu’s government to cut fuel subsidies and abandon a long-standing currency peg to allow the naira to trade freely brought the crisis to a head. The reforms have severely affected prices in a nation that relies heavily on road transport to distribute goods and imports much of what it consumes, making it vulnerable to exchange rate movements. According to government data, the price of a kilo of rice has doubled in the past year. A western-backed donation of 25,000 tonnes of wheat from Ukraine in February via the World Food Programme sparked a debate over the optics of a war-torn country donating aid to a nation nominally at peace, with opposition politician Peter Obi calling it the result of years of “leadership failure”.Glory Ehiremen, a senior analyst at SBM, said the Tinubu government needed to boost food production by ensuring the security of farmers, mechanising agriculture and boosting storage capacity to reduce loss and wastage.“Addressing food insecurity is a national emergency,” said Ehiremen. The ransacking of warehouses was a measure of the difficulties people faced, she said, adding: “There is growing concern within the private sector that the looting could result in the closure of businesses all round the country.”The government’s response has been muted but last month it released more than 100,000 metric tonnes of grains from its national strategic reserves for distribution by state governments. The customs service said last week that it would auction 400 bags of beans it had seized at a border area.Nigerian authorities also announced a crackdown last month on alleged hoarding by middlemen in the food industry. Tinubu has ordered security agencies to investigate such accusations, while officials in the northern state of Kano said 10 warehouses have been seized and that their owners faced prosecution over claims of hoarding.But analysts warned the strategy risked encouraging the public to see warehouses as legitimate targets, when in many cases they were simply storing stock for private businesses that bought in bulk to sell on later.“If the government doesn’t respect private property, then why should ordinary citizens?” said Joachim MacEbong, a governance analyst at data firm Stears. “Especially if they’re hungrier. People could be taking their cues from the government.”Video: A Fragile State by Lola Shoneyin | Democracy 2024 More