Aurelia Butler

TOKYO (Reuters) – Japan’s current account extended its surplus for a full year in January, Ministry of Finance data showed on Friday, as rises in overseas interest rates boosted gains from foreign bond holdings.The data showed Japan’s current account surplus stood at 438.2 billion yen ($2.96 billion) in January, compared with economists’ median forecast for a deficit of 330.4 billion yen in a Reuters poll.It followed 744.3 billion yen of surplus in December.A breakdown of the data showed exports grew 7.6% year-on-year in January driven by demand for cars, car parts and chip-making equipment while imports fell 12.1% reflecting declines of coal, liquefied natural gas and communications equipment.Primary income gains, or returns from past direct investment and portfolio investment overseas, saw Japan log a primary income surplus of 2.8516 trillion yen.In addition, the current account data showed a record gain in travel account due to a boost from inbound tourism.($1 = 148.0500 yen) More

(Reuters) -Costco Wholesale fell short of Wall Street estimates for quarterly sales on Thursday due to tepid demand for higher margin goods, pulling its shares down 5% in extended trading. With elevated day-to-day costs hammering household budgets, customers have kept a tight lid on their spending, particularly for big-ticket non-essential purchases such as home furnishings, sporting goods and garden supplies.In January, U.S. retail sales fell by the most in 10 months with decreases in sales of electronics and appliances as well as clothing, health and personal care products.However, demand for Costco (NASDAQ:COST)’s consumables and groceries held steady and helped the company’s comparable sales, excluding the impact of fuel and currency fluctuations, jump 5.8% in the second quarter. “The same store sales actually came out better than the street expected, which again was weird because you kind of knew what the number was heading into this year,” Telsey Advisory Group analyst Joseph Feldman said.Total sales were up 6% at $58.44 billion but missed LSEG estimates of $59.16 billion.The company said that net sales were negatively impacted by a shift in the fiscal calendar and gasoline price deflation.However, Costco’s e-commerce sales surged 18.4% in the quarter, driven by strong demand for gold and silver bullions, appliances and gift cards. The company now offers online sales of gold bars and more recently 25-count tubes of 1 ounce Canada Maple Leaf Silver coins, exclusively for members.Costco sold $100 million in one-ounce gold bars last quarter.These precious metals are considered a hedge against inflation and a safe-haven investment, especially in anticipation of potential U.S. Federal Reserve rate cuts.Meanwhile, gold prices reached an all-time high of $2,164.09 on Thursday and spot silver prices have also been on the rise over the past year.The company’s profit of $3.92 per share topped estimates of $3.62 on easing freight and commodity costs. More

TOKYO (Reuters) – Big Japanese companies look set to formally offer hefty pay hikes at annual wage talks with unions that wrap up on March 13, a move that will virtually cement the case for the central bank to phase out its unprecedented monetary easing in coming months.Economists see the wage negotiations resulting in an average increase of around 3.9% in annual pay for union workers at major firms. That would be the biggest rise in 31 years and heighten expectations the BOJ would end negative interest rates by April.The central bank has long contended that robust wage growth was a prerequisite for rolling back more than a decade of a radical monetary experiment that has aimed to lift Japan out of a protracted cycle of deflation and economic stagnation. The annual “shunto” negotiations, long a defining feature of Japanese business, were closely watched in the high growth era, but became less important in the decades after the asset bubble burst in the early 1990s, as companies scrambled to shed the three excesses of debt, workers, plant and equipment.Three decades on, wage negotiations are once again in the spotlight, as Prime Minister Fumio Kishida has made pay increases a top priority, as he looks to put an end to the years of meagre wage growth that have kept well behind the average for the OECD grouping of rich countries. “This year, big firms will probably offer wage hikes of near 4%, which should prompt the BOJ to end negative rates in April,” said Takeshi Minami, chief economist at Norinchukin Research Institute.A fierce labour crunch in Japan has also driven home the message that companies need to increase pay, Minami said.”Businesses can no longer stay afloat if they don’t offer attractive pay to bring in young talent,” he said.While the wage talks directly impact workers at the biggest firms – a sliver of the workforce – they set the tone for the rest of the economy. Toyota Motor (NYSE:TM), for instance, has long been seen as a pacesetter.Wages increases are increasingly important to attract workers as Japan is now grappling with higher prices, said Atsushi Takeda, chief economist at Itochu Economic Research Institute. That’s also a big change from the past three decades when prices also budged little.Japan’s largest trade union confederation, Rengo, has demanded pay rises of 5.85% this year, topping 5% for the first time in 30 years.Unions representing workers in industries ranging from automobiles, electronics, metals, heavy machinery as well as in the service sector have followed suit, demanding record pay hikes. Many of their demands are expected to be fully met.”Strong pay offers are a done deal,” a senior government official told Reuters requesting anonymity. “The BOJ could end negative rates in either March or April, if they wanted. It’s just a question of timing.”INFLATION 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. In January, the latest month available, real wages fell 0.6% year-on-year.With inflation running at or above the BOJ’s 2% target for nearly two years, nominal wages need to accelerate by more than 0.5%, meaning that the outcome of the wage talks would need to be a 4.5% increase to beat inflation, Norinchukin’s Minami said. Toyota workers are seeking pay rises of up to 28,440 yen ($190.85) a month and a record bonus payment worth 7.6 months of salary. The world’s largest carmaker by volume is expected to formally respond to those requests on March 13.Rival car companies Honda (NYSE:HMC) Motor and Mazda Motor (OTC:MZDAY) struck early deals last month, meeting union demands in full.One important question is whether pay hikes would continue from next year and after – and whether they will spread to the smaller firms that employ seven out of 10 Japanese workers.Smaller companies tend to have less leverage to pass on costs to clients, making it harder for them to raise pay.Last year, the anti-monopoly watchdog laid out guidelines aimed at making it easier for smaller companies to pass on higher labour costs to bigger customers.Tokyo has also extended collaboration among government, labour and management to regional levels so that the three parties can work together to improve wages across the country.To overcome a labour crunch, Hisashi Yamada, a Hosei University professor and expert on labour issues, calls for improving productivity at small firms, many of whom engaging in labour-intensive operations.”Small firms must boost productivity by investing in labour saving technology such as automation and robots,” he said. ($1 = 149.0200 yen) More

(Reuters) – The Consumer Financial Protection Bureau was sued on Thursday over its new rule capping late fees on credit cards at $8, which banking groups and the U.S. Chamber of Commerce say punishes consumers who pay their bills on time.In a complaint filed in the Fort Worth, Texas, federal court, the fee’s opponents accused the bureau of exceeding its authority, and ignoring Congress’ intent that fees be high enough to deter late payments, ensure cardholder accountability, and compensate issuers for their costs when payments are late.The plaintiffs include the Chamber, the American Bankers Association, the Consumer Bankers Association, and three Texas-based trade groups.In a statement, the consumer bureau pledged to defend the rule, saying it “closes a longstanding loophole abused by credit card giants to turn late fees into a major revenue stream,” and will save American consumers more than $10 billion.Credit card late fees have been a boon to issuers, totaling more than $14 billion in 2022 as the average fee swelled to $32, the bureau estimated.The new rule caps fees for issuers with more than 1 million open accounts, unless they can prove higher fees are necessary to cover their costs, and end what the bureau called “abuse” of an automatic adjustment for inflation.More than 95% of outstanding credit card balances are expected to be covered. CFPB Director Rohit Chopra has characterized the higher fees as “junk fees.”In Thursday’s complaint, opponents said capping late fees would cause irreparable harm through higher card losses and compliance costs for issuers, including on accounts they would have never opened had they known about the cap.”The agency’s own analysis has found that by limiting late fees, associated costs will be passed onto all credit card users, even those who have never made a late payment,” said Neil Bradley, the Chamber’s chief policy officer.The case was assigned to U.S. District Judge Reed O’Connor, an appointee of former President George W. Bush.His rulings have included a 2018 decision declaring unconstitutional the Affordable Care Act, also known as Obamacare. That ruling was reversed on appeal.The case is Chamber of Commerce of the United States of America et al v Consumer Financial Protection Bureau et al, U.S. District Court, Northern District of Texas, No. 24-00213. More

(Reuters) -An Oregon state jury on Tuesday ordered Berkshire Hathaway (NYSE:BRKa)’s PacifiCorp to pay at least $29.2 million to nine homeowners and a summer camp whose properties were damaged by 2020 wildfires they claim were sparked when the Oregon utility failed to shut off its power lines during high winds.The verdict came in a trial that kicked off on Feb. 27 in Multnomah County Circuit Court in Portland, where PacifiCorp is based. The trial, which Reuters viewed via the Courtroom View Network, was the second of at least three scheduled this year to serve as test cases to determine how much PacifiCorp owes Oregon residents and business owners, whose homes and properties were ravaged by a series of fires that torched parts of the state over Labor Day weekend in 2020, causing nearly $1.9 billion in property damage and other harms, according to a state estimate. The company could face billions of dollars in liability to compensate homeowners and business owners who claim the fires damaged approximately 2,400 properties across the state. The victims claimed in their 2020 class action that PacifiCorp had a duty to safely operate its electrical equipment, but negligently failed to shut it off.The company has said it is appealing previous verdicts against it. It said in a statement on Tuesday that it has settled separate claims related to the fires, and will continue to settle other “reasonable” claims as well.”Wildfires pose a catastrophic threat to communities, and require holistic solutions involving businesses, governments and other key stakeholders working together to design and implement enduring solutions for all Oregonians,” the company said.A separate jury last year already determined PacifiCorp was liable for the fires, finding the company was grossly negligent when it failed to shut down power lines that sparked during high winds and set off fires across the state. That trial involved 17 people whose homes or properties were damaged, but the liability findings apply to all the plaintiffs in the class action.The jury also set punitive damages, which are damages reserved for defendants whose behavior is deemed particularly egregious, at 25% of compensatory damages. That finding also applies to all of the plaintiffs, which should boost their overall recovery.The award from Tuesday’s verdict will exceed $42 million once punitive damages and other post-trial additions are made, attorneys who represented the plaintiffs said in a statement.In January, another jury ordered PacifiCorp to pay at least $62 million to nine homeowners whose properties were damaged by the wildfires.The company has defended its fire-prevention efforts, saying power shutoffs were not necessary based on what it knew. It has also said the plaintiffs did not establish that its equipment was to blame for the wildfires.Wildfires throughout Oregon in 2020 burned approximately 1,900 square miles (1.22 million acres), destroying an estimated 5,000 or more structures and killing at least nine people.The U.S. government has also threatened to sue the company over natural resources damages and fire suppression costs associated with the 2020 Slater wildfire in southern Oregon and northern California. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The Federal Reserve is “not far” from having the confidence to start cutting interest rates, its chair Jay Powell has said, bolstering hopes that the central bank will lower borrowing costs in the coming months. Powell told US senators on Thursday that the Federal Open Market Committee was “in the right place” on monetary policy while it waited for proof that almost two years of higher rates had tamed inflation. “We’re waiting to become more confident that inflation is moving sustainably to 2 per cent,” the Fed chair said, referring to the central bank’s official inflation target. “And when we do get that confidence, and we’re not far from it, it will be appropriate to dial back the level of restriction so that we don’t drive the economy into recession.” Powell’s comments will add to hopes the Fed is at last preparing to ease monetary policy after months of holding rates at a 23-year high of between 5.25 per cent and 5.50 per cent — part of its quest to quell price pressures that surged as the US economy emerged from the pandemic. Futures prices imply investors have priced in a quarter-point cut by July, with many betting the move will actually come in June. The personal consumption expenditures prices index, the headline inflation gauge used by the Fed to measure progress against its 2 per cent target, is now at just 2.4 per cent, having hit a high of 7 per cent in 2022. Powell was speaking in Washington just hours after European Central Bank president Christine Lagarde signalled the central bank could begin lowering interest rates in June. Stocks and bonds were both higher on Thursday, with the S&P 500 up 1.2 per cent while yields on rate-sensitive two-year Treasuries hovered around three-week lows at 4.52 per cent. The Fed’s rate-setters next meet on March 20, when the FOMC is widely expected to keep interest rates on hold. The Fed will also unveil a new so-called “dot plot”, detailing how many times officials think the central bank will cut rates in 2024. Analysts have forecast the Fed will make three or four cuts over the second half of 2024. The continued strength of the US economy has defied many forecasters and allowed the Fed to take a cautious approach to cutting rates, confident that higher borrowing costs will not trigger a sharp rise in unemployment. “We’re doing the best of anybody,” Powell said. “We’ve got the strongest growth and the lowest inflation of the advanced economies.” The US’s nearest economic rival in terms of the size of total gross domestic product, China, was having “significant difficulties”, he added.The ECB on Thursday also downgraded its growth forecasts for the fourth time in a row, saying it expected the eurozone economy to expand 0.6 per cent this year, compared with the previous estimate of 0.8 per cent. Many economists expect the to Fed upgrade its US GDP projections at the March vote. Additional reporting by Jennifer Hughes in New York More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The European Central Bank has signalled June is the earliest it is likely to cut interest rates after it lowered its forecasts for inflation, predicting it will reach its 2 per cent target next year.The central bank maintained its benchmark deposit rate at an all-time high of 4 per cent at its meeting on Thursday. But it lowered its inflation forecast for this year from 2.7 per cent to 2.3 per cent, and trimmed it for 2025, opening the door to possible rate cuts in the coming months.“We are making good progress towards our inflation target and we are more confident as a result,” said ECB president Christine Lagarde. “But we are not sufficiently confident. We clearly need more evidence and more data. We will know a little more in April, but we will know a lot more in June.”Lagarde rejected the idea that there was “no rush” to cut rates. Instead, she said the ECB governing council had “just begun discussing the dialling back of our restrictive stance” even though it did not discuss whether to immediately cut rates at this week’s meeting.Carsten Brzeski, an economist at Dutch bank ING, said: “This time the message was mercifully clear from Lagarde that they are looking to cut in June. The bigger question is how fast will they cut from that point.”The central bank also reduced its 2024 growth forecast for the fourth quarter in a row, saying it expected eurozone gross domestic product to rise just 0.6 per cent this year, down from its previous estimate of 0.8 per cent.Even as the economy slows to a crawl, several rate-setters have expressed concern that rapid wage growth could keep pushing inflation above the ECB’s 2 per cent target — particularly in the labour-intensive services sector. Underlining these worries, the ECB said it expected core inflation — which excludes volatile energy and food prices — to be 2.6 per cent this year, slightly lower than its previous forecast of 2.7 per cent.Lagarde said the ECB was “laser-focused” on wage growth and profit margins to seek “confirmation of what we are beginning to see, which is moderation on the wage front and an absorption of those higher wage costs by the profit margins”.“I wish everything was closer to our target — but we are not there yet,” she said, but added: “I am not saying that we will wait until we see everything at 2 per cent.”Ann-Katrin Petersen at the BlackRock Investment Institute said inflation was likely to remain sticky enough to avoid a return to the negative rates the ECB had in place two years ago. “With a still tight labour market and subdued productivity, domestic price pressures could keep inflation near or above 2 per cent,” she said.The ECB’s decision to leave rates on hold follows a similar move by the Canadian central bank on Wednesday and is expected to be mirrored by the US Federal Reserve and the Bank of England when they meet in two weeks’ time. Stickier than expected inflation readings have prompted investors to shift their bets this year on when the major central banks will start cutting borrowing costs from the spring to the summer.Federal Reserve chair Jay Powell said on Thursday that the US central bank was “not far” from having the confidence it needed to start cutting interest rates from their current 23-year high of between 5.25 and 5.5 per cent. The eurozone economy stagnated for much of last year and has been slower to recover from the double shock of the pandemic and Russia’s invasion of Ukraine than most advanced economies, in particular the US.Inflation in the eurozone has dropped rapidly from its peak above 10 per cent to 2.6 per cent in February. Yet services inflation has come down more slowly from its record annual rate of 5.6 per cent last July to 3.9 per cent in February. Lagarde said services-dominated domestic inflation was the one area that was not declining.She also said the ECB would announce the results of its operational framework review on March 13, when it is expected to announce how it will continue providing liquidity to commercial banks and the optimal size of its bond portfolio in the future.Additional reporting by Claire Jones in Washington and Stephanie Stacey in London More