Aurelia Butler

The BOJ kept its benchmark base rate at 3.5% for a ninth straight meeting, largely in line with analyst expectations. The move comes even as South Korean inflation eased substantially in recent months.But with consumer price index inflation remaining above the BOK’s 2% annual target, the bank is widely expected to keep policy restrictive in the coming months. A Reuters poll showed that analysts expect a rate cut only by the third quarter of 2024. A recent rebound in South Korean exports- which are a key growth driver- also pointed to resilience in the economy, which gives the BOK more headroom to keep policy restrictive. But the economy is still grappling with pronounced decline in manufacturing, while a housing market downturn and relatively high inflation also quashed private spending.  More

Below are the questions and answers in the poll, conducted from Feb. 6 – Feb. 16, for Reuters by Nikkei Research. Answers are denoted in percentages.Percentage totals for a given question may not come to exactly 100%, due to rounding. The “polled” and “replied” figures are in absolute terms.1. How are current business conditions at your company? (Pick one)Good Not so Bad Polled Replied good All 26% 60% 14% 400 250 Manufacturers 20% 60% 21% 211 126 Non-manufactur 32% 61% 6% 189 124 ers 2. How do you see business conditions at your company in three months time? (Pick one)Good Not so Bad Polled Replied good All 24% 66% 10% 400 250 Manufacturers 17% 71% 11% 211 126 Non-manufactur 31% 61% 8% 189 124 ers 3. How do you see the Chinese market over the next five years? (Pick one)Very Somewhat Neutral Somewhat Very Polled Replied optimistic optimistic pessimistic pessimistic All 0% 4% 34% 50% 12% 400 239 Manufacturers 0% 2% 32% 52% 14% 211 126 Non-manufactur 1% 6% 36% 48% 9% 189 113 ers 4. What worries you most about China? (Pick one)Economic Weak Deterioration in Real Anti-Jap Other Polled Replied slowdown consumer China-US relations estate anese sentiment over trade and market feeling politics crisis All 49% 2% 19% 24% 5% 2% 400 239 Manufacturers 50% 2% 22% 21% 3% 2% 211 125 Non-manufactur 47% 1% 16% 27% 7% 2% 189 114 ers 5. How are you responding to the economic slowdown in China? (Pick as many as apply)Reining in Shifting Considering Returning Other Polled Replied capital production and pulling out or capital to investment sales to other shrinking Japan markets operations All 16% 35% 17% 8% 38% 400 208 Manufacturers 18% 49% 21% 7% 26% 211 112 Non-manufactur 14% 18% 13% 8% 51% 189 96 ers 6. How have your China revenues fared since the same period the previous year? (Pick one)Increased No Fell Fell Fell Fell Polled Replied change between between between more 1-10% 11-20% 21-30% than 31% All 11% 47% 21% 10% 5% 6% 400 216 Manufacturers 11% 35% 22% 15% 7% 9% 211 116 Non-manufactur 11% 61% 19% 5% 2% 2% 189 100 ers 7. There is the possibility of a Trump administration after the U.S. election. Do you see this as a risk? (Pick one)See it as Don’t see it See it as an Polled Replied a risk is a risk opportunity All 49% 47% 3% 400 235 Manufacturers 56% 41% 3% 211 122 Non-manufactur 42% 54% 4% 189 113 ers 8. If Donald Trump were to become president again, what would be your biggest concerns? (Pick as many as apply)U.S.-China The impact of Impact Increasing Other Polled Replied trade stronger on U.S. protectionism friction anti-China domestic worldwide trade sanctions strategy All 37% 34% 15% 54% 7% 400 235 Manufacturers 32% 45% 19% 53% 5% 211 121 Non-manufactur 42% 23% 11% 54% 10% 189 114 ers 9. Are you considering making business plans on the assumption of a Trump presidency? (Pick one)Considering Plan to No plans to Undecided Polled Replied consider in consider the future All 0% 8% 60% 32% 400 238 Manufacturers 1% 12% 50% 37% 211 125 Non-manufactur 0% 4% 70% 27% 189 113 ers 10. As Japanese Prime Minister Fumio Kishida’s approval rating remains low, there is talk of succession. Who do you think would be an appropriate next prime minister? (Pick one)Shigeru Yuko Katsunobu Yoko Fumio Shinjiro Taro Yoshihide Sanae Yoshimasa Toshimitsu Kenta Katsuya Nobuyuki None of Polled Replied Ishiba Obuchi Kato Kawakami Kishida Koizumi Kono Suga Takaichi Hayashi Motegi Izumi Okada Baba these All 18% 0% 1% 12% 4% 6% 9% 12% 7% 3% 4% 0% 0% 0% 23% 400 218 Manufacturers 18% 1% 1% 14% 4% 4% 13% 13% 7% 3% 4% 0% 1% 0% 17% 211 114 Non-manufacture 19% 0% 1% 10% 3% 8% 5% 12% 8% 3% 3% 0% 0% 0% 30% 189 104 rs More

The ultraconservative House Freedom Caucus, which represents about three dozen of Johnson’s 219-212 Republican majority in the House of Representatives, promoted the idea in a letter as congressional leaders rushed to complete legislation to avert a possible partial government shutdown beginning early next month.The hardliners also asked Johnson to update House Republicans on spending talks, claiming that party members were being left in the dark about spending levels and potential policy changes.”Since January, Speaker Johnson has held regular meetings with members, including appropriators and HFC members, on the status of the FY24 appropriations process,” a Johnson spokesperson responded in a statement to Reuters. Hardliners, whose demands for deep spending cuts and conservative policy changes stymied progress on House Republican spending bills last year, are concerned that Johnson and Democratic Senate Majority Leader Chuck Schumer will soon unveil legislation with spending and policy compromises that they reject.”We could instead pass a year-long funding resolution that would save Americans $100 billion in year one,” 28 members of the hardline bloc told Johnson in the letter.The letter was referring to a section of the 2023 Fiscal Responsibility Act that requires a 1% across-the-board spending cut, if the federal government is funded by a stopgap measure come April 30. The current fiscal year began on Oct. 1, and the government has since been funded by a series of short-term stopgap bills.It was not clear whether the suggestion would make a difference to Johnson and other House Republican leaders.A dozen hardliners shut down the House floor in January to protest Johnson’s framework spending agreement with Schumer. The speaker responded by defying the group in a public statement. Funding is due to run out on March 1 for some federal agencies, including the Department of Transportation, while others like the Defense Department face a March 8 deadline. More

LONDON (Reuters) – Climbing costs at HSBC have added to growing investor concerns about how big banks manage their expenses, putting executives under pressure to quickly address spending.Although banks have seen revenues balloon in the higher interest rate environment of recent years, fast-rising costs are now beginning to pinch, consultants and shareholders said.Recent results have shown lenders struggling with wage bills, regulatory costs and accelerating investment plans.HSBC on Wednesday reported a 6% hike in costs in 2023, blaming spending on levies in the U.S. and Britain. Europe’s biggest bank by assets also forecast a 5% rise in costs in 2024, after committing to invest despite stubbornly high inflation.A report last year by consultants Oliver Wyman and investment bank Morgan Stanley highlighted the need for banks to avoid one-size-fits-all cost-cutting strategies, in order to achieve savings with minimal effect on revenues.HSBC’s 2023 pretax profit jumped 78% to $30.3 billion, but missed consensus estimates due to an unexpected $3 billion writedown on its stake in China’s Bank of Communications.And while a fresh $2 billion stock buyback went some way to soften these blows, some fund managers expressed concern.”Costs are clearly disappointing, with inflation and investment casting a shadow and posing a risk to earnings,” Hywel Franklin, head of European Equities at Mirabaud Asset Management told Reuters after the HSBC results.British bank Barclays on Tuesday set out savings and cost-income ratio (CIR) targets that also fell short for some investors.Barclays said it hoped to shave around 2 billion pounds off its costs over the next three years, lowering its CIR to “high-50s” by 2026, from 63% at end-2023.HSBC Chief Executive Noel Quinn said his bank was navigating the cost strains better than the surprise overspend implied, with its CIR for 2023 down to 48% last year, from 64% in 2022.Asset sales were also proving a useful cost management tool.”We are actually selling a billion dollars worth of costs,” Quinn said, pointing to sales of HSBC’s French retail and Canadian arms which were completed in recent weeks.”We continue to try and offset investment in the business for growth and efficiency reasons with savings elsewhere,” Quinn added on a media call.Other European banks have also felt the squeeze. Credit Agricole (OTC:CRARY) this month reported a 15% jump in year-on-year underlying operating expenses in its fourth quarter, more than expected, and flagged a further 8% rise in costs for 2024.Deutsche Bank said on Feb. 1 it would cut 3,500 roles as it tackles a 75% CIR and a 6% rise in 2023 non-interest expenses.COMPENSATIONThe Oliver Wyman and Morgan Stanley report said that global banks could redesign their workforce to clarify roles and align compensation, while corporate specialists should trim regional footprints to prioritise on recession-proof revenues. As inflation continues to pressure their returns, some investors and analysts said bank executives needed to exercise restraint on share buybacks and pay, pending further progress on broader savings and in case of possible economic shocks. “Buybacks artificially inflate earnings per share, potentially leading to unsustainable practices over quarterly periods,” Allen He, Research Director at FCLTGlobal, told Reuters, in comments about companies in general. Meanwhile, compensation is being viewed as an increasingly significant component of banks’ rising cost bases.A report on Feb. 8 from shareholder advisory firm Glass Lewis said it would “carefully review the strategic rationale for any rebalancing of bankers’ pay packages” in view of changes to regulation that removed caps on bonuses.Quinn saw his total pay double in 2023 to $10.6 million from $5.6 million the year before, as long-term incentives from his appointment in 2020 began to vest, boosting his variable pay.HSBC’s bonus pool rose to $3.8 billion from $3.4 billion in 2022, reflecting improved performance, and it would launch a variable pay scheme for junior and middle management staff.That contrasted with Barclays where the bonus pool dipped 3% in 2023 to 1.75 billion pounds and CEO C.S. Venkatakrishnan saw his total pay fall from 5.2 million pounds to 4.6 million.The Glass Lewis report said it would “generally expect increases in variable incentive opportunity to be accompanied by an appropriate reduction in fixed pay”, adding that the first bank to propose substantial changes may act as a litmus test.”If an overhaul of pay is well-supported by shareholders, the other banks’ interest may well be piqued,” it said. More

ORLANDO, Florida (Reuters) -The yen’s slide below 150 per dollar has fired up warnings from Japanese officials that the pace of depreciation is “excessive” and “undesirable,” but a repeat of the yen-buying intervention frenzy of 2022 seems unlikely.Tokyo may not intervene at all. Its tolerance for a weaker exchange rate may be greater now than it was then, lower yen volatility points to a pretty relaxed FX market, and U.S.-Japanese yield spreads are probably more likely to narrow than widen from here.In Japan, inflation has peaked and is now falling, pipeline price pressures have cooled significantly, the economy is in recession, and the country’s terms of trade have improved from 2022.What’s more, the Bank of Japan still appears to be on track to end negative interest rates soon, so a “natural” turn in the yen is a distinct possibility. Globally, while there may be increasing uncertainty around the timing and extent of the next interest rate moves by the Federal Reserve, European Central Bank and Bank of England, they will almost certainly be lower.None of that points to as pressing a need for policymakers in Japan to wade into the market spending tens of billions of dollars to prevent the yen from making new historic lows through 152 per dollar. NO HURRYTo be sure, they may want to prevent the yen’s slide from spiraling into a more damaging selloff that threatens the functioning of Japanese financial markets. It is already down a hefty 6% against the dollar this year.But a re-run of September and October 2022 when Japanese authorities bought yen in the FX market for the first time since 1998, and in record quantities, is a remote prospect.Annual consumer inflation at that time was above 3% and rising, and producer price inflation was a sizzling 10%. While authorities had for years been trying to escape deflation, an exchange rate/import price spiral was never the desired alternative.Inflation is close to the BOJ’s 2% target and slowing, and producer price inflation has virtually disappeared. Analysts at Morgan Stanley note that Japan’s terms of trade are not as bad as they were 16 months ago and import costs are nowhere near as high.This comes against the surprise news that the economy has slipped into recession, meaning Japan is no longer the third-largest economy in the world.Will policymakers want to drive up an exchange rate that is currently giving the export-heavy economy a path out of recession, boosting corporate profits, and thereby increasing the prospect of higher wage settlements they want to see?”Our suspicion is thus that the Kishida administration … will be in no particular hurry to curb the yen’s slide and thereby risk depressing corporate profits,” Morgan Stanley’s Koichi Sugisaki wrote on Sunday. ORDERLY FX MARKET If the domestic backdrop suggests less need for Japan to wade in with huge yen-buying intervention, so too does the international picture.In 2022 the Fed was undertaking its most aggressive rate-hiking campaign in 40 years and U.S.-Japanese yield spreads were widening sharply. The dollar’s surge above 150.00 yen was in line with exploding rate differentials.Intervention, therefore, maybe flew in the face of these fundamentals, but was understandable from the point of view of wanting to prevent the yen-selling mania from spiraling out of control.Today, the Fed has almost certainly topped out, U.S. yields are more finely balanced, and the BOJ is nearer “liftoff.” The yen may benefit from a natural narrowing of the U.S.-Japanese yield gap, without an official push.The risk for the BOJ is if its G4 peers don’t cut rates as quickly or as much as predicted. The yen could come under renewed downward pressure, testing the central bank’s intervention resolve. But right now, currency markets appear perfectly relaxed. Despite falling every week this year, the kind of one-way market that Japanese officials want to avoid, the yen’s decline has been anything but volatile. One-month and three-month implied dollar/yen volatility is at three-month lows around 7% and 8%, respectively, notably lower than in September and October 2022.”The risk of material intervention is still modest,” said Marc Chandler, managing director at Bannockburn Global Forex. (The opinions expressed here are those of the author, a columnist for Reuters.)(By Jamie McGeever; Editing by Paul Simao) More

WASHINGTON (Reuters) – The Internal Revenue Service said on Wednesday it plans to crack down on wealthy executives who may be using company jets for personal trips but claiming the costs as business expenses for tax purposes, as part of a new audit push to boost revenue collections.The IRS announced that it will begin dozens of audits involving personal use of business aircraft, focusing on large corporations, large partnerships and high-income taxpayers.The agency said it would use “advanced analytics” and other resources from the 2022 Inflation Reduction Act, which provided $80 billion in new funding over a decade for the IRS to modernize, improve taxpayer services and beef up enforcement and compliance. The IRS said the audits aim to determine “whether for tax purposes, the use of jets is being properly allocated between business and personal reasons.” Audits could increase based on initial results and as the agency hires more examiners. The use of business aircraft is an allowable expense against a company’s profit, reducing its tax liability. But U.S. tax laws require that such costs be allocated between business and personal use, requiring detailed record-keeping.IRS Commissioner Danny Werfel said this was a complex audit area where the agency’s work has been stretched thin by more than a decade of reduced funding and declining staffing. “With expanded resources, IRS work in this area will take off. These aircraft audits will help ensure that high-income groups aren’t flying under the radar with their tax responsibilities,” Werfel said in a statement.The IRS did not specify how much additional taxes could be collected from the audits. But for an executive using the company jet for personal travel, the costs should be included as additional personal income, and may reduce the firm’s ability to deduct expenses associated with the flight.The Inflation Reduction Act funds allowed the IRS to hire more than 5,000 staff to answer phones and process tax returns promptly, modernize antiquated technology and rebuild enforcement by hiring thousands of staff capable of handling audits of sophisticated partnerships and tax avoidance schemes.Republicans in the U.S. Congress have accused the Biden administration of building an “army” of IRS agents to harass Americans over their tax bills and have sought to rescind the funding at every opportunity. A bipartisan top-line spending deal for fiscal 2024 would cut $20 billion from the total over a year.After an initial success of collecting $38 million from more than 175 high-income taxpayers, the IRS is pursuing audits of 1,600 other wealthy taxpayers, with $482 million collected so far.The Treasury and IRS now estimate that spending the full $80 billion would increase tax collections by $561 billion over 10 years. More

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(Reuters) – A look at the day ahead in Asian markets.Equity markets across Asia are likely to rise on Thursday, assuming the initial gains in Nvidia (NASDAQ:NVDA) shares in after-hours U.S. trading on Wednesday following the company’s fourth-quarter earnings are sustained.The U.S. chip-making and artificial intelligence giant won’t be the only influence – traders in Asia have on their plate PMI reports from Japan, Australia and India; inflation data from Hong Kong; and South Korea’s latest interest rate decision and guidance. They will also have the chance to digest the U.S. Fed’s January meeting minutes that showed policymakers were concerned about the risks of cutting interest rates too soon, and a spike in U.S. bond yields following an extremely weak 20-year auction. But for stocks, at the open at least, it will be all about Nvidia. Fourth-quarter revenue beat forecasts and the first-quarter outlook also exceeded analysts’ expectations. Its shares rose 7% after the bell on Wednesday, but trading was extremely volatile. The recovery in Chinese stocks from recent five-year lows, meanwhile, continues. The Shanghai Composite and CSI 300 index of blue chip shares both gained around 1% and chalked up their longest winning streaks in over a year.Another up day on Thursday will seal their best runs since July 2020. The CSI 300 is now in the green for the year and the Shanghai Composite is creeping into positive territory.While investors have responded favorably to Beijing’s efforts to prop up the market, inject liquidity into the banking system and boost economic activity, how long that positivity lasts is an open question.The latest market measure, reported by Bloomberg on Wednesday, is a ban on major institutional investors reducing equity holdings at the open and close of each trading day. Japan’s Nikkei, meanwhile, continues to pause for breath at its recent lofty 34-year heights just below 39,000 points, as dollar/yen consolidates around the 150.00 level.Japan’s purchasing managers index reports on Thursday could reveal whether the economy is any closer to exiting recession. Manufacturing activity has contracted every month except one since October 2022. Japan’s government on Wednesday downgraded its view on the economy for the first time in three months on sluggish consumer spending, suggesting a bumpy path out of a recession in the face of slow wage recovery and lackluster industrial output.    The Bank of Korea will keep its key policy rate on hold at 2.50% for a ninth consecutive meeting, according to all economists polled by Reuters, who stuck to their long-held view the first rate cut will be in the third quarter.Money markets indicate one 25-basis point rate cut will be delivered by August, and another by the end of the year.The won has weakened 3% against the U.S. dollar so far this year, but has strengthened 3% against Japan’s yen. Here are key developments that could provide more direction to markets on Thursday:- Australia, India, Japan PMIs (February)- South Korea interest rate decision- Hong Kong inflation (January) (By Jamie McGeever; Editing by Josie Kao) More