Aurelia Butler

(Reuters) -Covington & Burling must identify some clients caught up in a 2020 hack on the law firm to the U.S. Securities and Exchange Commission, a federal judge in Washington ruled on Monday in a case that could impact future cyberattack investigations.U.S. District Judge Amit Mehta ordered Covington to give the SEC the names of seven public company clients that may have had information relevant to investors accessed or stolen, dealing a partial victory to the financial regulator in its probe of the attack.A spokesperson for Covington said the firm will “review the decision carefully and consider any next steps in consultation with our affected clients.”An SEC spokesperson did not immediately respond to a request for comment.The ruling, which is likely to be appealed to the D.C. Circuit U.S. Court of Appeals, strikes a middle ground in a dispute closely watched by the U.S. legal industry. Any final outcome could make it easier for the government to get information on law firm clients in the future, and law firms warn it could chill cooperation between the private sector and authorities investigating cyberattacks. The SEC had sought the names of all the nearly 300 companies affected, but Covington resisted identifying any clients. An internal review by the firm had identified seven companies that may have had market-relevant information accessed in the hack, according to court filings.Mehta wrote that the SEC’s subpoena was “too broad” but that there was nothing improper about the regulator gaining access to some client names for a probe. The SEC sued Covington in January to force the prominent Washington-based firm to identify public company clients whose information was accessed or stolen in the breach carried out by the Chinese-linked Hafnium cyber-espionage group, filings showed.The agency said it needed the names to probe for securities law violations associated with the attack, arguing that Covington’s law firm status did not shield it from cooperating.Covington told the court a law firm’s clients are part of a “zone of privacy” protected by the U.S. Constitution and legal ethics rules. It also argued the subpoena would force the firm to expose clients to government scrutiny without evidence of wrongdoing. More

UK pay growth since the start of the pandemic has been strongest for top earners in London, leading to a widening of regional inequalities, according to analysis released on Tuesday by a leading think-tank.The Institute for Fiscal Studies said that between February 2020 and May 2023 mean earnings for employees living in the UK capital had increased by 5 per cent, after adjusting for inflation, to £4,400 a month before tax. Many areas within commuting distance of London had also seen pay increases of more than 4.5 per cent — far above the average national increase of 2.7 per cent.“Inequality in mean earnings across the country had been falling in the two decades leading up to the pandemic, with the poorest areas seeing the highest pay growth. Since 2020 we have seen a reversal of this trend,” said Xiaowei Xu, senior research economist at the IFS.London had benefited, she said, because pay growth since 2020 had been strongest in sectors concentrated in and around the capital. Outside the energy sector, the biggest pay rises had been in administrative and support services, where mean earnings were almost 10 per cent higher in real terms than in 2020, and in professional services, where they had risen by 8.6 per cent.Mean earnings in finance were also 7.6 per cent above their pre-pandemic level, even though these had fallen from a 2022 peak, while in information and communication they were up 5.5 per cent.The IFS findings, based on payroll data collected by HM Revenue & Customs, will be uncomfortable reading for policymakers, who believe that rapid wage growth is fuelling price rises and that workers will need to take a hit for inflation to return sustainably to the government’s 2 per cent target.

The figures are surprising, given that the labour shortages plaguing the UK economy since its post-Covid reopening have been most acute in low-paid sectors, such as hospitality and logistics.HMRC’s data suggests that mean earnings in these sectors, and in others including manufacturing, education and public administration, have fallen in real terms since 2020.However, pay gains in the capital have not been evenly shared. The IFS said that despite rapid growth in mean earnings, pay at the median in the capital had risen only 1.7 per cent in real terms since the pandemic began, to £2,700 a month before tax.This was in contrast with the pattern seen elsewhere in the country, where middle earners had in general fared better than those at the top, leading to a narrowing of inequalities at local level. More

Some new post-Brexit trading rules for Northern Ireland due to take effect within weeks will prove “more burdensome” than current arrangements, a House of Lords committee has warned, urging London to “get on with” negotiating outstanding details.The Windsor framework, agreed by Rishi Sunak, the UK prime minister, and the EU in February, promised sweeping changes to the so-called Northern Ireland protocol, which had soured UK-EU relations and plunged the region into a political crisis.In a 133-page report published on Tuesday, the House of Lords Protocol on Ireland/Northern Ireland Committee welcomed the framework as a “distinct improvement” on the previous deal, particularly for large retailers, which can use a new “green lane” to send goods check-free into the region.But the committee’s chair, Lord Jay, said there remained unresolved problems, including over requirements for labels on goods destined to remain only in Northern Ireland and rules for hauliers transporting mixed loads from Britain of which only a small fraction may end up heading into the EU.“There’s no doubt the Windsor framework is a big, big improvement,” he told the Financial Times. But he added that a “huge amount of work” remained to be done. “This is not the end of the game, it’s the beginning,” he said. The Windsor deal promises unique access to both the EU and UK single markets for Northern Irish goods but companies and trade groups told the committee that “the movement of goods is likely to be more burdensome than the protocol as it has operated to date” because grace periods have prevented its full implementation.Brexit left Northern Ireland inside the EU’s single market for goods but the protocol, which took effect in 2021, put a customs border in the Irish Sea, angering pro-UK unionists who feel cut off from their own country.The Democratic Unionist party, the largest pro-UK political force, has blocked the formation of a power-sharing executive over the issue since elections in May last year and is demanding as yet unspecified guarantees from London that its rights will be protected as a precondition to returning to the Stormont executive and assembly.The Windsor framework promises to sweep aside the vast majority of onerous protocol customs paperwork if companies register for a trusted trader scheme that will launch on September 30. If their goods are destined to stay within the region they will enter Northern Ireland via a green channel. Goods at risk of travelling on to Ireland and the EU will pass through a red channel, with full customs, food and animal health checks. Some businesses say they will opt to use red lanes to gain free access to the EU. After October 1 meat and dairy products entering via the green lane will need to carry labels stating “Not for EU”. Trade body Retail NI said it was “disappointed at the lack of effective engagement on the labelling issue”, said chief executive Glyn Roberts. “We need to ensure this new scheme works for independent retailers and large supermarkets alike,” he added.Although Brexit was designed to allow the UK to chart its own regulatory course, some industries, such as dairy, require UK and EU rules to remain aligned because much of Northern Ireland’s milk is processed in Ireland. Jay warned that regulatory divergence between the EU and UK “is going to cause difficulties”. Some businesses fear the region could end up in a regulatory “no-man’s-land” that could hurt its supply chains and competitiveness.Jay cautioned that on some outstanding issues, like a deal on the supply of veterinary medicines, “It’s not just clarifying what has been agreed, it’s actually negotiating what hasn’t yet been agreed.”He added: “They’ve really got to get on with that.” More

The writer is chief Japan economist at JPMorgan in TokyoWhen will the Bank of Japan shift its monetary stance to reflect the reality of increasingly sticky inflation? Predicting policy remains difficult but the central bank’s interpretation of economic change remains as significant as the data itself.Recent wage and inflation data already justify some scaling back of the current super-accommodative monetary stance. The BoJ will probably revise its inflation forecasts upwards in its outlook report due on July 28, indicating that it expects inflation will remain higher than initially thought. As a result, we expect policymakers to widen the yield cap on 10-year Japanese government bonds to plus or minus 1 per cent at its policy meeting on the same day. It has stood at plus or minus 0.5 per cent since December 2022.The BoJ’s recent communications suggest that the July meeting will be include active policy decisions. Deputy governor Shinichi Uchida told Reuters earlier this month that the BoJ would make a balanced decision on tweaking its yield curve control policy, under which the bank intervenes to keep JGB yields within a certain range. Governor Kazuo Ueda has indicated the BoJ will scrutinise at each policy meeting the pace of progress Japan is making in sustainably achieving its 2 per cent inflation target.Japan’s inflation dynamics are clearly changing. Upward pressure on prices and a combination of structural and cyclical factors has heightened pressure on wages, leading to a rise in inflation expectations. With underlying prices continuing to rise a year after the global price shocks caused by Russia’s invasion of Ukraine, the BoJ’s argument that the rise in inflation is temporary is becoming untenable; even the government now expects inflation to average 2.6 per cent during fiscal 2023 against the BoJ forecast of 1.8 per cent. So far, the BoJ has justified continuing its easy monetary policy stance by reference to a subdued inflation outlook. Rate-setters are likely to continue to argue they are not yet confident of achieving the 2 per cent inflation target in a sustainable manner. But expectations are rising that the BoJ will revise up its full-year 2023 inflation forecasts and acknowledge that they are getting closer to the point where confidence in inflation remaining above 2 per cent for two consecutive years would be justified.In such an environment, there would no longer be a case for maintaining the super-accommodative monetary policy, which was introduced at a time when inflation had remained well below 1 per cent for an extended period. In addition, the chances of a global recession, flagged as a big risk to Japan’s economy, have receded recently. While upward revisions to the BoJ’s inflation outlook appear almost inevitable, the possibility of no policy changes cannot be excluded. But that would leave the bank facing not only communication problems but an increased risk of abrupt policy changes in the future. A change in monetary policy consistent with an expectation that the stable inflation target of 2 per cent will be achieved would, to our minds, include raising policy rates to the neutral level, not just removing the yield curve control regime and — by the middle of next year — the negative interest-rate policy. Recent market fluctuations also justify some policy revisions. The yen has risen and currency market volatility has increased. The longer the BoJ delays policy adjustments, the greater this volatility is likely to become. Last year, the BoJ’s dovishness contributed to a rapid weakening of the yen that required intervention in the foreign exchange markets. If the bank wants to avoid a similar experience this year, it would be reasonable to start gradually scaling back policy as inflation prospects change. Also, it would not be desirable for the central bank to continue holding so much of the outstanding 10-year government debt if the economic fundamentals that informed such a policy no longer apply. Monetary policy has become highly complex over the past 10 years. The BoJ may need to abolish YCC and start shrinking its bloated balance sheet before it begins to raise policy rates. Plus, years of prolonged monetary easing have left Japan’s economic structure and government financing vulnerable to higher interest rates, and the BoJ may be required to pay close attention to the potential negative impact on both, requiring it to take a gradual approach. So even if YCC is adjusted, expect the BoJ to continue to send dovish signals to the market and keep monetary policy extremely accommodative for some time. The result would be that Japan’s real policy rate will be left at its lowest level ever in the coming years. More