Aurelia Butler

TOKYO (Reuters) – The Bank of Japan is widely expected to maintain ultra-easy monetary policy on Friday despite stronger-than-expected inflation, as it focuses on supporting a fragile economic recovery amid a sharp slowdown in global growth.The central bank is also likely to keep intact a pledge to “patiently” sustain massive stimulus to ensure Japan sustainably achieves its 2% inflation target accompanied by wage hikes.With price rises showing signs of broadening, however, markets are focusing on whether BOJ Governor Kazuo Ueda will offer a stronger warning on the risk of an inflation overshoot at his post-meeting news conference.The BOJ review comes after the Federal Reserve’s decision on Wednesday to pause interest rate hikes as it closely watches the lagged economic impact of past monetary tightening.At the two-day meeting ending on Friday, the BOJ is widely expected to maintain its -0.1% short-term interest rate target and a 0% cap on the 10-year bond yield set under its yield curve control (YCC) policy.While the central bank may warn about risks to the global outlook, it will likely stick to its view Japan’s economy is headed for a moderate recovery thanks to a post-pandemic pickup in consumption, sources have told Reuters.Japan’s core consumer inflation hit 3.4% in April, staying above the BOJ’s target for over a year, keeping alive market expectations the bank will phase out YCC sometime this year.Ueda has repeatedly brushed aside the chance of a near-term YCC tweak, arguing that the recent, cost-push inflation will slow back below the BOJ’s target later this year.But he also said the BOJ will “act swiftly” if its inflation projections prove wrong, and pointed to signs that corporate price-setting behaviour was starting to change.With companies offering the largest pay hikes in three decades, the BOJ is also dropping hints that Japan’s prolonged era of wage stagnation may be ending.In an academic paper issued in May, the BOJ said inflation and wage growth could accelerate abruptly once costs exceed a certain threshold – and that once wages begin to rise, the trend could persist.Many BOJ officials, however, prefer to stand pat for now to scrutinise global economic developments and corporate earnings, for clues on whether wages will keeping rising next year.Japan’s economy is making a delayed recovery from the pandemic and expanded an annualised 2.7% in the first quarter, with solid corporate and household spending moderating the blow from soft exports. More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.The Bank of Japan, the most dovish major central bank in the world, announces its latest policy decision on Friday, with markets highly sensitive to signs of when and to what degree it will ditch its super-loose policy. Asian markets should go into the decision on the front foot, after the S&P 500 and Nasdaq closed at 14-month highs on Thursday as investors bet that U.S. interest rates are close to peaking.The BOJ follows surprisingly aggressive interest rate increases and guidance recently from policymakers in Canada and Australia, and this week’s hawkish signals from the European Central Bank and, to a lesser extent, the U.S. Federal Reserve. The BOJ remains the outlier among major central banks, promising to maintain its loose policy until it is sure inflation meets the 2% target. Polls, sources and market moves all suggest no move on rates or the yield curve control (YCC) scheme, leaving the focus on BOJ Governor Kazuo Ueda’s press conference.While the Fed and others have tightened policy by 500 basis points or raised rates to their highest in decades, Japanese interest rates are still negative and the central bank is buying unlimited amounts of bonds to cap yields at a certain level.Around half of the economists in a Reuters poll expect a rollback of easing, including a tweak to YCC, in either July or September. Ueda could open the door to this on Friday, nodding to inflation currently overshooting BOJ forecasts and a potential upgrade to BOJ price projections in July, they said.But Ueda has stressed the need to maintain ultra-loose policy until durable wage growth accompanies rising prices. Changes to YCC may come as soon as July, but an interest rate hike is a long way off – Bank of America (NYSE:BAC) analysts think rates will stay on hold until summer 2024.If Japanese assets are any indication, investors expect Ueda and his colleagues to err on the dovish side. The yen on Thursday slid to a new low for the year through 141.00 per dollar and, most remarkably after the ECB made it clear it will raise rates further, to a 15-year low against the euro of 153.68 per euro. Japanese authorities will be watching these developments closely and intervention to stop the rot cannot be ruled out. Perhaps 145.00 per dollar would be the trigger. The cheapness of Japan’s currency has made its stock markets extremely attractive to foreign investors. The benchmark Nikkei 225 index rose to fresh 33-year high of 33,767 points on Thursday before closing marginally lower. Here are key developments that could provide more direction to markets on Friday:- Japan monetary policy decision – Euro zone inflation (May, final reading)- Fed’s Bullard, Waller and Barkin all speak (By Jamie McGeever) More

NEW YORK (Reuters) -Federal Reserve Bank of Atlanta President Raphael Bostic acknowledged Thursday more issues with his past financial disclosures, as part of a general release by the regional Fed banks of financial disclosure forms for their leaders covering 2022. Bostic already acknowledged last year what he deemed as inadvertent errors in past disclosures tied to when some of his trades happened. He said in a footnote to his form covering 2022 there were more problems. Noting his past acknowledgement that funds he and his spouse held, which were not managed by the couple, were traded during periods forbidden by Fed rules, Bostic said more trades happened when they should not have. “The transactions that occurred on May 2, 2022, were associated with funds invested through one such account and occurred prior to realizing that they were subject to blackout restrictions,” Bostic wrote. The official said when preparing his disclosure form for last year, “it came to my attention” that entries in his disclosure for 2021 “needed to be clarified.”Under the rules then, Fed officials, among a range of limitations, were prevented from trading securities and other investments around the time of Federal Open Market Committee meetings. Bostic’s issue is that those who managed his money did trade when they were not supposed to, causing him to amend his financial disclosure forms. Bostic said the trades have been reported to both his bank and to the Board of Governors, as well as the Fed’s Inspector General, its in-house watchdog, which is currently investigating trading activity by regional Fed banks. The investigation into Fed officials trading comes in the wake of disclosures that showed the then leader of the Dallas Fed, Robert Kaplan, had traded extensively in markets while helping set monetary policy. Former Boston Fed leader Eric Rosengren also reported trading that caused concern among observers, and both men left their positions in September 2021.After their exit, the Fed tightened its ethics system to sharply restrict what officials and senior staff could invest in, and restricted when they could shift investments. Fed Chairman Jerome Powell and then Fed Vice-Chair Richard Clarida also faced questions about their trading and were cleared last year by the central bank’s Inspector General. Powell’s issues echoed those of Bostic and also dealt with accidental trades landing during forbidden periods. An ongoing investigation by the watchdog has yet to report on any potential wrongdoing by regional Fed leaders over trading. The Fed’s I.G. has faced repeated criticism over the speed of its investigation and whether it can pursue it independently. The disclosures for the regional Fed banks follow the release in May of disclosures for central bankers serving on the Board of Governors in Washington. The disclosures for Fed senior leaders are released annually as officials are now operating under a much more stringent ethics code after a series of controversies over market trading by some former central bankers. While some observers have applauded the Fed’s new trading restrictions, some remain critical of the effort on transparency. The restrictions extended beyond top Fed leadership and even include spouses, but even so, regional Fed banks are not providing public disclosure information on their respective senior staffs. “Regional Fed banks have enormous power, and their actions impact the lives and livelihoods of all Americans,” said Dennis Kelleher, leader of Better Markets, a group that presses for more financial market regulation. “Their unwillingness to provide even the most basic transparency is an insult to the American people. They either need to start disclosing much more information or Congress is going to force them to,” he said. More

Good morning. We begin today with the Chinese central bank’s decision to cut its main policy rate for the first time in 10 months as new data reinforced concerns over a stalling post-Covid recovery in the world’s second-largest economy. The People’s Bank of China trimmed its medium-term lending facility rate, a one-year rate that influences bank funding costs, from 2.75 per cent to 2.65 per cent, amid widespread expectations that Beijing would be forced to take further action to support the economy.The move signalled official dissatisfaction with the state of the Chinese economy, which was widely expected to rebound after authorities abandoned strict coronavirus controls at the start of the year.But growth has remained feeble, hamstrung by a property sector slowdown, weaker demand for exports and a lack of business and consumer confidence.Economists anticipate Chinese policymakers will unleash more support over the coming months.“Ultimately they’ll need to use every lever in the policy bag to get this economy to turn around,” said Rob Carnell, Asia-Pacific head of research for ING.Go deeper: Earlier this week, China unexpectedly cut the seven-day reverse repo rate, an important gauge for short-term banking sector liquidity, and announced tax breaks for businesses. What do you think is behind China’s struggles to reinvigorate its economy? Email your ideas to [email protected]. Here’s what else I’m keeping tabs on today and over the weekend:Japan: The Bank of Japan makes its interest-rate announcement following the Monetary Policy Committee meeting today. In politics, prime minister Fumio Kishida is expected to face a no-confidence vote. (Reuters)US-China relations: Secretary of state Antony Blinken will travel to Beijing this weekend, part of an American effort to stabilise ties with China.Holiday: Father’s Day is celebrated in various countries on Sunday. Five more top stories1. The European Central Bank has raised interest rates by a quarter-point to 3.5 per cent, their highest level in 22 years, and warned that inflation is far from vanquished. ECB president Christine Lagarde said that rate-setters were “very likely” to increase rates again in July.More eurozone news: The bloc’s balance of trade slid back into a €7.1bn deficit in April after goods exports from the single currency zone fell while imports rose compared to the previous month.2. A bitter clash among Nissan’s top leadership has forced out an executive previously tipped as its next president. The impending departure of chief operating officer Ashwani Gupta is seen as smoothing the Japanese carmaker’s partnership with France’s Renault. Read more about the chronic infighting at Nissan.3. Boris Johnson has been condemned for lying to parliament over the Covid-19 partygate scandal. The damning report said that the former prime minister would have faced a 90-day suspension if he had not already quit as an MP. The findings cast doubt on whether Johnson can stage a political comeback.Opinion: Warnings from seeing the UK’s three most prominent leaders — and the most monomaniacal — blow up.4. German industrial conglomerate Siemens has announced significant investments in factories in China and Singapore, as part of its diversification strategy to serve more markets in Asia and tackle supply chain issues. But Siemens’ China strategy has been questioned by investors, who are becoming wary of any dependence on the country amid geopolitical tensions.5. Australia’s government has blocked Russia from building a new embassy near its parliament over national security concerns. Read more on Canberra’s darkening view of Moscow. Also in Australia: A tax leaks scandal involving PwC has prompted Australia’s government to roll back the influence consultants have on its public sector. How well did you keep up with the news this week? Take our quiz.The Big Read

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At first glance, the US stock market seems to have defied pessimists. The S&P 500 has risen more than 14 per cent this year, and with two weeks still to go, this is already one of the best half-years for the index in two decades. But this is a rally standing on top of some very slender stilts. Strip out just a tiny clutch of tech companies, and the index is going nowhere.We’re also reading . . . FT investigation: The UK’s struggling fishing industry has come to rely on low-paid workers. A tightly knit band of Filipino fishermen suffered the consequences. Russia’s nuclear fever: Putin’s threats are a symptom of a wider anxiety that the US and Nato are bent on Russian dismemberment, writes Rose Gottemoeller. VC investment: The good old days when VCs could thrive by adopting a “spray and pray” investment strategy are over — even when it comes to AI, writes John Thornhill.Graphic of the day

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Cruise ships pumped four times more harmful sulphuric gases into the atmosphere in Europe than passenger vehicles last year, according to climate lobby group Transport & Environment. Barcelona ranks as the worst-affected port city in Europe for sulphur oxide emissions, which have been proven to cause acid rain and can aggravate respiratory conditions.Take a break from the newsDownhill skateboarding is a breathtakingly dangerous sport. But skaters like Jenny Schauerte are part of a growing band of free spirits who travel the globe in search of the perfect descent. Simon Usborne’s hair-raising piece takes you inside their wild world. Additional contributions by Tee Zhuo and Gordon Smith More

NAIROBI (Reuters) -Kenya’s finance minister on Thursday said the government will pay all debts when they fall due, and cut the budget deficit for the fiscal year starting next month to 4.4% from an estimated 5.8% in this financial year.In a budget speech that was briefly interrupted by the walk-out of more than a dozen lawmakers from the opposition coalition, Njuguna Ndung’u said the global shocks had increased the risks associated with debt.”Although the debt burden has risen … The government is committed to honour all public debt obligations as they fall due,” he said.The East African nation’s total public debt stands at 67% of GDP according to the World Bank, which together with the International Monetary Fund rates the debt as being at a high risk of distress.Ndung’u set the total government expenditure for the year at 3.7 trillion shillings ($26.5 billion), which parliament’s budget committee said represented a lower increase on the previous year when compared with the historical average.”We have moderated our spending to ensure value for money,” the minister said.The opposition has rejected a raft of tax hikes proposed by President William Ruto’s government, which argues that the pain is necessary to stabilise government finances in the face of growing debt repayments.The opposition lawmakers who walked out of the budget speech left while shouting, prompting Speaker Moses Wetangula to call out “Order! Order”.FISCAL DISCIPLINEGrowth is expected to rebound to 5.5% this year, Ndung’u said, after a severe drought and other shocks curbed economic activity last year.Ruto, who was elected last August on a platform of helping the poor, has vowed to entrench fiscal discipline, including shunning a rapid accumulation of debt. But his maiden budget has run into stiff resistance after his government moved to double the tax on petroleum products to 16%, introduce a new housing tax of 1.5% for every employee and impose a tax on digital content creators.”This is the most controversial finance bill I have ever seen,” said Junet Mohamed, the opposition chief whip in the national assembly, and an 11-year veteran of the house, referring to a draft law that accompanies the budget.The bill sailed through its second reading late on Wednesday and lawmakers are expected to hold a final vote on every provision next week.The budget also comes against a backdrop of slowing economic activity, persistently high costs of basic commodities like maize flour and a slower than expected revenue collection pace.”Given this, one would expect a reduction in expenditure, but it is set to increase,” said Nikhil Hira, partner at Kody Africa LLP, a Nairobi-based tax advisory.($1 = 139.8000 Kenyan shillings) More