Aurelia Butler

NIIGATA, Japan (Reuters) – Treasury Secretary Janet Yellen on Thursday will underscore the United States’ commitment to continue supporting Ukraine for as long as needed, while working with other rich nations to degrade Russia’s ability to wage war against its neighbor.Yellen identified redoubled support for Ukraine as one of her three core priorities – along with bringing down inflation and bolstering long-term economic resilience – in excerpts of remarks she will give later Thursday ahead of meetings with her counterparts from Group of Seven rich nations in Japan.”I look forward to coordinating with other G7 members to support Ukraine and degrade Russia’s ability to wage war,” she said in the remarks released by Treasury as the war approaches its 450th day.”Since Day One, our countries have stood united to support the Ukrainian people as they have mounted a fierce resistance,” she said. “As I’ve said before, we will stand with Ukraine for as long as it takes.”Yellen said the United States and a broad coalition of other countries had provided significant economic, security, and humanitarian assistance to Ukraine, while using sanctions and export controls to impose heavy economic costs on Russia.Those efforts had “systematically degraded Russia’s military-industrial complex and helped reduce the revenues that Russia can use to fund its war,” she said, noting Washington and the coalition were focused this year on countering Russia’s efforts to evade those sanctions.”We have taken a wave of actions in the past few months to crack down on evasion. And my team has traveled around the world to intensify this work,” she said. Treasury Undersecretary Brian Nelson and other officials used meetings in recent weeks to highlight how they believe Russia is circumventing sanctions to acquire electronic components, optics and other equipment.Yellen also said caps on the price of Russian oil and oil products, discussed by G7 finance ministers for the first time just a year ago, were clearly working just a few months after its implementation in December and February, respectively.The Russian government’s oil revenues from January through March of this year were over 40% lower than a year earlier, and global oil markets have remained relatively stable since the imposition of the crude oil cap last December, she said.While the price cap coalition was moving to phase out all imports of Russian oil, officials were urging developing countries “to save on their oil costs by taking advantage of the price cap to negotiate steep bargains on Russian oil,” she said.The U.S. Treasury chief said she also looking forward to working with several other countries, including Brazil, India and Indonesia, invited by this year’s host Japan to take part in this week’s meetings. More

From June, the price of watching a film at Japan’s biggest cinema chain, Toho, will rise by ¥100 ($.074): a hike of between 5 to 8 per cent depending on the type of ticket. Not wallet-shredding or even audience-deterring, perhaps, but critical for the new world it symbolises. For the school of thought that believes Japan is now crossing (or has already crossed) its most important inflection point in decades, that seemingly trivial ¥100 has distinctly non-trivial implications. It may not take many more of these increases before ordinary Japanese start wondering whether cash is no longer king and they should be hedged against inflation.Ending the price deflation stupor that has gripped Japan for more than two decades — a phenomenon every bit as psychological as it was economic — always required a grand, transformative mind game but was always desperately short of players. For much of it, the central bank’s ultra-loose, experimental monetary policy was alone at the board, unable to convince either industry or the general public to join. That has now changed.The psychological impact of the cinema price increase is qualitatively strong, and arguably much more so than surges in food, electricity, fuel and other commodity-price related goods for its appearance of irrevocability. The fact that it comfortably exceeds the Bank of Japan’s long-held target of 2 per cent inflation is quantitatively influential. Toho raised its ticket prices by ¥100 in 2019, but on that occasion it was doing so for the first time in 26 years. The decision then was eye catching, certainly, but came with an explanation (purchases of new digital equipment) that suggested it might be a one-off. This second increase, imposed as soon as corporate decency around the pandemic allowed and with reference to labour costs and the weak yen, implies a crucial, deflation-slaying threat: not only could these increases keep happening every year, but they are a response to pressures that apply to a very great proportion of Japanese businesses. The question, then, is how far any of this has actually begun to change people’s behaviour. Analysts at JPMorgan believe that it may be starting to, or at least that there is a growing body of anecdotal evidence that points to an attitude shift. In research published last month, the bank noted that the pace of broad property asset inflation was now rising on a trajectory not seen since the bubble era. Japan’s official nationwide residential property price index, JPMorgan said, has risen by at least six per cent year-on-year in each of the past 18 months. “Neither the pace of post-pandemic property price rises, nor the time over which these gains have been sustained, has been matched since the late 1980s,” wrote Benjamin Shatil, the report’s author.Buying by foreigners is certainly playing a part in the Japan residential real estate boom: Tokyo and Osaka remain favourite targets of US, Chinese and other Asian buyers, though locals in Kyoto now grumble that the historic capital has also become a target. But, revealingly, the property price increases have also coincided with a lurch in levels of household leverage. After years without much movement, housing loans as a share of GDP rose in 2022 to their highest level since the 1990s. Foreigners only rarely rely on Japanese bank financing for their purchases, which suggests that domestic buyers have suddenly found a reason to take advantage of low borrowing rates that have been available for years.In its April Financial System Report, the BoJ made special mention of the fact that the household debt to disposable income ratio was at its highest ever and that real estate loans had risen despite the increase in dwelling vacancy rates across Japan.Taken in the wider context, argues Shatil, rising asset price inflation may reflect a shift in perceptions about the direction of all prices in Japan. During the long decades of deflation, there was no compelling incentive against holding cash: it would hold its value, resiliently and at low risk, as long as efforts to stoke inflation failed. Suddenly, it seems, that logic may be broken and individuals may be looking for more inflation-proof assets. Property, for many, will feel like the safest place to start.There is fragility in all this — and victory in the reflationary mind game cannot be declared just yet. Earlier this week Japan’s furniture giant Nitori declared its first full year drop in profits in 24 years after a series of five price increases on its wares since last autumn. When it realised just how quickly customers were fleeing, said the company, it began slashing prices on 500 of its products and will continue to do so. Old habits, and all [email protected] More

LONDON (Reuters) – British Prime Minister Rishi Sunak risks missing his goal of halving inflation this year as underlying inflation shows little sign of having peaked in Britain or abroad, according to new economic forecasts published by a think-tank on Thursday.The National Institute of Economic and Social Research (NIESR) estimated annual consumer price inflation will be 5.4% in the final quarter of 2023 – well above forecasts from the Bank of England and the government’s budget watchdog.Sunak said in January one of his 2023 goals would be to halve inflation, which in December was 10.5% and averaged 10.7% across the final quarter of 2022. The government has not said exactly how the prime minister’s pledge will be measured.Either way, NIESR’s forecast for inflation at the end of this year is well above the 2.9% pencilled in by the Office for Budget Responsibility in March or the BoE’s 3.9% projection from February, which is due for a quarterly update later on Thursday.NIESR projected full-year consumer price inflation would be 7.4% in 2023 and 3.9% in 2024.In common with other forecasters, NIESR expects the BoE to raise its key interest rate later on Thursday to 4.5% from 4.25%, in what would be its 12th consecutive rate increase.While energy and commodity prices have fallen since they surged last year due to Russia’s invasion of Ukraine, ‘core’ measures of inflation have not dropped as businesses seek to preserve profit margins and raise pay in a tight labour market.In addition, Britain’s productive capacity had been damaged by the global financial crisis, a “botched Brexit” and the COVID-19 pandemic, NIESR Director Jagjit Chadha said.”That means there’s more incipient inflationary pressure in the economy than would otherwise be the case,” he said.The BoE is unlikely to bring inflation back to its 2% target until late 2025, NIESR predicts.The central bank has said it expects to bring inflation below its target in 2024.Overall, NIESR expects high inflation since the start of the pandemic to leave Britain’s poorest fifth of households an average of 4,000 pounds ($5,000) a year worse off.Chadha said Sunak’s pledge to halve inflation blurred the line between the government and the operationally independent BoE and might even have made people think inflation would be higher than they previously expected.”The government, by stating a target for halving inflation this year, has inadvertently provided an unhelpful focal point for inflation at some 5% by the year-end. The previous central case was for something well below that,” Chadha said.NIESR is more optimistic about the outlook for economic growth than many forecasters, predicting gross domestic product will rise 0.3% this year and 0.6% in 2024.Last month, the International Monetary Fund predicted Britain’s economy would shrink by 0.3% in 2023, the biggest decline of any major advanced economy.($1 = 0.7923 pounds) More

LONDON (Reuters) – British property surveyors reported a drop in demand in April as new buyers turned more cautious ahead of the Bank of England’s latest expected interest rate increase, an industry survey showed on Thursday.The Royal Institution of Chartered Surveyors (RICS) said its measure of new buyer enquiries fell to a net balance of -37 in last month from -30 in March, the lowest since January.The BoE is expected to increase borrowing costs for a 12th meeting in a row on Thursday, taking Bank Rate to 4.5% from 4.25%, as it tries to keep a lid on inflation which was running at 10.1% in March.The RICS house price balance, which measures the difference between the percentage of surveyors seeing rises and falls in prices, rose to -39 in April from -43 reported in March and -47 in February.April’s figure was slightly above the -40 level that economists had forecast in a Reuters poll. Simon Rubinsohn, chief economist at RICS, said the survey pointed to challenges in terms of sales and lettings.”Most notably, buyer demand still appears to be subdued in the face of relatively high borrowing costs, the prospect of at least one more interest rate hike and ongoing affordability challenges,” Rubinsohn said. However, RICS said most of the survey’s indicators improved slightly from the lows of late 2022 after the market turmoil that followed former prime minister Liz Truss’s “mini-budget”.The net balance of agreed house sales across Britain fell slightly but respondents noted a pick-up in the number of properties on the market.The survey pointed to a further improvement in the market in the coming 12 months.Data from mortgage lender Halifax published on Tuesday showed house prices grew at the slowest annual pace in more than 10 years in April. But Nationwide said prices rose by a monthly 0.5% in April after falling for the seven previous months. More

LONDON (Reuters) – The Bank of England (BoE) is poised to raise borrowing costs for the 12th meeting in a row on Thursday, as it tries to tackle stubbornly high inflation that stands at double the level of the United States and much higher than in the euro zone too.Investors are fully pricing in another quarter-of-a-percentage point increase in Bank Rate, taking the BoE’s benchmark rate to 4.5%, when the Monetary Policy Committee (MPC) announces the outcome of its May policy meeting at 12 p.m. (1100 GMT).Markets’ main focus will be any signals from the BoE about the likelihood of further rises in the months ahead.A poll of economists by Reuters earlier this month showed most expected the BoE would hold rates at 4.5% for the remainder of this year after an increase in May.But Goldman Sachs (NYSE:GS) is now forecasting that borrowing costs in Britain will keep on going up to a peak of 5% in August after recent data showed little let-up in price pressures and an economy that is defying forecasts of a recession.”We expect that the Bank will only start to reduce rates from 2024 Q2 given resilient growth momentum,” Goldman Sachs economist James Moberly told clients this week.The prospect of further rate hikes adds to the dilemma for the BoE, which was the first major central bank to start raising borrowing costs in December 2021 but which has been accused by critics of not moving aggressively enough as inflation headed towards a four-decade high of 11.1% struck in October.Two of the nine MPC members – Swati Dhingra and Silvana Tenreyro – voted in March to keep rates on hold and are expected to have done so again in May because they think the full impact of the BoE’s 11 rate hikes to date has yet to be felt.PERSISTENT INFLATIONBut Governor Andrew Bailey and most of his colleagues have shown they remain uneasy with an inflation rate that held above 10% in March – more than five times their target – with pay growth also far above its historical average.”We have to be very alert to any signs of persistent inflationary pressures,” Bailey said on March 27, before the latest round of data showed inflation fell less than expected. “If they become evident, further monetary tightening would be required.”Last week, the U.S. Federal Reserve and the European Central Bank both raised their benchmark borrowing rates by 25 basis points. While Fed Chair Jerome Powell hinted at a pause, ECB President Christine Lagarde said it was too soon to stop.Britain’s high inflation problem stems in large part from its heavy dependence on imported natural gas for power generation, leaving it particularly exposed to the surge in energy prices after Russia’s invasion of Ukraine last year.The impact of that price surge is likely to fade quickly from the inflation data in the coming months. But the BoE is worried that the recent rise in pay growth could turn into a long-lasting problem for the economy.Its chief economist Huw Pill said last month that British businesses and individuals had to accept that their earnings had fallen in inflation-adjusted terms, triggering a wave of criticism from trade unions and some former BoE rate-setters. The BoE is expected to revise up its forecast for the economy in 2023 after its stronger-than-expected start to the year, although it is likely to paint a picture of very slow growth due to weak productivity and the after-effects of Brexit.The central bank is also likely to increase its inflation forecasts.Bailey and other top officials from the BoE are due to hold a news conference at 12:30 p.m. (1130 GMT). More