Aurelia Butler

In a huge hangar in Quonset Point, Rhode Island, welders are aiming blazing torches at sheets of aluminium. The hulls of three new ships, each about 27-metres long, are taking shape. The first will hit the water sometime in the spring, ferrying workers to service wind turbines off the New England coast. The US barely has an offshore wind sector for these vessels to service. But as the Biden administration accelerates a plan to decarbonise its power generation sector, turbines will sprout along its coastline, creating demand for services in shipyards and manufacturing hubs from Brownsville, Texas, to Albany, New York.Senesco Marine, the shipbuilder in Rhode Island, has almost doubled its workforce in recent months as new orders for hybrid ferries and larger crew transfer vessels have come in. “Everybody tells me recession in America is inevitable,” says Ted Williams, a former US Navy officer who is now the company’s chief executive. “But it’s not happening in shipbuilding.” Nor is it happening in any clean energy sector in America. Across the country, a new revolution is under way in sectors from solar to nuclear, carbon capture to green hydrogen — and its goals are profound: to rejuvenate the country’s rustbelt, decarbonise the world’s biggest economy, and wrest control of the 21st-century’s energy supply chains from China, the world’s cleantech superpower. The world is only just beginning to contend with what it means. Less than three years ago, the US had ditched the Paris agreement on climate change and then president Donald Trump was touting an era of American energy dominance based on the country’s fossil fuel abundance. Europeans chided the US for its foot-dragging over climate. Since then, President Joe Biden has passed sweeping legislation to reverse course. Last year’s colossal Inflation Reduction Act and its hundreds of billions of dollars in cleantech subsidies are designed to spur private-sector investment and accelerate the country’s decarbonisation effort. “It is truly massive,” says Melissa Lott, director of research at Columbia University’s Center on Global Energy Policy. “It’s industrial policy. It’s the kitchen sink. It’s a strong, direct and clear signal about what the US is prioritising.”

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The tax incentives have made the US irresistible to investors, say cleantech developers, and are sucking money away from other countries. Since the passage of the IRA last year, $90bn of capital has already been committed to new projects, according to Climate Power, an advocacy group. “The US is now the most opportunity rich, most aggressive growth, most prolific market for renewables investment in the world today,” says David Scaysbrook, managing partner of Quinbrook Infrastructure Partners, a global cleantech private equity group. “And will be for quite some time.” And yet it is a gamble for the US too. The ring of protectionism, and the sheer scale of the state intervention, has alarmed allies — even those who once implored the US to rejoin the global climate fight. France’s president Emmanuel Macron says the IRA could “fragment the west”. Ursula von der Leyen, the European Commission’s president, has complained it would bring “unfair competition” and “close markets”. And the underlying effort to break the dependence on cheap Asian components that have sped the advance of renewables in recent years leaves many analysts sceptical. At a time when the White House is also contending with high inflation and Russian aggression, can the US reset the global energy order, create high-paying cleantech jobs at home and cut emissions — all at the same time? “There is simply no reason why the blades for wind turbines cannot be made in Pittsburgh rather than Beijing,” Biden said in a speech last April. “Global arms race for clean energy? Certainly,” says Daniel Liu, an analyst at Wood Mackenzie. “But there has to be some level of collaboration because no country can do it alone.”Powering growthIn a warehouse in Turtle Creek, just east of Pittsburgh, Pennsylvania, a line of workers are assembling batteries, each about the size of a suitcase, based on zinc — an alternative to lithium-ion that its proponents say will offer competitively priced, non-flammable, dispatchable energy for hospitals, schools and other stationary users. It’s a young cohort of workers, many people of colour and military veterans. “We’re hiring right out of high school,” says Joe Mastrangelo, the Edison, New Jersey-based head of Eos Energy Enterprises, the company making the batteries.

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His goal for the factory in western Pennsylvania is to double its total capacity to 3 gigawatt-hours in 2024, producing a battery every 90 seconds once the plant is fully automated. The workforce will also double, to 500.“We’re doing this in a location that was historically an old energy economy, creating not jobs but career paths for people to get to middle class,” Mastrangelo says. Climate is central to the IRA. But it is industrial policy on a grand scale too, aiming to revamp the US’s decrepit infrastructure and create advanced manufacturing jobs in rustbelt regions like western Pennsylvania, once the heart of the country’s steelmaking industry. From Ohio to Georgia, investment is also pouring into lithium-ion energy storage, the technology that will underpin the electrification of the US auto fleet. All told, the IRA offers $369bn of tax credits, grants, loans and subsidies, many of them guaranteed past 2030. The credits can be sold, too, allowing deep-pocketed investors with enough tax liability to buy the credit — a way to get more capital to developers, quickly. Credit Suisse thinks the public spending enabled by the IRA could eventually reach $800bn, and $1.7tn once the private spending generated by the loans and grants is included.The tax breaks have made marginal projects suddenly economical, say developers. A battery plant can generate tax credits of up to 50 per cent of headline costs, if it meets several criteria including prevailing wage requirements, domestic sourcing of materials and location in a fossil fuel community. This can translate into an effective reduction of 60 to 65 per cent of a project’s fair market value, according to law firm Vinson & Elkins. “It enables us to grow and also enables a further incentive for people that want to invest,” says Mastrangelo. Wood Mackenzie estimates investment in energy storage will more than triple by the end of the decade, reaching $15.8bn. Energy storage capacity additions will grow from 5GW to 25GW per year by 2030, enough to power almost 20mn homes.While juicy subsidies are also available for wind and solar, the IRA’s biggest impact may be on technologies that have yet to achieve scale, including carbon capture and bioenergy. For green hydrogen, a potential clean alternative to natural gas in industries such as steelmaking, the subsidies wipe out about half the project cost, vaulting the US from its position as a global also-ran in the eyes of developers to the most attractive destination for future investment.

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For Europe, which hopes scaling up domestic supplies of green hydrogen can speed decarbonisation and help replace the loss of Russian natural gas, the US now poses a threat. The EU is scrambling to respond, but the US incentives are so comprehensive — tax breaks for every section of the green hydrogen supply chain — that it will be hard to compete, say analysts. “If you look at the price at which a well located green hydrogen project, let’s say in Texas, exporting through the port of Corpus Christi, could generate green hydrogen if they can access low cost renewable power — it’s pretty untouchable,” says Scaysbrook. “It’s a pretty potent trade advantage.” The geopolitics of the IRAGaining a similar advantage over China, however, will be far harder. About two-thirds of the world’s batteries for electric cars and nearly three-quarters of all solar modules are currently produced in China, according to the International Energy Agency. BloombergNEF estimates China invested $546bn in its energy transition in 2022.Meanwhile, the domestic supply of raw materials, parts and processing capacity is lacking too. The lithium refineries, and nickel and cobalt for batteries; the rare earth materials for solar modules; the nacelles and monopoles for offshore wind — almost everything can be sourced more cheaply from abroad.Together, China and Europe produce more than 80 per cent of the world’s cobalt, while North America makes up less than 5 per cent of production, according to the IEA. China also accounts for 60 per cent of the world’s lithium refining. “The Germans make a lot of this stuff. The Chinese make a lot of this stuff. So we are still facing the irony that for the IRA to succeed in the short term, it still relies a lot on China,” says Scaysbrook.Some early progress is being made. Last month, GM announced $650mn to develop the Thacker Pass mine in Nevada, the US’s largest known source of lithium. Honda, Hyundai, BMW and Ford have all announced multibillion-dollar plans to build batteries in the US following the IRA’s passage.

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But it’s a drop in the ocean compared with the scale of Chinese domination. Wood Mackenzie estimates the US will make up 13 per cent of lithium battery manufacturing by the end of the decade, only a 3 per cent upward revision compared with forecasts before the IRA. Asia-Pacific will still account for two-thirds. “There are so many components when you think about building solar and wind. It’s not going to be realistic that the US is going to become totally self-sufficient in that way,” says Marlene Motyka, US renewable energy leader at Deloitte. ‘You have to be able to build the thing’To claim the mantle of cleantech superpower from China will take an extraordinary expansion of infrastructure — but not everyone in the US welcomes it.This month, authorities in Scranton, Pennsylvania — the city Biden regularly invokes to remind Americans of his blue-collar heritage — held a 90-minute zoning board hearing about a proposed solar array on West Mountain, north-west of the city’s centre.The array, said its developers, would have created dozens of jobs and been sited on a former coal mine — exactly the kind of project that the federal government wants to coax along.But residents were less impressed. One of them, Brian Gallagher, said he would be able to see the facility from his porch. “We’re not an asset, we’re a neighbourhood. We don’t want to wake up and look at this,” he said. The board voted 4:1 against the project.The US may have the west’s most generous subsidy regime and its federal government may be committed to reshoring supply chains, but permits to build stuff are another matter. Congressional efforts to loosen the rules have made little progress, leaving states and local authorities with significant power to block projects. Some climate campaigners and conservationists fear a laxer permitting regime would encourage more fossil fuel projects, like the pipelines sought by the oil industry. A woman works at the Eos battery making facility in Turtle Creek, Pennsylvania, which plans to double its capacity to 3 gigawatt-hours in 2024, producing a battery every 90 seconds © John HalpernBut building transmission infrastructure across state lines — crucial if windy, sparsely populated regions such as Oklahoma are to be connected with big consumer centres on the coasts — is especially difficult. Paul Bledsoe, a former Clinton White House adviser who now works for Washington’s Progressive Policy Institute, says the “chronic sclerosis” of current permitting rules means that by the time projects have met all the conditions demanded of them, about 95 per cent have been delayed by five years or more. This could limit the green potential of the legislation. While credible models suggest the law’s provisions could allow the US to cut 45 per cent of emissions compared with 2005 by 2030, putting it within spitting distance of the Biden administration’s target of 50 to 52 per cent, slower permitting could reduce this to 35 per cent, says Lott, at the CGEP.“Until we resolve those things, it doesn’t matter how many production tax credits or incentives you put out there, you have to actually be able to build the thing to take advantage of those tax credits,” she adds. Given the tight timeline to get the projects up and running — both to capitalise on the 10-year tax credits and to meet the Biden administration’s decarbonisation targets — worker shortages are another pressing problem.“We have another generation of mega projects in front of us and the labour market is already strained to the limit,” says Anirban Basu, chief economist at the Associated Builders and Contractors. The ABC estimates the US will need to add half a million more construction workers in 2023 on top of the normal hiring pace to meet demand: a sign that clean energy is creating the jobs, but an alarming prospect for the developers. Yet some of the IRA tax credits also depend on paying prevailing wages and including apprenticeships in the workforce — measures designed explicitly to address the longstanding complaints of American workers who have watched jobs “shipped overseas” over decades of globalisation, but which are also increasing costs. Fields full of mirrors shine sunlight at a solar power boiler used to drive steam turbines in the Mojave Desert. Nearly three-quarters of all solar modules are currently produced in China © Bing Guan/Bloomberg“These standards are actually going to undermine the Biden administration’s clean energy agenda as a whole,” says Ben Brubeck at the ABC. It leaves the pace of the energy transition in the US depending on how, or whether, the Biden administration will be willing to compromise on any of the goals in its sweeping clean energy legislation. Even many supporters wonder how an industrial policy to rejuvenate America’s manufacturing heartlands can happen alongside an effort to decarbonise the economy in less than a decade — all while the US adopts a geopolitical strategy to compete with China in a new clean energy race.Others say one cannot happen without the others. Either Biden ensured the fight for the climate would bring jobs for Americans, or Americans would forget about climate. Either the reliance on foreign supply chains would be broken, or America would be relegated in the new global energy order.“This is the future of ambitious climate legislation that can actually pass,” says Sonia Aggarwal, a former Biden climate adviser who now runs the Energy Innovation think-tank. “We have to actually be more holistic. Without including worker policies, and including this broader global perspective of where we are going, we wouldn’t have the climate policy at all.” More

Outside the Cairo bicycle shop where he works as a mechanic, Ahmed bemoaned soaring prices and the absence of customers in Egypt’s crisis-hit economy. “People have stopped buying and there isn’t as much repair work,” said the father of three teenagers, who did not want to give his surname. “So we’re buying less meat — it’s once or twice a month at most,” he said, adding that his modest wages had failed to keep up with the surging cost of basic goods. “Look at the price of eggs. If I gave each child an egg for breakfast, how much would that cost?”After three devaluations in 2022, the Central Bank of Egypt floated the pound in January to meet an IMF condition for a $3bn loan, the country’s fourth bailout from the fund since 2016. The move, coupled with a foreign currency crunch causing shortages in imported goods, has sent inflation soaring and imposed even greater hardship on millions of poor families. The Egyptian pound has halved in value against the dollar, falling from E£15.8 to the US currency in March 2022 to E£30.5 this week. Annual urban inflation stood at 25.8 per cent in January, its highest level in five years. Annual food price inflation in urban areas soared 48 per cent in January. Al-Monira food market in Giza, Egypt. The cost of living crisis is affecting Egyptians of all classes and not just the poor © Islam Safwat/BloombergThe dollar shortage was partly sparked by Russia’s full-scale invasion of Ukraine, which led portfolio investors to pull $20bn from the country. This has eased slightly as a result of the devaluation but the cost of living crisis is affecting Egyptians of all classes and not just the poor such as Ahmed. Inji, a homeopath living in an upscale part of Cairo who also did not give her surname, tries to avoid visiting the dentist to save money and instead waits for her toothache to recede. “If I go, I’ll have to pay for an X-ray and E£400 for the journey there and back,” she said. “Now I calculate every trip I make.”For Egyptians this is a grim reminder of the 2016 devaluation that accompanied a $12bn IMF loan package. Inflation soared to 30 per cent and millions were driven into poverty. Seven years later, 60 per cent of Egypt’s 105mn population can be classified as poor or vulnerable, according to the World Bank.The ramifications of the Ukraine war exposed the weakness of the country’s economic model since the 2016 agreement, analysts said. Inflows of “hot money” from investors attracted by one of the highest interest rates in the world into short-term debt ensured that foreign currency was readily available. But the exit of those funds has created a currency crisis in a country that is heavily dependent on imports of food and other goods.

Despite international praise for reforms that were part of the IMF deal, such as cuts in energy subsidies, Egypt’s private sector has stagnated while the government poured billions into infrastructure projects, usually overseen by the military. Some of these ventures were needed but others were criticised as vanity projects, such as the building of a new capital outside Cairo. Businesses have argued that the expanding role of the military in the economy had spooked private and foreign investments wary of competing with the country’s most powerful institution.Under its latest agreement with the IMF, Cairo will implement reforms to boost private sector participation. A state-ownership policy endorsed by President Abdel Fattah al-Sisi defines the sectors that are not considered strategic, from which the state has undertaken to withdraw. The government last week announced plans to offer stakes in dozens of state companies for privatisation.The IMF has also demanded greater transparency and regular reporting of the finances and tax payments of state and military enterprises.Sisi said this month that military-owned companies paid tax and utility bills and did not compete unfairly with the private sector. He also repeated an earlier assertion that all could be opened up for private sector participation.

A restaurant in Esna, Egypt. The government has postponed electricity price increases and expanded social protection programmes but Egyptians fear they will face even steeper inflation © Fadel Dawod/Getty Images

“We’ve argued for some time that a crucial step to unlocking faster productivity growth and higher economic growth in the long run will be to reduce the footprint of both the state and the military in the economy,” said James Swanston, an economist at Capital Economics, a London-based consultancy. “This will allow for greater competition and entice foreign investors into Egypt, which should allow for a transfer of technology and knowledge to boost economic growth over a longer horizon.”In the short-term, however, inflation is expected to increase further, to “peak at around 26 to 27 per cent year on year as the impact of earlier falls in the pound continues to push up non-food inflation”, he added.The government has postponed electricity price increases and expanded social protection programmes to cover almost a quarter of the population to mitigate the effects of inflation. But Egyptians already battered by high prices fear they will face even steeper inflation. “All prices have increased but incomes have not,” said Robert Botros, a family therapist, who added that clients were cutting down on visits to save money.His children’s school fees have jumped 50 per cent since the start of the school year in September, and the family has stopped going to fast-food restaurants to rein in their expenses. “I’m now worried they’ll increase fuel prices, which will increase the cost of everything, starting with fruit and vegetables,” Botros said. “I don’t see anything to make me feel reassured.” More

LONDON (Reuters) – The European Central Bank will raise its deposit rate at least twice more, taking the terminal rate to 3.25% in the second quarter, with a vast majority of economists polled by Reuters saying the greater risk is it goes even higher.ECB President Christine Lagarde said at a news conference this month that the euro zone’s central bank would add 50 basis points to the deposit rate. Economists took her at her word, with all 57 of them polled in the Feb. 10-15 period expecting a deposit rate hike to 3.00% at the March 16 meeting.The ECB will follow up on March’s move with a further 25-basis-point lift next quarter, medians showed, giving a terminal deposit rate of 3.25% and a refinancing rate of 3.75%. The U.S. Federal Reserve and the Bank of England are also nearing the end of their tightening cycles.But there was no clear consensus in the poll.Twenty-six of 56 respondents expected a hike of 25 basis points next quarter, 19 expected a 50-basis-point move, while nine said no move and a further two said the ECB would accelerate its pace of tightening and deliver a 75-basis-point increase. In response to an additional question, an overwhelming majority – 26 of 28 – said the risk was the terminal deposit rate ends higher than they expect, rather than lower.”Given the persistently high underlying inflation pressures, the risk for our ECB call is skewed to the upside,” analysts at DWS Group said.As well as raising the deposit rate by 50 basis points, the ECB will do the same with the refinancing rate next month, taking it from 3.00% to 3.50%, the poll showed.”March is more or less basically a done deal. There will now be a lot of competing about what happens in May,” said Melanie Debono at Pantheon Macroeconomics.Pierre Wunsch, head of the National Bank of Belgium and a member of the ECB Governing Council, said earlier this month that rate hikes could exceed market expectations. Markets are currently pricing in a terminal deposit rate of 3.50%.Inflation in the 20 countries using the euro fell to an annual rate of 8.5% last month from 9.2% in December, official data showed. While the poll suggested it would continue to fall, it was not expected to reach the ECB’s 2.0% target until 2025 at least.Given a host of positive developments in recent months, inflation could fall faster than earlier thought, ECB policymaker and Bank of Spain Governor Pablo Hernandez de Cos said on Wednesday.Still, none of the 22 respondents to another question said the ECB would cut rates this year.Despite soaring costs consumers have continued spending and the economy expanded 0.1% last quarter. While the poll said it would contract 0.2% this quarter, it was expected to eke out 0.1% growth in the second quarter, dodging the technical definition of recession.The first-quarter prediction was a slight upgrade from a January poll. The third- and fourth-quarter forecasts were for 0.2% and 0.3% growth, respectively.Gross domestic product was predicted to expand 0.4% this year before growth accelerates to 1.2% in 2024.(Other stories from the Reuters global long-term economic outlook polls package) More

(Reuters) – The founder of WallStreetBets, which has been credited with helping ignite investors’ frenzy into “meme” stocks, sued Reddit Inc on Wednesday, accusing it of wrongly banning him from moderating the community and undermining his trademark rights.Jaime Rogozinski said his ouster, ostensibly for violating Reddit policy by “attempting to monetize a community,” was a pretext to keep him from trying to control “a famous brand that helped Reddit rise to a $10 billion valuation” by late 2021.According to the complaint filed in federal court in Oakland, California, Rogozinski applied to trademark “WallStreetBets” in March 2020, one month before his ouster, when the community reached 1 million subscribers.Founded in 2012, the community now has 13.6 million subscribers.”If you build it, they will come,” the complaint said, quoting from the 1989 movie “Field of Dreams. “Reddit’s dreams, however, turned out to be Mr. Rogozinski’s nightmare as the company insists, ‘if you build it, we will take it from you.'”Reddit rejected Rogozinski’s claims.”This is a completely frivolous lawsuit with no basis in reality,” a spokeswoman said. “Jamie was removed as a moderator of r/WallStreetBets by Reddit and banned by the community moderators for attempting to enrich himself. This lawsuit is another transparent attempt to enrich himself.”Rogozinski said he is a dual U.S.-Mexican citizen, and lives in Mexico City.He is seeking at least $1 million in damages for breach of contract and violations of his publicity rights, and a ban on Reddit’s use of WallStreetBets unless it reinstates him as senior moderator of the r/WallStreetBets subreddit.Meme stocks typically gain popularity through discussions, often among inexperienced investors, in online forums such as WallStreetBets and Twitter. The popularity often leads to volatile stock prices that do not reflect companies’ fundamentals or financial health.Prominent examples of meme stocks have included AMC Entertainment (NYSE:AMC) Holdings Inc, Bed Bath & Beyond Inc (NASDAQ:BBBY), GameStop Corp (NYSE:GME) and Koss Corp.The case is Rogozinski v Reddit Inc, U.S. District Court, Northern District of California, No. 23-00686. More

TOKYO (Reuters) – Growth in Japan’s merchandise exports slowed sharply in January amid weakening Chinese demand, creating the country’s largest trade deficit on record.Trade figures issued on Thursday followed weaker-than-expected gross domestic product data, underscoring the challenge for the Bank of Japan in achieving growth led by private demand while stably sustaining inflation above 2%.Aggressive interest rate rises in other advanced economies have cooled demand for Japanese products, which came under more downward pressure in January as China celebrated the lunar New Year holiday.The value of Japan’s merchandise exports in January was 3.5% higher than a year earlier, Ministry of Finance (MOF) data showed, slowing sharply from the previous month’s annual gain of 11.5% but beating economists’ median estimate for a 0.8% rise.Imports of goods were up 17.8%, compared with the rise of 20.7% in the previous month and a median forecast for 18.4%.The result was a 3.49 trillion yen ($26.07 billion) deficit in merchandise trade in January, the biggest in records going back to 1979, the data showed. Imports of crude oil, coal and liquefied natural gas drove up overall import bills.”With commodity inflation peaking and the yen unlikely to weaken further, import prices are likely to decline from now on, but exports are still trending downward, so large trade deficits will persist,” said Kenta Maruyama, economist at Mitsubishi UFJ (NYSE:MUFG) Research and Consulting.By region, January exports of goods to China, Japan’s largest trading partner, fell 17.1% from a year earlier, dragged down by shipments of cars, car parts and chip-making equipment, the data showed.U.S.-bound shipments were 10.2% higher, led by demand for cars, mining machinery and metal processing machinery.Separate data showed core machinery orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, was 1.6% higher in December than a year before, compared with a 3.0% rise expected by economists.Data issued on Monday showed Japan’s economy, the world’s third largest, had grown at an annualised rate of only 0.6 in the fourth quarter as business investment slumped.Japan reports trade in services separately, in its current account data.($1 = 133.8600 yen) More

In his final appearance at the Bank of Japan in April 2005, Kazuo Ueda said he considered himself lucky to have been a board member at “an extraordinarily difficult time”, as the economy battled a financial crisis and persistent deflation.Now about to return almost two decades later, Ueda faces an equally daunting but different challenge: preparing to lead a pivot from the longstanding ultra-loose monetary regime that has left the Bank of Japan as the last major central bank clinging to negative interest rates, while its global peers tighten policy to rein in soaring inflation.The 71-year-old economist, who has been nominated as the bank’s next governor, will seek to slowly transition towards interest rate normalisation under intense scrutiny from global investors. Any missteps from the BoJ — whose policies to hold down interest rates have left it holding more than half of Japan’s government bond market — could destabilise financial markets.“The new BoJ leadership faces an extremely thorny path ahead,” said Izuru Kato, a longtime BoJ watcher and chief economist at Totan Research. “There will be no easy exit. It will be extremely difficult to tackle the BoJ’s balance sheet, which has recklessly expanded.”

Japanese prime minister Fumio Kishida: ‘I decided that Mr Kazuo Ueda was the best fit’ © Eugene Hoshiko/Pool via Reuters

Prime minister Fumio Kishida is betting that Ueda’s monetary policy expertise will allow him to chart a gradual exit from the BoJ’s unprecedented quantitative easing measures. “I decided that Mr Kazuo Ueda was the best fit since he is an internationally well-known economist with deep financial knowledge of both theory and practice,” Kishida told a parliamentary committee on Wednesday, in his first public comments on the nomination.If Ueda is approved by Japan’s Diet in the coming weeks, he will take over in April from incumbent Haruhiko Kuroda, who has battled persistent low inflation with aggressive monetary easing and stimulus.But the direction Ueda will take in monetary policy remains a major unknown. In terms of orientation, Ueda, professor emeritus of the University of Tokyo with a PhD in economics from MIT, is neither a dove nor a hawk. Analysts pointed to his voting record on the BoJ board, where he served from 1998-2005, to suggest a pragmatic approach to decision-making that drew more on market and economic conditions than ideology.“Mr Ueda obviously knows theory very well but he also places importance on markets,” said Nobuyasu Atago, a former BoJ official who is now chief economist at Ichiyoshi Securities, who described the incoming governor as “an ideas man”. “I think he will be very practical and decide on monetary policy based on actual economic conditions,” Atago added. Ueda is known for helping introduce forward guidance when the BoJ adopted its zero-interest rate policy in the late 1990s, and opposed lifting that policy in 2000, saying he wanted to wait until stock markets had stabilised. Toshihiko Fukui, BoJ governor when Ueda stepped down, praised the academic at the time as a “pillar of logic” who understood “central bank spirit”.The business community has urged the BoJ not to pivot drastically from its ultra-loose monetary easing, fearing currency volatility, while calling on it to unwind record purchases of Japanese government bonds to keep yields low.

Investors are betting the Bank of Japan will be forced to abandon its yield curve control policy © Yuichi Yamazak/AFP via Getty Images

In December, the BoJ stunned investors by announcing that it would allow 10-year JGB yields to fluctuate by 0.5 percentage points above or below its target of zero, widening the previous band of 0.25 percentage points.It has since maintained its target ceiling, but at a cost of bloating its balance sheet with more than $300bn in government bond purchases. The BoJ also holds more than half of all locally listed exchange traded fund assets. Investors are betting the BoJ will be forced to abandon the yield curve control policy as Japan’s core inflation rate, which excludes volatile food prices, has risen to a 41-year high of 4 per cent.Atago of Ichiyoshi Securities said he expected the BoJ’s first step to be shortening the target duration of the YCC policy to three years, from 10 years. Goldman Sachs has forecast the YCC shortening to five years in the second quarter of 2023. Kato at Totan Research said the measure could be dropped altogether by summer while maintaining its quantitative easing with large purchases of JGBs until markets stabilised. He also predicted the BoJ could start shifting its ETFs to a separate entity by the second half of Ueda’s term, which could allow it to attempt an orderly unwinding without upending financial markets.Ueda has previously warned against premature tightening, noting that the Japanese economy was not yet in a state where the central bank’s inflation target of 2 per cent could be sustainably maintained.“The BoJ must not rush to radically change the way it has been doing things, and I don’t think that would happen,” Kengo Sakurada, chief executive of Sompo Holdings and chair of the Japan Association of Corporate Executives, said at a news conference on Wednesday.

Another person close to the BoJ suggested Ueda was unlikely to embark on a major policy change until the central bank determined whether this year’s wage negotiations would flow into pay rises next year. But with an uncertain global economic outlook, Atago said the BoJ might need to entertain additional easing if inflation falls sharply and growth slows.“For the BoJ, it’s extremely important to consider not only normalisation but also to leave options open,” he said.As Ueda prepares to become the first outsider at the helm of the BoJ, he will be supported by deputy governors with international stature and deep knowledge of financial markets. On Tuesday, the government also nominated Ryozo Himino, a well-regarded former commissioner of the Financial Services Agency with a Harvard MBA, and Shinichi Uchida, a BoJ executive who played a central role in shaping monetary policy, as deputy governors. All three are English speakers with ties to the central banking and financial community. Kishida said he considered factors such as market communication skills and the ability to work closely with global central bank chiefs in choosing the BoJ’s next leadership team. “It’s an incredible trio,” said one BoJ official.Additional reporting by Eri Sugiura in Tokyo More

WASHINGTON (Reuters) – World Bank President David Malpass on Wednesday said he would leave his post well before his term ends, months after running afoul of the White House for failing to say whether he accepts the scientific consensus on global warming.Malpass, appointed by former President Donald Trump, will depart the multilateral development bank, which provides billions of dollars a year in funding for developing economies, by the end of June. His five-year term was due to end in April 2024.The former investment banker informed U.S. Treasury Secretary Janet Yellen of his decision on Tuesday, a source familiar with the matter said. Malpass, who survived multiple calls for his resignation last fall and was not expected to be offered a second term, gave no specific reason for the move, saying in a statement, “after a good deal of thought, I’ve decided to pursue new challenges.”Malpass has been under pressure from Yellen in recent months to accelerate reforms aimed at changing the way the World Bank operates to ensure broader lending to combat climate change and other global challenges.Yellen thanked Malpass for his service in a statement, saying: “The world has benefited from his strong support for Ukraine in the face of Russia’s illegal and unprovoked invasion, his vital work to assist the Afghan people, and his commitment to helping low-income countries achieve debt sustainability through debt reduction.”The U.S. Treasury chief said the United States would soon nominate a replacement for Malpass and looked forward to the bank’s board undertaking a “transparent, merit-based and swift nomination process for the next World Bank president.”Yellen last month declined comment when asked if the United States would support a second term for Malpass.Malpass is expected to stay at least through the April meetings of the World Bank and International Monetary Fund, but could leave his post before the end of June, given the timeline for nominating and confirming a successor, one source said.By long-standing tradition, the U.S. government selects the head of the World Bank, while European leaders choose the leader of its larger partner, the International Monetary Fund.Nadia Daar, who heads the Washington office of Oxfam International, said the process should be opened to more candidates to improve the credibility of the institution.”If shareholders really want to ‘evolve’ the @WorldBank, Malpass’ successor must be hired based on an open and merit-based selection process,” she said on Twitter.Malpass took up the World Bank helm in April 2019 after serving as the top official for international affairs at U.S. Treasury in the Trump administration. Before that, he served as the chief economist for the now-defunct investment bank Bear Stearns for more than a decade. In fiscal 2022, the World Bank committed more than $104 billion to projects around the globe, according to the bank’s annual report. Leaving at the end of the fiscal year at the end of June was a natural time to step aside, a source familiar with Malpass’s thinking said. Doing so will give his successor time to put their imprint on the reforms before the joint meetings of the World Bank and the IMF in Morocco in October.Two of the top contenders for the post are Samantha Power, who currently leads the U.S. Agency for International Development (USAID) and served as U.S. ambassador to the United Nations under President Barack Obama, and Rajiv Shah, former USAID administrator under Obama and currently president of the Rockefeller Foundation, a philanthropic group.The World Bank’s governors are expected to approve the bank’s “evolution roadmap” for reforms incorporating U.S.-requested changes, such as balance sheet adjustments that free up an additional $2 billion for lending in fiscal 2024, at the spring meetings of the IMF and World Bank set for mid-April. FEELING THE HEAT ON CLIMATE Pressure to shake up the leadership of the World Bank to pave the way for a new president who would reform the Bank to more aggressively respond to climate change has been building for over two years from the United Nations, other world leaders and environmental groups.In November 2021, Special Adviser to the U.N. Secretary-General on Climate Change Selwin Hart called out the World Bank for “fiddling while the developing world burns” and called the institution an “ongoing underperformer” on climate action.Pressure on Malpass was reignited last September when the World Bank chief fumbled answering a question about whether he believed in the scientific consensus around climate change, which drew condemnation from the White House.Environmental groups cheered his departure. “This is great news. It is hard to think of a worse fit for World Bank President than an alleged climate denier and the chief economist of Bear Stearns ahead of the 2008 recession,” said Bronwen Tucker, Global Public Finance Campaign Co-Manager at Oil Change International. According to the bank’s 2021 annual report, Malpass earned $525,000 in annual net salary that year, and the bank made more than $340,000 in annual contributions to a pension plan and other benefits.  More