Aurelia Butler

TOKYO/OSAKA (Reuters) -Japanese Finance Minister Shunichi Suzuki said authorities stood ready to respond to speculative currency moves, a fresh warning that comes days after Tokyo intervened in the foreign exchange market to stem yen falls for the first time in more than two decades.Suzuki also told a news conference on Monday the government and the Bank of Japan (BOJ) were on the same page in sharing concerns about the currency’s sharp declines.”We are deeply concerned about recent rapid and one-sided market moves driven in part by speculative trading,” Suzuki told the news conference. “There’s no change to our stance of being ready to respond as needed” to such moves, he added.Japan likely spent a record around 3.6 trillion yen ($25 billion) last Thursday in its first dollar-selling, yen-buying intervention in 24 years to stem the currency’s sharp weakening, according to estimates by Tokyo money market brokerage firms.BOJ Governor Haruhiko Kuroda said on Monday the central bank was likely to retain its ultra-loose monetary policy for the time being, but added that its commitment to keep interest rates at “present or lower levels” may not necessary stay unchanged for years.At last week’s news conference, Kuroda had said the BOJ was unlikely to change its guidance on interest rates for “two to three years”.But on Monday he retracted that.”It won’t be that long, such as two to three years,” Kuroda told a briefing in Osaka, western Japan, signalling that the guidance could change depending on how long the economy took to fully emerge from the effects of the COVID-19 pandemic.Still, Kuroda warned of heightening risks to Japan’s economy and stressed his resolve to maintain the ultra-low rates blamed by analysts for accelerating the Japanese currency’s declines.”If risks to the economy materialise, we will obviously take various monetary easing steps without hesitation as needed,” he told a meeting with business executives in Osaka, western Japan.The remarks came after the government’s decision on Thursday to intervene in the currency market to stem yen weakness by selling dollars and buying yen for the first time since 1998. Analysts, however, doubted whether the move would halt the yen’s prolonged slide for long.Kuroda said the government’s intervention was an appropriate move to deal with “rapid, one-sided” yen moves. He countered the view Japan was chasing contradictory goals by propping up the yen with intervention, while helping drive down the currency by maintaining ultra-low interest rates.”Monetary policy and currency policy have different goals and effects,” he said. BOJ POLICY CONUNDRUMThe yen’s recent sharp declines, which have pushed up households’ living costs by boosting imported fuel and food prices, have been driven in part by widening divergence between the U.S. Federal Reserve’s aggressive monetary tightening and the BOJ’s ultra-loose monetary policy.The dollar added 0.54% to 144.175 yen on Monday, continuing its climb back towards Thursday’s 24-year peak of 145.90. It tumbled to 140.31 that same day after Japanese authorities stepped into the market.In a meeting Kuroda held with business executives in Osaka, Masayoshi Matsumoto, head of the region’s business lobby Kansai Economic Federation, praised Japan’s decision to intervene in the market.”It was a meaningful move that showed Japan’s determination it won’t leave unattended sharp market volatility,” he said.Yoshihisa Suzuki, an executive of trading house Itochu Corp, called on the BOJ to adopt a “balanced” policy approach that took into account not just the demerits of a weak yen but the potential risks of a sharp yen rise that hurt exports.”People talk a lot about the demerits of a weak yen. But a strong yen is also painful,” Suzuki said.While government officials’ jawboning may keep markets nervous of the prospects of further intervention, stepping in repeatedly in the currency market and selling huge sums of dollars could be difficult due to the criticism Japan may face from its G7 counterparts.The U.S. Treasury Department said last week it “understood” Japan’s intervention was aimed at reducing volatility, but stopped short of endorsing the move.”It’s unlikely Japan will continue intervening to defend a certain line, such as 145 yen to the dollar,” former top Japanese currency diplomat Naoyuki Shinohara told Reuters.($1 = 144.1800 yen) More

Sterling plunged to a record low against the dollar today, leading to speculation that the Bank of England may be forced into an emergency interest rate increase.The pound fell 4.7 per cent to $1.035 against the US currency in Asian trading, the lowest since the decimalisation of the currency in 1971. Sterling also fell as much as 3.7 per cent against the euro to €1.0787, reaching the lowest level since September 2020. The pound recovered somewhat in European trading to €1.1072, a 1.2 per cent fall from Friday’s close.The UK’s cost of borrowing surged as investors worried about the massive amounts of government debt that would be required to finance the tax cuts and spending pledges unveiled on Friday by new UK chancellor Kwasi Kwarteng. The yield on 10-year gilts, which move in the opposite direction to the price of the financial instrument, surged 0.24 percentage points to 4.1 per cent while the yield on two-year gilts, which are more sensitive to monetary policy, rose 0.3 percentage points to reach 4.3 per cent.Kwarteng on Friday unveiled a £45bn debt-financed tax-cutting package, the biggest fiscal stimulus for half a century, triggering a sharp sell-off of the pound and a surge in UK borrowing costs.Despite the severely negative response from financial markets to the statement, the chancellor yesterday vowed to double down on his risky policy.The next interest-rate-setting meeting of the BoE, which has a 2 per cent inflation target, is not scheduled until November. But some economists today called for emergency intervention by the UK central bank to restore confidence in the pound.Paul Dales, chief UK economist at Capital Economics, said: “By bringing forward a lot of the policy tightening that might be needed to have happened anyway, the bank would demonstrate in no uncertain terms that whatever the [UK] government does it will ensure that inflation returns to 2 per cent.”He added: “This would go a long way to easing the crisis.”“The UK is now in the midst of a currency crisis,” said Vasileios Gkionakis, Citigroup’s head of foreign exchange strategy.Traders ramped up bets on an emergency interest rate rise before the BoE’s meeting in November. Derivatives markets are pricing in a rise of more than 0.5 percentage points in a week’s time and an increase of nearly 1.5 percentage points by the November meeting.Analysis: Kwasi Kwarteng invoked the spirit of Margaret Thatcher when unveiling his go-for-growth budget, write Chris Giles and Delphine Strauss. But, they say, the more accurate historical comparisons are with Anthony Barber’s ill-fated 1972 budget and Reaganomics.Opinion: Toby Nangle, head of asset allocation at fund manager Columbia Threadneedle Investments, says it is hard to overstate how poorly Kwarteng’s announcement has been received by financial markets.Does the fall in the pound affect you? Do you think the tax cuts and spending pledges unveiled by the UK government on Friday will spur growth? Email me at [email protected]. Here is the rest of today’s news — GordonFive more stories in the news1. Far right storms to victory in Italian election Giorgia Meloni is poised to become Italy’s first female prime minister since Italian unification in 1861 after her far right Brothers of Italy party emerged with the biggest number of votes in yesterday’s general election. She will form a governing alliance with Matteo Salvini’s nationalist League and former prime minister Silvio Berlusconi’s Forza Italia. Go deeper: Rome correspondent Amy Kazmin recently wrote this profile of Italy’s new prime minister.

Giorgia Meloni is poised to become Italy’s first female prime minister since Italian unification in 1861 © Guglielmo Mangiapane/Reuters

2. Western allies boost nuclear deterrence Several countries are making contingency plans in case Russian president Vladimir Putin acts on his threats of nuclear attacks against Ukraine, sending private warnings to the Kremlin about possible consequences, according to western officials. Putin’s nuclear warnings are “a matter that we have to take deadly seriously”, US national security adviser Jake Sullivan told CBS yesterday.Trouble at home: Protests against Putin’s mobilisation of hundreds of thousands of reserve soldiers spread across Russia at the weekend. 3. UAE agrees LNG deal with Germany The United Arab Emirates has agreed a deal to supply liquefied natural gas to Germany as Chancellor Olaf Scholz visited the Gulf state as part of a regional tour seeking to drum up alternatives to Russian energy. The supplies will be the first delivered to a new import terminal on Germany’s northern coast.4. Investors pile into insurance Investors are buying record amounts of insurance contracts to protect themselves from a sell-off that has wiped trillions of dollars off the value of US stocks this year. Purchases of put option contracts on stocks and exchange traded funds surged to $9.6bn in the past week alone.5. Interpol issues red notice for Terraform Labs co-founder Interpol is looking for Do Kwon, the co-founder of collapsed cryptocurrency operator Terraform Labs, who is on the run and refusing to co-operate with South Korean authorities over the $40bn implosion of the terraUSD and luna tokens. Law enforcement officers in South Korea said today that agencies worldwide will now co-operate to locate and arrest Kwon. The day aheadMarket outlook US equity markets are expected to open lower later today after shedding 5 per cent last week as central banks raised interest rates to control surging inflation, spooking investors. Europe’s Stoxx 600, which ended in “bear territory” on Friday, fell 0.3 per cent this morning. Monetary policy Several officials across the Federal Reserve’s network are scheduled to speak today, marking some of the first remarks from policymakers following the US central bank’s decision last week to raise interest rates by 0.75 percentage points for the third time in a row.Economic data Among the most closely followed economic data from Latin American countries today are July economic activity figures for Mexico and Argentina as well as July current account numbers from Brazil.Elon Musk The Tesla co-founder is set to be questioned in Delaware by lawyers for Twitter as the two sides prepare for October’s trial over the billionaire’s efforts to walk away from his $44bn takeover of the social media group. According to a court filing from last week, the deposition could stretch into Wednesday if needed. Nasa’s Dart mission The US space agency will deliberately crash a spacecraft into an asteroid at 23,000kph in order to divert its path. The $300mn double asteroid redirection test has picked the asteroid Dimorphos as its target because it orbits another asteroid rather than the sun.Keep up with the important business, economic and political stories in the coming days with the FT’s Week Ahead. Click to subscribe here. And don’t miss our FT News Briefing audio show — a short daily rundown of the top global stories.What else we’re readingHow abortion rights are upending the US midterms The Supreme Court’s decision to strike down the half-century Roe vs Wade legal precedent, rescinding the constitutional right to terminate a pregnancy, is energising Democrats and unsettling Republicans ahead of November’s midterm elections.

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Brazil’s election and the search for an economic revival Brazil’s ascendancy in the early years of the 21st century as an emerging market darling — the B in Brics — ended with a thud in 2014. Since then living standards have stagnated, and as voters prepare to go to the polls on October 2 it is how to revive the economy that is uppermost in their minds.The seven economic wonders of a worried world In periods of economic gloom, it is worth highlighting the few countries that defy the prevailing pessimism. Ruchir Sharma outlines seven that stand out in a world tipping towards recession.Men who get their legs broken to gain height are not entirely mad Study after study shows that it pays to be taller than average, especially for men. Does that explain the grisly new trend of leg lengthening? Pilita Clark has done some research of her own and has words of caution for anyone thinking of undergoing the procedure. Talent wars: why businesses have to battle to hire the best From technology to hospitality, construction and life sciences, employers are experiencing a talent crunch. The rise of remote working has had a knock-on impact on “deskless” workers, with potentially dire consequences for some other industries. Anjli Raval reports on the climate facing hiring managers.ArtsHTSI published its autumn 2022 arts special this weekend. Highlights included how artists in Ukraine are responding to the war, an interview with one of Broadway’s youngest producers and an appreciation of artists’ muses.

Nineteen Ukrainian creatives gather in artist and creative director Masha Reva’s Kyiv studio © Lesha Berezovskiy More

The value of foreign direct investment into the north of England has risen by almost three-quarters in the past five years while falling in every other part of the UK, including London. Analysis of market data and government statistics carried out by the Northern Powerhouse Partnership lobby group — whose economists include former Treasury minister Lord Jim O’Neill — also shows that the north has increased its share of the UK’s FDI projects from 19 per cent to 33 per cent over the same period, overtaking London. The number of jobs created in the north rose by 18 per cent. O’Neill, who spearheaded the “Northern Powerhouse” push to boost the region’s economy between 2015 and 2016 when George Osborne was chancellor, said the rise represented the only “notable success” to have emerged from the project. He added that the rest of the agenda had “dwindled” under the Tory administrations that followed. During Osborne’s chancellorship the north was marketed heavily to overseas investors, particularly in Asia.The latest analysis, which combined data from fDi Markets, part of the Financial Times group, with those from the Office for National Statistics and the Department for International Trade, shows FDI rising by 72 per cent — from $25.257bn to $43.683bn — across the North West, North East and Yorkshire and the Humber during the years 2017-2021, compared with the previous five-year period. In Greater London and the South East it fell 14 per cent, from $56.26bn to $48.524bn. FDI also fell in all other regions, with Scotland recording the largest drop, at 23 per cent. O’Neill highlighted that Asian investment into the north had risen 7 per cent while it had “plummeted” 56 per cent across the rest of the UK. “I often felt that the Northern Powerhouse concept was better understood by investors in Asia than it was among politicians and financiers in London,” he added. The agenda was designed to capitalise on the potential of northern cities, and to provide a counterweight to London in an economy with some of the greatest regional disparities of any major western country. The project fell out of favour with Tory governments that followed the EU referendum in 2016. But the NPP report argues that the new prime minister Liz Truss’s goal of hitting 2.5 per cent economic growth will require “higher productivity overall — which means closing the north-south divide”, including through FDI. FDI into some sectors nevertheless dropped sharply in the north during the five-year period, including into coal, oil and gas, industrial equipment and automotive components, all once regional strengths. These falls were offset by much larger increases of foreign investment into electrical components, where the value rose ninefold, followed by biotech. That was particularly the case in Osborne’s own seat in Cheshire, near Greater Manchester, where the departure of AstraZeneca for Cambridge in 2014 had caused concern.But Jessica Bowles, director of strategy at property company Bruntwood, part of the public-private Manchester Science Park partnership that now owns AstraZeneca’s former base at Alderley Park, said there had since been a surge in FDI.“I think what we’ve done really well over the last five to eight years is be really clear about where our specialisms are — so a biotech and life sciences focus and an understanding of our strengths across the north,” she said.“I would like to see it capitalised upon. I think understanding of this success is patchy across government.”International trade secretary Kemi Badenoch said overseas investment had created more than 50,000 jobs across the north in the past five years, describing it as “great news” that would be capitalised upon through the government’s tax-cutting agenda, which was designed to “allow businesses to invest more of their profits and boost our attractiveness to overseas investors”.  More

The writer is chair of Rockefeller InternationalIn periods of gloom like this one, when commentators see nothing but faults in most countries, it is worth highlighting the few that defy the prevailing pessimism. Here are seven that stand out in a world tipping towards recession and higher inflation: Vietnam, Indonesia, India, Greece, Portugal, Saudi Arabia and Japan.They share some combination of relatively strong growth, moderate inflation or strong stock market returns — compared with other countries. By fascinating coincidence, most of them also defy deep biases about the supposedly dim prospects of certain countries, cultures and systems. The least surprising name on my list is Vietnam, a case study in communism that works. As geopolitical tensions increase with China, western businesses are hedging their bets by adopting a “China plus one” strategy — and often the “one” extra sourcing destination is Vietnam. By investing heavily in the infrastructure required of a manufacturing export power, and opening its doors, Vietnam is growing at nearly 7 per cent, the fastest pace in the world. Criticism of the economic trials of Muslim countries long ignored the most populous one, Indonesia. Resource rich, it is benefiting from the global commodity price boom, but with a domestic market of 276mn it is not overly dependent on exports. It has unusually low debt compared with other developing economies, and an unusually stable currency in a year when most currencies are falling sharply against the dollar. The result, a benign mix of 5 per cent growth with less than 5 per cent inflation, makes Indonesia a shining example of economically adept Islam.Though India’s growth is always flattered by its low base, its economy will continue to be one of the world’s fastest growing. Policymakers have done just enough reform to draw in investors who, spooked by the regulatory crackdowns in China, are now gravitating to the second largest emerging economy. New investment in digital services and manufacturing are bearing fruit and the vast domestic market insulates India from global recession. Some of the “Pigs” — the countries at the core of the eurozone debt crisis a decade ago — are now in revival mode. Greece and Portugal have cut their government deficits by more than half, and are less exposed than most of Europe to gas supply shocks emanating from Russia.Greece is getting a boost from a revival in foreign investment — and in tourism, which Covid had cut from 20 to 15 per cent of its gross domestic product. Less than 10 per cent of bank loans are non-performing, down from 50 per cent during the crisis. Now growing at more than 4 per cent, with inflation coming down fast, Greece is enjoying one of the region’s healthiest recoveries. Portugal is in a similar place. It is wisely investing support funds from the EU and reforming one of the continent’s most excessively generous pension systems, while a special “golden visa” attracts a tide of rich new émigrés. Perhaps not coincidentally, the best performing stock market in the developed world this year is Lisbon’s. The Pigs acronym is passé. Saudi Arabia is leading a movement among Gulf states to diversify beyond oil. Reforms, including loosening restrictions on women, workers, tourists and nightlife, have helped push projected growth to nearly 6 per cent over the next two years. The regime is investing oil money in infrastructure, including 10 smart cities which promise a futuristic and car-free version of urban life. Though harshly criticised for political repression and with some distance to go on civil rights, the kingdom is also expanding economic freedoms and putting this petrostate at the forefront of green urban development.The most surprising country on my list is Japan, where growth is actually picking up. After being dogged by deflation for years, Japan is also the rare country that gains from a return of inflation — now running just over 2 per cent. Its supposedly weak corporate culture has been raising profit margins. Labour costs are now lower in Japan than in China. The cheap yen is boosting exports and could revive animal spirits in the market as a late reopening from Covid restrictions draws back visitors.Any of these economies could, of course, falter, undone by a turn in leadership, policy or by complacency. Still, these nations are already among the top performing stock markets this year. Amid well-founded worry about global prospects, a new set of winners is emerging. More

TOKYO (Reuters) – Japan likely won’t intervene in the currency market to defend a line-in-the-sand such as 145 yen versus the dollar, and instead limit any further action to smoothing operations aimed at taming volatility, former top currency diplomat Naoyuki Shinohara said.After the dollar’s spike to near 146 yen, Japan intervened in the currency market on Thursday to buy yen for the first time since 1998. Finance minister Shunichi Suzuki signalled readiness to step in again if yen moves become too volatile.Shinohara, who oversaw Tokyo’s currency policy during the Lehman crisis in 2008, said any further yen-buying intervention will be limited in scale given Japan’s need to avoid drawing criticism from G7 advanced nations.”It’s unlikely Japan will continue intervening to defend a certain line, such as 145 yen to the dollar,” said Shinohara, who retains close ties with incumbent policymakers.”It’s impossible to reverse the market’s broad trend with intervention alone,” he told Reuters in an interview on Saturday. “The most authorities can do is to soothe markets when currency moves become very volatile.”The dollar slid to near 140 yen shortly after Thursday’s intervention, but bounced back above 143 yen by Friday. It stood at 143.320 yen in early Asia trade on Monday.The United States likely did not criticise Japan’s action on Thursday since Tokyo described it as countering “excess volatility,” which the G7 agrees could hurt growth, he said.But Washington will likely voice opposition if Tokyo repeatedly steps into the market, or gives the impression it is preventing the yen from falling below a certain level, said Shinohara, who also served as deputy managing director at the International Monetary Fund until 2015.The yen has hovered around 24-year lows against the dollar as investors focused on the widening policy divergence between the U.S. Federal Reserve’s aggressive interest rate hikes and the Bank of Japan’s (BOJ) pledge to maintain ultra-low rates.Tokyo’s intervention came shortly after the yen’s dive triggered by the BOJ’s decision to keep ultra-low rates, and governor Haruhiko Kuroda’s post-meeting comments that rates likely won’t rise for several more years.The yen’s downtrend will be hard to reverse as long as the BOJ maintains ultra-low rates, Shinohara said.”Kuroda appeared determined more than ever before to maintain ultra-easy policy, which is tantamount to declaring the BOJ will keep pumping yen to markets,” Shinohara said.The BOJ’s dovish stance contradicts the goal of the government’s yen-buying intervention, which seeks to prop up the currency by mopping up yen from the market, he said.”Japan is stepping on the accelerator and the brakes at the same time. When you do that with your car, you either damage the brakes or lose control of your steering wheel,” Shinohara said.”I don’t think Japan can keep doing this for too long.” More