Aurelia Butler

Japan is forging ahead with plans to buy up vast quantities of bonds in a bid to support the country’s economy, drawing a stark contrast to other major countries that are exiting stimulus programmes.The Bank of Japan will buy about ¥10tn worth of bonds in June — roughly equal to the US Federal Reserve scooping up $300bn worth of debt per month when adjusting for gross domestic product, according to Deutsche Bank calculations.Policymakers in Tokyo are pursuing the bond-buying programme as part of a plan to keep a lid on medium-term costs known as yield-curve control that has been in place since 2016. The scheme’s continuation pushes Japan far out of line with even its most dovish global peers, such as the Swiss National Bank that this week surprised markets with its first interest rate rise in 15 years. “This is an extreme level of money printing given that every other central bank in the world is tightening policy,” said George Saravelos, head of European foreign exchange strategy at Deutsche Bank.The BoJ on Friday said it would hold interest rates in negative territory and also continue targeting a 10-year bond yield of within 0.25 percentage points either side of zero. Intense pressures in the global bond market have pushed the 10-year Japanese government bond yield right up to the upper limit, meaning the central bank has had to purchase big batches of debt on a regular basis to maintain its target. Japan’s decision to continue buying bonds has hit the yen, which plunged earlier this week to a near 24-year low beyond ¥135 against the dollar. BoJ policymakers say the underlying economy is too weak to withstand monetary policy tightening and are also wary of reversing progress on exiting a protracted period of tepid price growth and even deflation. Core consumer prices, which exclude volatile food prices, have risen at their fastest pace in seven years, hitting the BoJ’s target with annual growth of 2.1 per cent in April.However, even as price growth in Japan has heated up in recent months, it remains much lower than levels across other major economies. US core inflation registered 6 per cent in May, while that figure was almost 4 per cent in the eurozone last month. “The Bank of Japan is happy to continue being the ‘odd one out’ among central banks,” said Takayuki Toji, an economist at Sumitomo Mitsui Trust Asset Management. Additional reporting by Hudson Lockett in Hong Kong More

Countries worldwide are battling cost-of-living levels not seen in decades, ratcheted up by the reopening of the global economy after the COVID-19 pandemic and the Russia-Ukraine war. The Bank of England predicts inflation will top 11% in October.”If you think about all the money that’s spent on marketing and doing deals to promote some of the big leisure activities that the British people enjoy, let’s take some of that money,” David Buttress, former chief executive of Just Eat, told the BBC.”Let’s refocus it on what really matters to people which is making their prices more competitive so their money goes further.”Buttress was appointed by the government this week to work with the private sector to develop, identify and promote schemes such as discounted prices or product offers to help ease the increasing pressures on household budgets.”I want my old friends and colleagues and business and industry to come to the party the next six months and help because reality is this is a global challenge we all face and it’s on all of us I think to try and muck in and do something about it,” he said.Thousands of people are expected to join a demonstration in central London on Saturday organised by trade unions to call on the government to do more to tackle the cost of living.Junior finance minister Simon Clarke warned on Friday that while pay was part of the answer to helping with the cost of living, the government had to be careful about “preventing inflation from becoming a self-fulfilling prophecy.””What we can’t do is have unrealistic expectations around pay, which do in turn prolong and intensify this inflation problem because we all want it to end. And the way it will end soonest is if we are sensible about pay,” he told the BBC. More

Lindner said he wanted to bring an end next year to the three years of government largesse that had characterised attempts to prop up the economy through the coronavirus crisis and reapply Germany’s constitutional debt brake next year.”We are experiencing dangerous inflation that has to be braked,” he told the Welt am Sonntag newspaper in an interview. “Preparedness to take entrepreneurial risks could be reduced. We can’t let this become an economic crisis.”Germany spent 4 billion euros on interest last year, said Lindner, from the business-friendly Free Democrat party, adding that he would resist calls from his coalition partners for increased spending.”We can’t afford ill-directed subsidies any more,” he said. He listed subsidies for buying electric and hybrid cars that were available even to very high earners as examples of subsidies that should be scrapped. More

Soaring consumer prices and creeping borrowing costs have clipped growth expectations across Latin America, with developing economies especially vulnerable to the economic volatility.Peru’s central bank lowered its 2022 growth projection to 3.1% from 3.4% previously, while maintaining its estimate for 3.2% growth next year, bank president Julio Velarde said in a presentation.Velarde cited persistent mining conflicts, in addition to the impact of the Russia-Ukraine war, as driving the downwardly revised growth projection.Protests by indigenous people have disrupted Peru’s mining sector in recent months, including a 51-day shutdown at China-based MMG Ltd’s Las Bambas copper mine, a top global producer of the red metal.”Other sectors are behaving better than we expected in March. What is falling is mining,” said Velarde.The central bank slashed its 2022 growth expectation for the mining sector from 5.9% to 2.9%.Velarde said he sees mining investment falling by nearly 5% this year, and a much steeper fall potentially in 2023.”If no new projects appear next year … there will be a contraction in mining investment next year of almost 16%.”The bank’s projections also include a lower fiscal deficit this year of 1.9% of gross domestic product compared to 2.5% previously projected in March, principally due to higher revenue, Velarde said.The bank expects annual inflation of 6.4% for 2022 and 2.5% for 2023. In March, the bank said it expected 3.6% inflation this year.Annual inflation in May reached 8.09%, its highest level in two dozen years, leading the bank to raise its benchmark interest rate to 5.5% earlier this month. More