Aurelia Butler

The yen plunged to a 24-year low of ¥135.17 against the dollar on Monday, with the currency’s slide drawing increasing scrutiny from Japanese authorities wary of its rapid weakening. Following a week of setting fresh 20-year lows, the yen continued its descent as traders bet that the Bank of Japan will remain the only leading central bank to maintain ultra-loose monetary policy despite its counterparts in the US and Europe entering an interest-rate raising cycle. “It’s important that currency rates move stably reflecting fundamentals. But there has recently been sharp yen declines, which we are concerned about,” said Hirokazu Matsuno, Japan’s chief cabinet secretary. “We are ready to respond appropriately as needed, while communicating closely with each country’s currency authorities,” said Matsuno. He declined to comment on whether the government would intervene to stop the yen’s decline.Interview: The yen’s plunge will hand a significant advantage to foreign bidders in the competition for Japanese assets and drive a wave of inbound dealmaking, says the chief executive of Nomura.Share your feedback on this newsletter by emailing [email protected]. Thanks for reading FirstFT Asia. Here’s the rest of the day’s news — EmilyFive more stories in the news1. US stocks trade in bear market territory as sell-off accelerates US stocks closed in a bear market on Monday after a late-session sell-off, while government bond yields soared, with investors unnerved over high inflation and the prospect of aggressive monetary tightening by central banks.2. Bitcoin tumbles after crypto lender Celsius blocks redemptions Binance halted withdrawals of bitcoin for several hours after crypto lender Celsius also blocked customers from pulling funds from its platform, citing “extreme market conditions”, while digital assets slumped in price. The move comes amid growing signs that the infrastructure underpinning the digital asset market is creaking under the strain. 3. China tells banks to limit executive pay Chinese securities regulators and industry associations have instructed local and foreign banks to rein in executive pay levels, in the latest sign that President Xi Jinping’s drive to promote “common prosperity” is gathering pace ahead of a crucial Communist party congress this year.4. Johnson pushes ahead on plan to rip up N Ireland protocol UK prime minister Boris Johnson has defied criticism and published legislation to rip up his 2020 Brexit deal with the EU, insisting there was “no other way” of protecting the peace process in Northern Ireland.5. ‘Ferocious’ Omicron outbreak in Beijing An outbreak at a popular 24-hour bar in the Chinese capital’s usually bustling Chaoyang district has infected more than 200 people and forced more than 6,000 people to isolate at home. Authorities have since closed all entertainment venues in Chaoyang.The day aheadAnniversary of London’s Grenfell tower block fire Today marks five years since fire that engulfed west London’s Grenfell tower block, exposing shortcomings in the building’s cladding and sparking a crisis for apartment owners across the UK that continues to generate repercussions.UK plan to deport asylum seekers begins The UK government’s plans to deport asylum seekers to Rwanda by air can go ahead on Tuesday, the Court of Appeal has ruled.What else we’re reading The WTO’s lonely struggle to defend global trade For almost three decades, the World Trade Organization has been lowering barriers to trade and smoothing the path of globalisation. Yet its ministerial meeting in Geneva this week could result in something that would do the opposite: new tariffs.Japan’s heavy industry looks to a greener future Japan may be the world’s fifth biggest carbon emitter but its leaders are unequivocal in their commitment to do better. While such pledges are not unusual, Japan may be better placed than many of its Asia-Pacific peers to meet them.Go deeper: Check our full special report on Asia-Pacific Climate LeadersSidestepping Beijing’s ban through livestream steak sales Chinese edtech New Oriental has discovered a workaround to survive Beijing’s ban on companies profiting from teaching school curriculum subjects by combining language classes with product sales. Teachers using English lessons to sell steaks have become a viral hit.

New Oriental is struggling to shore up sales after Beijing’s sweeping overhaul of its private education industry last year © Qilai Shen/Bloomberg

Elon Musk’s bankers face dilemma: should they help him kill the Twitter deal? Wall Street lenders bankrolling the Tesla chief’s $44bn acquisition of the social media company may soon find the industry’s biggest payday on the line, as Musk claims that concerns about fake accounts give him grounds to walk away from a deal.A bitterly divided board, Birkin bag bonuses and a fight for control Incumbent bosses usually feature on the official company slate of nominees for a board election. But in one of the most unusual corporate battles in recent memory, there will be no Aerojet slate at a June 30 meeting as two rival factions, each with four members of the eight-person board, square off for control of the company.TravelWith FT Globetrotter’s insider guide to a green weekend in London, find out where to stay (luxuriously), eat (deliciously) and roam (non-pollutingly) for a sustainable sojourn in the UK capital.

Start your Sunday with a stroll or cycle ride along Regent’s Canal © Lecart Photos/Alamy More

Top executives at two of Wall Street’s biggest banks have struck an optimistic tone about the trajectory of the US economy, arguing on Monday that consumers were in good financial health despite stark market signals that a recession is looming. Speaking as US equities slid into bear market territory, Morgan Stanley chief executive James Gorman said investors were forgetting that consumer and corporate balance sheets remain “very strong” following government stimulus during the coronavirus pandemic and years of cheap borrowing. “I am totally relaxed about it. I don’t think we’re falling into some massive hole over the next few years,” Gorman said at a financial industry conference organised by Morgan Stanley. Gorman added that markets “aren’t in a very good position”, but said he would rather have “markets off-kilter than the fundamentals driving consumer credit particularly off-kilter”.Almost 70 per cent of leading academic economists polled by the Financial Times predicted that the US economy will tip into a recession next year, as the Federal Reserve raises interest rates in an effort to contain the highest inflation in about 40 years.Gorman estimated the chances of an impending recession at about 50 per cent, up from his previous mark of 30 per cent, but he de-emphasised the likelihood that any downturn would be too punishing or long-lasting. “I think eventually the Fed will get hold of inflation. It’s going to be bumpy. People’s 401(k) plans are going to be down this year, but we’re unlikely at this stage to go into a deeper, long recession,” Gorman said.

His optimism was echoed by Alastair Borthwick, chief financial officer of Bank of America. Borthwick said the bank, the second-largest in the US by assets, was “still seeing very healthy balance sheets and healthy spending”, and that consumer spending in June was up 9 per cent year over year. Even with higher spending, Borthwick said retail customers were hoarding cash. As an example, he said customers who had account balances of $1,000-$2,500 before the pandemic now had about seven times that amount. “What we’re seeing right now, credit is in great shape,” he said. “I’d expect it to bump around because we’re at such low levels. And one would think over time, it would trend back towards history, but we don’t see that right now.” More

Good eveningNews this morning that the economy had shrunk for the second month in a row is the latest piece of evidence that the UK is suffering from the worst combination of surging prices and lack of growth since the 1970s.GDP fell in April by 0.3 per cent, far more than forecasts had suggested, sending the pound down to a two-year low against the dollar. The decline was across all sectors but was led by a 5.6 per cent drop in health services as the NHS test and trace programme wound down. The services sector overall fell by 0.3 per cent, while production was down 0.6 per cent as businesses were hit by price rises and supply chain problems. Construction slipped 0.4 per cent.Today’s data follow forecasts last week from the OECD which said the UK would have the weakest growth in the G20 outside Russia. Zero growth was predicted for next year as the economy stagnated. Separate FT analysis said the UK would experience the highest inflation in the G7 from now until 2024. One of the factors contributing to the country’s cost of living crisis is soaring petrol prices, something acknowledged today by the UK’s competition watchdog as it launched an investigation into the retail fuel market. Business secretary Kwasi Kwarteng had queried whether the government’s cut in fuel duty was being passed on to drivers.The surge in inflation means the Bank of England is still likely to raise interest rates after its policy meeting on Thursday, despite the poor growth figures. Most economists expect a rise of 0.25 per cent.Separate data from this morning show the UK is also suffering its second-largest trade deficit since records began in 1997 after importing £24.3mn more than it exported in the three months to April.Trade is at the heart of today’s other big UK story: the move by the government to rip up its own Brexit deal by expunging key elements of the Northern Ireland protocol, which governs relationships between the province, mainland Britain and the EU. Under the proposals, goods from Great Britain destined to stay in Northern Ireland would go through a “green lane” with no checks, while those heading across the open border into the Republic of Ireland and the EU single market would face “red lane” checks. The measure would end the role of the European Court of Justice in policing the protocol as well as giving Westminster sweeping new powers, but faces strong opposition from many MPs, the House of Lords, the Irish government and the business community in Northern Ireland, which currently benefits from being part of the European Single Market as well as the UK internal market. Today the EU said it would launch legal action as Brussels and London moved closer to a possible trade war. Here’s our explainer on the bill and why it’s so contentious. Prime minister Boris Johnson argues that the protocol has created political tensions as well as business disruptions between Northern Ireland and the rest of the UK.Latest newsEnvironment Secretary George Eustice says UK will bring forward another 10,000 visas for seasonal workers and expand scheme to cover poultry (Press Association)EU agency sees risk of Covid deaths rising as Omicron subvariants spread (Reuters)Berlin working on multibillion euro rescue for Gazprom GermaniaFor up-to-the-minute news updates, visit our live blogNeed to know: the economyIt’s an important week for central banks and interest rates. The Bank of England’s decision is preceded on Wednesday by the US Federal Reserve, which is expected to announce the first back-to-back half-point interest rate rises since 1994. Announcements also come from Brazil (Wednesday), Switzerland (Thursday) and Japan (Friday).China’s major cities returned to lockdowns and mass testing over the weekend as Covid cases continued to spread. Global China editor James Kynge says the human and economic cost of Beijing’s “techno-authoritarian” zero-Covid strategy is mounting.Latest for the UK and EuropeThe UK looks set to extend the life of a coal-fired power station slated for closure as it seeks to beef up energy security. Continuing the West Burton plant would cost tens of millions of pounds and likely spark a fierce backlash from environmental groups. Electricity generator SSE told the FT that the UK’s windfall tax would harm investor confidence just as companies planned to plough billions into new projectsEU commissioners meet today to discuss Ukraine’s bid to join the bloc ahead of a summit next week. Our Europe Express newsletter assesses its chances.Global latestSome 70 per cent of top economists polled by the FT think the US will enter recession next year. Many are also sceptical about the Fed’s plans to moderate inflation. “This is not landing a plane on a regular landing strip. This is landing a plane on a tightrope, and the winds are blowing,” said one.

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The Summit of the Americas, a gathering that takes place every three or four years, was marred by the US exclusion of Cuba, Venezuela and Nicaragua. The highlight was a (non-binding) migration pact that would allow farmers in the US and Canada to employ more seasonal labourers. It also urges countries to set up “legal pathways” for people from Latin American and the Caribbean to reach the wealthier north. New forecasts from Citgroup suggest global consumers of commodities could pay $5.2tn more this year then they did before the pandemic as prices surge and supplies are squeezed. “The ongoing commodity shock is on track to be a similar order of magnitude as the first oil shock almost 50 years ago, when taken as a share of global GDP,” it said.Our Big Read looks at the role of the World Trade Organization in an era of fracturing alliances and trends towards deglobalisation. As this week’s ministerial meeting in Geneva got under way, WTO director-general Ngozi Okonjo-Iweala urged governments to end export restrictions on food which she said were exacerbating problems caused by Russia’s invasion of Ukraine. Food versus fuel: Our new explainer looks at how the war has sharpened the debate on the use of crops for energy. The total amount used each year for biofuels is equal to the calorie consumption of 1.9bn people, highlighting the volume of agricultural commodities that could be diverted if the food crisis worsened. UN forecasts say the combination of conflict and climate could put a record 49mn people in 46 countries at risk of famine.

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China’s drive to decarbonise has been set back by the increasing use of coal power as it seeks to boost flagging economic growth, but industry in Japan sees opportunities in its government’s net zero push. Read more in our special report: Asia-Pacific Climate Leaders.Need to know: businessBinance halted withdrawals of bitcoin hours after crypto lender Celsius blocked customers from pulling funds from its platform, fuelling a sell-off across the digital asset market. Bitcoin and other tokens dropped sharply following a turbulent weekend as the market infrastructure that underpins digital assets came under stress.China has told banks to rein in executive pay as part of President Xi Jinping’s “common prosperity” drive, a move that will benefit local banks, says the Lex column. A regulatory crackdown has cut some $2bn off the market value of tech groups over the past 12 months: our Big Read examines Xi’s plans for capital markets after his criticism of “disorderly expansion”. US companies have lost $40bn in earnings because of the dollar’s rise to its highest level since 2002. As earnings growth slows, the currency effect could mean the difference between expanding and shrinking, our capital markets team explains.A small red burger and a couple of fries have replaced McDonald’s Golden Arches logo in Russia. The chain of 850 restaurants has been rebranded as Vkusno & Tochka (‘Tasty — Full Stop’) by its new owners, who bought the operation last month.A Vkusno & Tochka employee delivers a food order © Kirill Kudryavtsev/AFP/Getty ImagesPassenger demand is surging but airports are still crippled by staff shortages. Our Big Read looks at whether the aviation industry can get its act together in time for summer. Wealthier travellers meanwhile have been driving a boom in private charters after getting used to being unshackled from commercial flight schedules (and avoiding fellow humans) during the pandemic.FT Future of Finance will be live streamed on June 16 and 17 from the heart of Europe’s leading tech festival, The Next Web (TNW). We’ll be exploring how new technologies continue to uproot existing banking operations and how fintechs are further exacerbating this rate of transformation. Register for free today.The World of WorkCompany finance chiefs have been faced with extraordinary challenges during the pandemic but what can they learn from past crises? Read more in our special report Business education: Financial Training, including our ranking of the best Masters in Finance courses.Get the latest worldwide picture with our vaccine trackerAnd finally…“I was like the Kofi Annan of Blur vs Oasis.” Britpop, a guitar-playing Tony Blair and the business of being human are on the menu during musician, broadcaster and author Jarvis Cocker’s Lunch with the FT.© James Ferguson More

Liz Truss, Britain’s foreign secretary, on Monday published “reasonable and practical” legislation to rip up parts of Boris Johnson’s 2020 Brexit deal with the EU, relating to trading arrangements in Northern Ireland.The Northern Ireland protocol was agreed by Johnson to address the unique situation of the region after Brexit, Northern Ireland remaining in the EU’s single market for goods and retaining an open border on the island of Ireland. Truss insisted the unilateral rewriting of the protocol would “support political stability” in the region. But it has generated a wave of criticism from Brussels, Dublin, Washington and Tory MPs.What does the protocol bill do?The bill, if enacted, will allow ministers to “fix” problems identified in the protocol by giving them powers in domestic law to unilaterally override the Brexit treaty with the EU.It focuses on four areas, including how to remove friction at Irish Sea ports. Under the protocol, checks are currently carried out on goods travelling into Northern Ireland from Great Britain — creating a contentious internal UK trade border.A check-free “green lane” would be set up for goods destined for Northern Ireland, while trucks taking goods through the region across the open border into the Republic of Ireland — and thus the EU single market — would face “red channel” checks.The bill ends the role of the European Court of Justice in enforcing the protocol — an affront to Tory Eurosceptics — although ministers could allow UK courts to refer matters of EU law to the ECJ. The bill would also remove EU control over state aid and value added tax in the region.A fourth provision creates a dual regulatory regime, giving businesses a choice on whether to place goods on the market in Northern Ireland under either British or EU rules.What is the point of the bill?Johnson argues that the deal he agreed with Brussels has antagonised pro-UK unionist politicians in Northern Ireland, who hate the internal trade barrier within their own country.Theresa May, his predecessor as prime minister, said no British leader could ever agree to a border in the Irish Sea. Johnson claims the overzealous operation by the EU of checks under the protocol is to blame for destabilising the 1998 Good Friday Agreement that ended three decades of sectarian violence in the region.Brussels rejects this and the majority of the members of the regional assembly elected last month support keeping the protocol.Johnson hopes that by legislating to rewrite the protocol, he can reduce trade disruption and persuade the biggest pro-British party — the Democratic Unionists — to rejoin the region’s power-sharing executive at Stormont alongside the Sinn Féin nationalists.The problem is the DUP does not trust Johnson — the prime minister double-crossed unionists when he signed up to the original protocol. It is waiting to see if Johnson actually delivers the legislation.Downing Street said changing the law would provide a more “stable” solution than simply activating Article 16 of the protocol, which allows either side to make temporary changes to the rules to avoid economic or political upheaval. Tory Eurosceptic MPs also demanded a new law.Why is it so contentious?Tory MPs critical of the bill say it will break international law and undermine Britain’s standing in the world, since it would mean ripping up a treaty only two years after the ink dried. The EU is furious.The legislation also includes a controversial Clause 15, which gives ministers sweeping powers to rip up other parts of the protocol if they believe societal or economic damage is being caused.Only three areas — human rights, free travel and north-south co-operation — are exempt. Government officials insist this is an “insurance policy” in case there needs to be any “tidying up”.Downing Street insisted the power would not be used to scrap a planned “consent vote” in 2024, in which Britain and the EU agreed that Northern Ireland would be asked if it wanted to retain the protocol.The protocol is popular with many in Northern Ireland, since it leaves the region uniquely with one foot in both the EU and UK markets. However, government insiders said any consent vote would apply to the protocol as rewritten by the bill — not the original.Will it ever take effect?Downing Street is confident the bill will survive a legal challenge, insisting it complies with the “doctrine of necessity” in international law, which allows states to act in the event of a grave risk to their essential interests.Ministers claim that “primacy” goes to safeguarding the Good Friday Agreement, rather than upholding the protocol. Some Tory MPs accuse Johnson of going legal “opinion shopping” to find lawyers to agree with him.Downing Street says it is “urgent” to sort out the protocol, but the House of Lords is expected to block a measure that many peers feel trashes Britain’s international reputation.In the event of such a move, Johnson could deploy the little-used Parliament Act to bypass the Lords. It was last used by Tony Blair’s Labour government in 2004.Johnson would then have to reintroduce the Northern Ireland bill in the following parliamentary session. But by that point, he would be getting close to a general election, due in 2024.And even if the bill is enacted, the changes would not come into effect automatically — the legislation would only give ministers the powers to come up with an alternative regime.A new regime is still some distance away, giving Britain and the EU months to try to come to a negotiated settlement — Johnson insists this is his preferred outcome. But trust and goodwill are now almost non-existent. More

The writer is a former member of the US Congress and was chair of the House permanent select committee on intelligence, 2011-15In 1944 allied nations came together at Bretton Woods and established economic rules for the postwar era. These would provide much needed stability and structure. But as economies grew and financial interconnectedness increased, governments eventually needed greater freedom of action. The decision taken by the Nixon administration in 1971 to remove the dollar from the gold standard was a key driver of the demise of the so-called Bretton Woods system.Today, we find ourselves in the midst of a global ideological conflict between liberal democracy and authoritarianism. Friendly democracies need, once again, to come together to establish a new economic agreement — one based on the liberal values of free trade, competition and freedom. Think of this as a digital Bretton Woods to ensure continued growth and progress. Failure to reach such an agreement risks ceding the future of global economic governance to China and its model of authoritarian capitalism. China’s pursuit of a digital currency — a digital renminbi, or e-CNY — is just one example of Beijing’s aims. The e-CNY’s development is cloaked in the language of innovation, but hides potentially undesirable outcomes. Domestically, it will allow Beijing unparalleled oversight and control of financial transactions. Western companies in China will undoubtedly be subject to intrusive oversight and risk potential disruption should Beijing find their (or their country’s) behaviour unacceptable. Internationally, the e-CNY will undermine the dollar’s role as a reserve currency. This is the Chinese Communist party’s aim. As a director of a state-owned bank told the Financial Times last year: “A bigger goal of ours is to challenge the dominance of the US dollar in international trade settlement.” There are many worldwide who would say this is an attractive development — undermining reliance on the dollar would reduce America’s global influence and its ability to impose sanctions. Yet doing so would introduce instability into the global economy at a time when confidence is needed more than ever. While China has sought to bide its time and hide its capabilities, it is now embarking on an effort to remake global institutions in a manner that favours its values and approach. The e-CNY is representative of Beijing’s overall push to redefine the global economy and its financial rules. China’s efforts in a range of international forums follow a pattern in which Beijing participates in the process, advancing policies that are in its own long-term interest and not necessarily those of the global economy. While engaging with both the process and institutions, China undermines international norms by provoking diplomatically inspired trade disputes, such as the confrontation with Australia over duties on barley imports, and dumping goods on to the market. When the IMF allowed the renminbi to become a reserve currency in 2016, the drive to unseat the dollar began in earnest. Beijing’s devaluation of the renminbi the previous year gave Chinese companies an unfair market advantage, reducing the cost of their exports to America and accelerating existing trade deficits with the US and EU.The need for a new Bretton Woods led by the world’s liberal democracies is not wholly about China, however. The emergence of fintech, cryptocurrencies and other novel financial instruments is adding fresh complexity to an already highly fluid global economy — one for which existing policy structures were not designed. The swiftness with which novel financial instruments emerge will continue to outpace our ability to regulate them in real time. This necessitates a fresh set of rules to guide international co-operation and help competition in these new economic spaces. The goal of a digital Bretton Woods would not be to constrain financial innovation or limit individual governments’ ability to act. Nation states must retain the ability to manage their own economic and fiscal policy. Rather, it is about creating a set of norms informed by, and based on, liberal democratic values that will facilitate the next evolution of the global economy, while at the same time protecting the principles that gave birth to the modern world. A future global economic order, and the rules governing it, must be based on liberal democratic values such as privacy and competition, not those of an authoritarian regime with hegemonic ambitions. It should not take a global conflict for us to understand what is at stake. More

As one contagion ends, another begins. The symptoms of a stagflationary slowdown are pronounced. About two-thirds of economists polled by the Financial Times expect a US recession. UK gross domestic product fell unexpectedly in April. Cryptocurrencies, a prime indicator of speculative exuberance, are slumping.As equities and bonds lurch downward, investors are rushing for safety. The MSCI All-Country index (ACWI) has already lost 18 per cent in dollar terms this year. Lex is holding to its expectation of a long, grinding market correction amid extempore monetary policymaking. Here are some defensive strategies for the months ahead.Bonds deserve attention, especially those denominated in the strong US dollar. Any bet on fixed income is dependent on where you think inflation will peak. In corporate credit, favour businesses with strong balance sheets and cash flows. A zero weighting to high-yield bonds makes sense.As for stocks, defensive choices depend on how protected companies are from inflation, higher rates and slower growth, as Rob Buckland of Citi points out.In the 1970s, energy and mining shares outpaced inflation. The same bet has worked this year. Two of the top three sectors within the MSCI ACWI include those groups. Currently, the value of all commodity consumption as a proportion of global GDP — nearly 11 per cent — approaches that of the second Opec oil shock in 1979.Rising rates require the typical investor to tilt away from expensive growth. These are companies whose valuations depend on low, long-term discount rates, in sectors such as tech and renewables. Instead, buy defensive stocks with less “earnings beta” or sensitivity to broader profits volatility. Aim for telecoms and other utilities, consumer staples and healthcare shares. Momentum-following algos tend to perform well in extended market corrections. Shares in Man Group, whose AHL product group meets that description, are up 11 per cent over six months.Pundits do not unanimously predict a recession. Full employment and high bank capital ratios make RBC Wealth strategists optimistic about financials this year. But even they accept risks are mounting. They tip the UK stock market for its relative cheapness.At 17.25 times, the forward earnings multiple for the S&P 500 index is just above its 10-year average. Shiller’s cyclically adjusted price/earnings ratio, which aims to smooth out economic peaks and troughs, remains relatively high. There is plenty of room for markets to fall further, so be prepared.The Lex team is interested in hearing more from readers. Is a recession a certainty or is a contrarian tactic worthwhile? Please tell us what you think in the comments section below. More