Aurelia Butler

SEOUL (Reuters) -South Korea’s central bank governor nominee Rhee Chang-yong said on Tuesday the bank will continue to tighten monetary policy, but suggested the pace of hikes will be more sedate than what is expected of the U.S. Federal Reserve. In a speech prepared for a parliamentary hearing, Rhee noted that downside risks to growth is increasing, but called for further reduction in the Bank of Korea’s accommodative policy settings to curb inflation now at double the bank’s 2% target.”The degree of policy accommodation needs to be adjusted at an appropriate pace to stabilize prices without hurting growth momentum, and (the BOK) will also seek to ease household debt growth in the process,” Rhee said in the speech. In a surprise move, the BOK last week raised its benchmark rate to 1.50%, the highest since August 2019 as it ramped up the fight against rampant inflation, which is threatening its economic recovery.Rhee said although inflation is likely to strengthen over the next year or two, growth headwinds from the Ukraine crisis, U.S. monetary policy, and COVID-19 resurgence in China will also need to be closely monitored and factored in policy decisions. The four rate hikes since August last year returned the policy rate to pre-pandemic levels, reinforcing BOK’s position as one of the most hawkish central banks in the region, along with it’s peer in New Zealand.Analysts currently expect the policy rate to rise to 2.00% by the end of this year as most economies are now moving in the same direction to fight surging inflation.”The U.S. has room to raise the policy interest rate at a faster pace as inflation there is double that of ours and as its growth rate is between 3% and 4%, but our growth rate isn’t as strong,” Rhee said at the parliament when asked to comment on the speedy U.S. rate hikes https://www.reuters.com/business/fed-raise-rates-aggressively-coming-months-say-economists-2022-04-11 expected by markets and their impact on local policies.The yield on the most liquid three-year treasury bond declined 5.8 basis points to 2.927% by late morning, reflecting the more sedate pace of tightening flagged by Rhee. Rhee, a veteran International Monetary Fund official, is expected to start his four-year term once formally appointed after the necessary parliamentary hearing. More

TOKYO (Reuters) -Japan’s ruling coalition has yet to agree on the need for an extra budget to fund emergency relief measures to be compiled by the cabinet to ease the pain of surging fuel prices, according to lawmakers.The government is scrambling to compile emergency measures by the end of April to help households and small firms cope with surging prices of fuel and other items by tapping budget reserves of up to 5.5 trillion yen ($42.83 billion).The ruling Liberal Democratic Party (LDP) and its small coalition ally the Komeito party have been at odds over sources of funding, with the LDP resisting calls for an extra budget and Komeito urging the government to craft one as soon as possible.The prospect of an extra budget could open the door for policymakers to spend big on economic stimulus, possibly including additional bond issues to fund the spending.That could further strain the industrial world’s heaviest public debt burden at more than twice the size of the world’s third-largest economy.Even as the chance of an early extra budget fades, lawmakers are likely to pile pressure on Prime Minister Fumio Kishida’s government to spend big on a second round of stimulus.It is almost a done deal that the government will compile a stimulus package before July upper house elections to appeal to voters, and craft an extra budget after the elections with the aim of passing the budget bills likely in the autumn.”We share a substantial amount of views already but must continue talks, as there are some areas that must be worked out,” the LDP’s secretary general, Toshimitsu Motegi, told reporters after meeting his counterpart and the policy chief at Komeito.Sanae Takaichi, the LDP’s policy chief who also was at the meeting, insisted that fiscal 2022 budget reserves be tapped as spending on emergency measures would not exceed about 2 trillion yen, the Kyodo news agency reported.Komeito leader Natsuo Yamaguchi said earlier the passage of an extra budget before the current legislature session ends in mid-June was necessary to prepare for unexpected expenses.In parliament earlier on Tuesday, Finance Minister Shunichi Suzuki repeated that the government prioritises tapping reserves as a fast option, when asked about the necessity of compiling an extra budget.Kishida is expected to unveil details of measures next week after planning within the coalition and government ministries.GASOLINE TAX CUTS SHELVEDLawmakers in charge of tax policy at the ruling parties and the opposition Democratic Party for the People (DPFP) agreed on Tuesday to “keep considering” the possibility of gasoline tax cuts by evoking so-called trigger clause in the tax codes.With the effective pigeonholing of tax cuts originally proposed by the centre-left DPFP, the government is set to address energy costs by extending fuel subsidy schemes expanded last month.For Japan, which relies on imports for about 90% of its energy needs, rising costs of energy and raw materials are particularly painful. Adding distress to consumers and firms is the yen’s rapid weakening.Analysts expect the world’s third-largest economy to expand an annualised 4.9% this quarter, lower than earlier predictions, according to the latest Reuters poll.($1 = 128.4000 yen) More

While the UK government launches a search for Brexit opportunities, one group has already discovered them: Dutch warehouse owners.An influx of British-based companies to the Netherlands has swelled as they struggle with the disruption of a customs border across the North Sea.More than 90 investors have built or rented distribution space since 2017, half of them in 2021, according to government agency Invest in Holland. They include Huboo, a logistics provider to online retailers. Martin Bysh, chief executive, said it had to act after clients deserted as Brexit negotiations went to the wire in December 2020. “We lost about 10 per cent of our revenue, which was clients leaving the UK for Europe,” he said. “It was a chaotic landscape.”Boris Johnson’s government repeatedly said it was prepared to leave the EU on December 31 2020 without a trade deal as it haggled with Brussels. Eventually, an agreement for tariff-free, quota-free trade was clinched on Christmas Eve. But this introduced customs, food safety and tax controls after a year-long transition period.“We didn’t know what to do, and there was almost no government advice,” said Bysh. Many smaller companies simply stopped supplying the EU because they could not understand the paperwork and worried they would be trading illegally, he said. Martin Bysh: ‘The Netherlands is a great place to set up a business. They are ready to help and they sit next to so many key markets’ © HubooHuboo had already been looking to rent a warehouse in Germany but Covid-19 and bureaucracy had delayed the process. It switched to the Netherlands and by June 2021 its facility in Eindhoven, near the Belgian border, was operational with 40 staff. “The Netherlands is a great place to set up a business. They are ready to help and they sit next to so many key markets,” he said.The 32,000 sq m warehouse has more than 300 customers, including a growing number from the Netherlands. UK companies can send a pallet at a time, keeping stock there, rather than sending individual items direct from the UK to consumers, each one of which would require a customs form. For companies that source their product in the EU, bringing it to the UK to send it back to the EU makes even less commercial sense.Snag, which sells Italian-made tights and other clothes online, had to take a decision in July 2021 to accommodate growth: build a new distribution centre in the UK or in the EU, which accounted for about a third of sales. Tom Martin, chief executive, said he decided on the EU. “At that time there was still no trade deal and none was guaranteed. It was a great decision.”Snag, which sells Italian-made tights online, realised it made little commercial sense to source a product in the EU, bring it to the UK, then send it back to the EU © Snag TightsAfter assessing a number of countries, Snag chose the Netherlands, and found a warehouse in the town of Venlo near the German border. The corridor from the port of Rotterdam in the west to Venlo in the east is crammed with road, rail, and river traffic taking goods to and from warehouses. “Germany is our biggest EU market and we can now ship there the next day,” Martin said.Snag had a choice of premises but that has narrowed as more UK-based and international businesses arrive. Staffing has also become an issue. The Netherlands has just 3.4 per cent unemployment. It is also harder to hire temporary workers, vital in the ecommerce industry when orders peak before Christmas. In the UK agency workers are available almost on tap but the Netherlands has higher social benefits. “Wages for permanent staff are 10 per cent more than the UK. But temporary staff cost twice as much,” said Martin. Dutch employers also cover commuting costs. But he said it was still economic to operate there. The Netherlands has long been a trading entrepôt, hosting Europe’s biggest port in Rotterdam, and using the Rhine river to shift products to and from the industrial heartland of Germany. Since 2017 the amount of warehouse space at the port has doubled to 4mn sq m, or 400 hectares. “There is a lot of demand, and Brexit is one of the factors,” said Danny Levenswaard, director of break-bulk at the port. But he said many international companies also wanted “buffer stock” because of the disruption to supply chains caused by the pandemic.The Netherlands has long been a trading conduit for imports and exports and uses barges to move cargo along the Rhine © Vasilis Ververidis/AlamyRotterdam, which had record container traffic of 15.3mn 20ft equivalents (TEUs) in 2022, was Brexit ready after updating its processing systems and educating traders.Truckers, freight forwarders and customs agents must register with Portbase, a non-profit company, which pre-clears all cargo. The only checks are on food and animals, and when customs spots something suspicious. Brexit has increased the company’s workload by a fifth but it is manageable, said Marty van Pelt, business relations manager. “We don’t have queues. The longest wait is four minutes, which is the time customs officers have to decide if they want to inspect something.” But the number of UK customers has dropped from 367 to 300 since Brexit as many truck companies gave up on delivering to the EU because of increased paperwork.Rotterdam itself has attracted 40 investments from companies with UK operations since 2016, said Roos Vermeij, the alderman responsible for the economy at the city council. There is a dedicated council service for expats in English. Executives at foreign companies are welcomed at a red carpet dinner every year with the mayor.Bysh of Huboo says many British entrepreneurs have now adapted to the new trading regime. He has opened distribution centres in Spain and Germany and is looking to expand in the Netherlands.His latest innovation allows UK customers to list goods in euros on Bol.com, a big Dutch online retailer, with one click and he believes more midsized companies are ready to resume exporting.“Once you are VAT registered in the EU and you jump through a few smaller hoops it’s not complicated [to export there],” he said. “And . . . so you might just think, well, this is a great opportunity. Let’s just do this properly and at scale.” More

SYDNEY (Reuters) – Australia’s central bank is nearer to raising interest rates for the first time in more than a decade as inflation accelerates and a tightening labour market nudges wage growth higher, minutes of its April policy meeting showed on Tuesday.The Reserve Bank of Australia’s (RBA) Board saw core inflation lifting above the bank’s 2-3% target range in the March quarter and more firms were expecting to pass on price rises to consumers. Wage growth was still lagging but likely to pick up as the unemployment rate fell to 4% and below.”These developments have brought forward the likely timing of the first increase in interest rates,” the minutes showed. “Over coming months, important additional evidence will be available on both inflation and the evolution of labour costs.”Data for consumer prices are due on April 26 and analysts suspect it will show core inflation jumped by 1.0% or more in the first quarter to lift the annual pace to at least 3.2%.That would be the first time core inflation topped the RBA’s 2-3% target band since early 2010, making it harder to justify retaining rates at emergency lows of 0.1%.Key figures on wages for the March quarter are out on May 18, while data on gross domestic product on June 1 would provide broader evidence on labour costs.”While the Q1 wage index will still show subdued wage growth, we think that will be trumped by rapidly rising inflation and we’re sticking to our long-held forecast that the Bank will start its tightening cycle in June,” said Marcel Thieliant, a senior economist at Capital Economics.Markets, too, are wagering heavily on a rate rise to 0.25% at the RBA’s June 7 policy meeting, and have almost seven more hikes to near 2.0% implied by year end. That aggressive outlook in part reflects expectations the U.S. Federal Reserve will hike by 50 basis points in both May and June, adding to pressure for other central banks to follow.Central banks from New Zealand and Canada both recently hiked by half a point citing the need to restrain inflation expectations.Any RBA rate rise would be a shock for local borrowers given they have not seen an official increase since 2010 and households are sitting on record levels of mortgage debt. More

The Reserve Bank of Australia said quicker inflation and a pickup in wages growth have moved up the likely timing of the nation’s first interest-rate increase since 2010. The central bank said in minutes of its April policy meeting that annual core inflation in the first three months of this year was likely to be above the top of its 2-3% target. Policy makers also noted that wages growth had picked up.“These developments have brought forward the likely timing of the first increase in interest rates,” the RBA said Tuesday. “Over coming months, important additional evidence will be available on both inflation and the evolution of labor costs.”The currency ticked higher and and three-year government bond yields climbed as the minutes reinforced the RBA’s more hawkish message from its April 5 meeting. At the time, it scrapped a reference to remaining “patient” on policy and signaled inflation on April 27 and wages on May 18 will be key readings.Australia’s shift reflects a hawkish turn among central banks worldwide as they struggle to cool consumer prices fueled by pandemic-era stimulus and exacerbated by Russia’s war on Ukraine. South Korea and Singapore tightened on Thursday after Canada and New Zealand implemented jumbo half-percentage point hikes the day before. “An updated set of bank forecasts will be published in May,” the RBA said in the minutes. “The speed of the resolution of the various global supply-side issues, developments in global energy markets and the evolution of overall labor costs were key sources of uncertainty about the inflation outlook.”(Updates with further details.)©2022 Bloomberg L.P. More

The meeting would take place later this week. Authorities in both countries agreed late last month to communicate closely on currency issues following a sharp weakening in the yen.The prospect of aggressive U.S. interest rate hikes and the Bank of Japan’s determination to continue powerful monetary easing have helped push the yen to 20-year lows against the dollar. More