Economy

TOKYO (Reuters) – More than 60% of Japanese companies want the central bank to end its policy of massive monetary easing this fiscal year due to pain from the weak yen, with roughly a quarter calling for it to take action now, a Reuters survey shows.Less than a year ago, Japan Inc had enthusiastically backed the Bank of Japan’s policy but this year’s rapid slide in the yen to a two-decade low has jacked up prices of fuel and raw materials imports, lifting not only corporate costs but also hitting household spending.This month the yen hit a fresh low of 131.34 to the dollar, a 14% decline since the start of the year.”Any weakening of the yen beyond 125 to the dollar is excessive and policymakers should take action in some way, including – but not limited to – hiking rates,” one manager at a chemicals maker wrote in the monthly Reuters Corporate Survey.Twenty-four percent of respondents said the central bank should abandon large-scale monetary stimulus now, while 23% said by the end of the first half in September.All in all, 64% want large-scale stimulus gone by March when the fiscal year ends and that number jumps to 84% for April when BOJ Governor Haruhiko Kuroda serves out his term.While Kuroda has said the yen’s moves have been rapid, he argues that a weak yen on the whole benefits the economy. In stark contrast to shifts to interest hikes in other parts of the world, Kuroda has also said the central bank will continue with monetary powerful easing given the impact of the pandemic and tepid inflation. Of those respondents keen to see a change in BOJ policy, 58% want to see negative rates scrapped, 35% want interest rates hiked and 25% are eager to see the bank drop or change its 2% inflation target. Multiple answers were allowed for this question. The results of the April 26-May 13 poll of 500 large and midsize non-financial firms, which saw 230 firms respond, represent a major U-turn from July when the survey last asked comparable questions about monetary policy.At that time, 72% of Japanese firms saw a positive impact from BOJ policy with a majority saying ultra-low rates should continue for another 3-4 years.The sharpness of the currency’s decline has outweighed the benefits normally associated with a weaker yen, namely the inflation of profits earned abroad when repatriated and longer term the ability to export more cheaply. Japanese exporters have also continued to shift production abroad.”As the production shift continues, the impact on the economy from higher raw materials costs and other imports from the weaker yen is greater than the apparent increase in profits for exporters,” said one manager at a retailer.Respondents reply to the survey on condition of anonymity.BOJ SLAMMEDSome managers were withering in their criticism of BOJ policy, expressing concern the weak yen could ultimately erode Japan’s economic might. “The easing policy has turned out to be nothing but a stupid plan that weakens national power,” one manager at a services firm wrote. The survey also found firms wary of boosting capital spending due to the impact of the weak yen and rising input costs. Almost a half of them plan to keep business investment flat this fiscal year while another 14% expect it to decline.The survey also showed that China’s anti-COVID measures – including a lockdown in Shanghai – have hurt nearly two-thirds of Japanese firms. Ten percent said they were suffering a “big impact” on business.”Imports of China-produced car parts have stopped, putting downward pressure on car output,” a chemicals maker manager wrote.($1 = 129.02 yen) More

As Canon kicked off Japan’s corporate earnings season in late April with an upgrade to its annual profit guidance, chief executive Fujio Mitarai welcomed the yen’s sharp decline as “a big plus” for the printer maker. Canon has been one of the biggest beneficiaries as the Japanese currency fell through ¥130 against the dollar just days before its results came out. The yen’s tumble has made it cheaper to export the office equipment it makes in Japan while boosting profits earned overseas.Other big Japanese export names such as Sony, Toyota and Nintendo have done even better, churning out record profits despite Covid-19 disruptions. But what was long a blessing for corporate Japan is suddenly turning into a threat as the yen’s spectacular fall to a multi-decade low coincides with a surge in commodity prices sparked by Russia’s invasion of Ukraine.The Japan Iron and Steel Federation has warned that the yen’s fall presents “a risk for Japan’s manufacturers for the first time”. Noting that companies import raw materials to make and sell products in Japan, Tadashi Yanai, outspoken chief executive of Uniqlo owner Fast Retailing, has declared that “the weak yen has no merit whatsoever”.That is not quite the case. Bank of Japan governor Haruhiko Kuroda argues that a weak yen remains broadly positive for the Japanese economy despite the difficulties it causes, particularly for smaller businesses dependent on imports of fuel and raw materials.But even for large exporters, the benefits of a weaker yen have waned compared with a decade ago, when businesses warmly welcomed then-prime minister Shinzo Abe’s efforts to drive the currency lower through aggressive monetary easing.Tokyo headquarters of Sony. The company has reported record profits, helped by a weak yen © Kimimasa Mayama/EPA-EFE/Shutterstock“Before Abenomics, the yen was too strong so the move from ¥80 to ¥110 was welcomed. And a weak yen was convenient to resolve deflation,” said Kazuo Momma, executive economist at Mizuho Research Institute.Japanese carmakers and other manufacturers have shifted production overseas to reduce their exposure to currency volatility since being punished by a strong yen in the wake of the global financial crisis in 2008. The ratio of overseas production among Japanese manufacturers rose to an estimated 22 per cent in the last fiscal year from 17 per cent in fiscal 2007, according to cabinet office data.“If somebody tells me that ¥130 [against the dollar] is good news for you, I will say it’s not good news and it’s not bad news because . . . we have plants all over the world,” Ashwani Gupta, Nissan’s chief operating officer, said in an interview. “I think we will say that anything between ¥116 and ¥122 makes our operations the most effective globally.”The common use of hedges to protect against swings in foreign exchange rates also means Japanese companies cannot cut export prices immediately in line with a weakening of the yen. Moritaka Yoshida, president of Toyota supplier Aisin, said responding was even trickier when the currency moves as dramatically as when the yen dropped from ¥114 against the dollar in early March to ¥130 by the end of April. Another critical difference from the Abenomics era is the inflationary pressure now squeezing households. The yen’s fall has accelerated the global rise in commodity prices, making everything from petrol to bread and vegetables more expensive since Japan is a net importer of oil and food. For Toyota, “an unprecedented” rise in raw material and logistics costs will wipe ¥1.45tn ($11bn) from its operating profits for the fiscal year through to March 2024, far outweighing ¥195bn in currency-related gains. Even considering the group’s conservative exchange rate forecast of ¥115 to the dollar, compared with ¥128 on Wednesday, its costs from climbing steel and aluminium prices are unlikely to be offset by a weaker yen.

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Toyota produces a third of its cars in Japan, compared with less than 20 per cent for Nissan and Honda. That makes it a bigger beneficiary of the weaker yen, but analysts said Japan’s largest carmaker was at a disadvantage to global rivals when it came to passing on the higher cost of raw materials to consumers.“Raising prices for finished products is not widespread in Japan,” said Takaki Nakanishi, an automotive analyst. “It is relatively easier for those that produce overseas to raise product prices to address the increase in costs during the production process.” The chip shortage and other supply constraints have also prevented companies from increasing production from their plants. That has reduced the trickle-down effect of the weaker yen, which comes when companies lower in the supply chain benefit as export giants invest in factories at home to expand capacity.

“The future has become uncertain due to the Ukraine crisis,” said Wakaba Kobayashi, economist at Daiwa Institute of Research. “So while exporters are benefiting from the weak yen, they remain hesitant to make capital investments.”Still, longtime Japan watchers such as Nissan’s Gupta are convinced the weaker yen will be good for the economy as a whole if it can eventually help achieve the government’s long-stated goal of sustained domestically generated inflation.“We are seeing Japan graduating from deflation. This is great news,” Gupta said. “Of course it was driven more by the cost side, but I think we’re getting into a cycle when it will be pulled by the people.”Additional reporting by Antoni Slodkowski More

An unprecedented leak of a draft opinion earlier this month suggests that the U.S. Supreme Court is set to vote to overturn the landmark 1973 Roe v. Wade ruling, which legalized abortion nationwide.Following is a list of companies who have offered their U.S. employees reproductive healthcare benefits including abortion coverage or travel benefits for out-of-state abortions.Company Benefit(s) Offered Citigroup Inc (NYSE:C) The bank has started covering travel expenses for employees who go out of state for abortions because of newly enacted restrictions in Texas and other places, becoming the first major U.S. bank to make that commitment. Yelp (NYSE:YELP) Inc The crowd-sourced review platform will extend its abortion coverage to cover expenses for its employees and their dependents who need to travel to another state for abortion services. Amazon.com The second-largest U.S. private employer told employees it will pay up to $4,000 in travel expenses yearly for non-life threatening medical treatments, among them elective abortions. Levi Strauss (NYSE:LEVI) & CO The apparel company will reimburse travel expenses for its full- and part-time employees who need to travel to another state for healthcare services, including abortions. United Talent Agency The private Hollywood talent agency said it would reimburse travel expenses related to women’s reproductive health services that are not accessible in an employee’s state of residence. Tesla Inc Tesla’s Safety Net program and health insurance includes travel and lodging support for its employees who may need to seek healthcare services that are unavailable in their home state, according to the company’s 2021 impact report. [https://www.tesla.com/ns_videos/2021-tesla-impact-report.pdf ] Microsoft Corp (NASDAQ:MSFT) Microsoft Corp said that it would extend its abortion and gender affirming care services for employees in the United States to include travel expense assistance. Starbucks Corp (NASDAQ:SBUX) Starbucks Corp said it will reimburse U.S. employees and their dependents if they must travel more than 100 miles from their homes to obtain an abortion. Mastercard Inc (NYSE:MA) Mastercard Inc said it will fund travel and lodging for employees seeking abortions outside their home states from June, according to an internal memo seen by Reuters. More

BRASILIA (Reuters) – Brazil’s Economy Ministry will hold its economic growth outlook at 1.5% in 2022 and 2.5% in 2023, two officials told Reuters on Wednesday, forecasting activity ahead of market projections due to labor market strength and growing private investments.The ministry will update its forecasts for economic indicators on Thursday and inflation figures are expected to be lifted from the previous outlook, in March, when the IPCA consumer price index was seen at 6.55% this year.Data will be used in the bi-monthly income and expenditure report calculations, scheduled for Friday.Economists have been increasing their forecasts for this year’s GDP, bringing the numbers closer to those forecast by the government. Analysts say demand in the country has been helped by greater fiscal stimulus, following an increase in a cash transfer program to poorer people. In addition, the job market has shown signs of strength and the Omicron coronavirus wave has not knocked social mobility as feared.However, they say expectations for 2023 have deteriorated, with aggressive central bank monetary tightening to tame inflation set to affect activity from the second half of the year onwards.The central bank has raised interest rates to 12.75% from a record-low 2% in March 2021, and has already signaled another likely hike in June.Goldman Sachs (NYSE:GS) and Credit Suisse now see Brazil’s GDP rising 1.25% and 1.4% this year, respectively, against previous 0.6% and 0.2% projections. For 2023, Goldman Sachs lowered its forecast to 0.9% from 1.2%, while Credit Suisse cut its outlook to 0.9% from 2.1%.Bank of America (NYSE:BAC) projected on Tuesday that Brazil will grow 1.5% in 2022 from 0.5% earlier. However, expansion is now seen at 0.9% in 2023, from 1.8% previously. More

(Reuters) -Two U.S. central bankers say they expect the Federal Reserve to downshift to a more measured pace of policy tightening after July as it seeks to quell inflation without lifting borrowing costs so high that they send the economy into recession.It’s not clear if that view – mapped out on Tuesday by Chicago Federal Reserve Bank President Charles Evans and on Wednesday by Philadelphia Fed chief Patrick Harker – marks a consensus at the Fed for how to bring down the highest inflation in 40 years. But it does suggest that while policymakers broadly back using half-point rate hikes to get short-term borrowing costs to a range of 1.75%-2% over the next two months, support for sticking to that pace beyond July may be limited.Evans on Tuesday told an audience in New York City that he expects to transition to “measured” rate hikes after an initial burst of policy tightening. In the Fed lexicon, “measured” means quarter-point rate hikes. On Wednesday Harker gave a similar assessment, telling the Mid-Size Bank Coalition of America that after July, “I anticipate a sequence of increases in the funds rate at a measured pace until we are confident that inflation is moving toward the Committee’s inflation target.” As he spoke, the S&P 500 and the Dow Jones Industrial Average were tumbling and ended with the sharpest one-day loss in nearly two years.”I still am in the camp that we can have, if not a soft landing, a safe landing,” Harker said, noting the strength of the labor market, with nearly two jobs open for every American jobseeker, and an unemployment rate of 3.6%. The U.S. economy will likely grow between 2% and 3% this year, he said, adding, “this economy can withstand a measured, methodical approach to tightening financial conditions.” Fed policymakers say the current bout of high inflation — running at more than three times the Fed’s 2% target — is the product of outsized demand bumping up against constrained supply. Fed Chair Jerome Powell has not been specific about his expectations for the policy path beyond July. On Tuesday he said the Fed will keep pushing on rate hikes until it sees clear and convincing evidence that inflation is cooling. More

Yesterday, US stocks suffered their sharpest fall since the early months of the coronavirus pandemic as weak results from consumer bellwethers stoked concerns about the impact of inflation and choked-up supply chains on corporate earnings.The benchmark S&P 500 share index fell 4 per cent, its biggest loss since June 2020, with 98 per cent of stocks in the index declining yesterday. Target, the US retailer, led the declines, plunging 25 per cent after it said higher freight, wage and fuel costs and disrupted logistics would hit its profit margins. The warning came a day after Walmart, the world’s largest bricks-and-mortar retailer, cut its earnings guidance and said it had also been wrongfooted by broad inflationary trends.The lacklustre quarterly reports sparked selling across US exchanges as investors, fearing an economic slowdown, cut positions across their portfolios. Tech giants including Apple, Nvidia and Amazon all dropped more than 5 per cent, with the tech-dominated Nasdaq Composite down 4.7 per cent.“There’s a beginning of a deterioration in the [economic] growth story,” said Michael Metcalfe, head of macro strategy at State Street Global Markets. “And it’s started to get picked up in [corporate] earnings.”Thanks for reading FirstFT Asia. Feedback on today’s newsletter? Email me at firstft@ft.com. — SarahFive more stories in the news1. Erdoğan blocks Nato accession talks with Sweden and Finland Turkey’s president has held up Nato’s plans to bring the two Nordic countries into the military alliance but insisted it was not ruling out the membership bids. Ankara wants to “reach an agreement” which includes the extradition of 30 people accused of terrorism in the country.2. International investors sell Chinese debt at record pace Foreign fund managers have sold $35bn worth of renminbi-denominated bonds in 2022, with nearly half of it in April. Covid-19 lockdowns have hit the country’s currency — which has fallen 5% against the dollar this year — while rising US yields have reduced appetite for Chinese debt.More on China’s economy: Local governments have been forced to divert anti-poverty funds to finance mass coronavirus testing, as Xi Jinping’s zero-Covid policy causes growing financial strains.3. Nike’s diversity chief to leave company after 2 years Felicia Mayo, who has served as chief talent, diversity and culture officer at the world’s largest sportswear maker since July 2020, will leave the company at the end of July. She is the second executive to leave that role in as many years. For more news on the business of sport sign up to our Scoreboard email.4. Saudi Arabia’s PIF acquires 5% stake in Nintendo Saudi Arabia’s sovereign wealth fund has purchased 6.5mn shares in the Kyoto-based creator of Mario and Donkey Kong as it continues to expand in the games and e-sports industry.5. Casino mogul accused by US of lobbying on behalf of China Steve Wynn, who helped transform Las Vegas and Macau into booming gambling centres, has been accused by the US justice department of lobbying the Trump administration on behalf of the Chinese government to deport a prominent critic from the US to China. Lawyers acting for Wynn denied the allegations.The day aheadPhilippines monetary policy committee meeting Analysts at DBS Bank, HSBC, and Standard Chartered expect policymakers to announce a 25-basis point rise in the country’s interest rate. (The Manila Times) Nato Defence chiefs will meet in Brussels on Thursday, while US president Joe Biden hosts the leaders of Finland and Sweden at the White House to discuss their Nato applications.European Central Bank minutes Policymakers will release the minutes from their last meeting, at a time when central banks around the world are seeking an interest rate sweet spot in the inflation fight. Getting the balance between growth and inflation just right is fraught with difficulty.What else we’re readingIndia’s export shock exacerbates a global food crisis In an abrupt U-turn, India has announced an export ban on wheat after sudden heatwaves pushed down forecast domestic production and drove up prices. India’s volte-face highlights the need for some more efficient large-scale food producers who reliably prioritise exports, writes Alan Beattie.How Covid affects the human brain The cognitive impairment caused by severe Covid-19 is comparable with losing 10 IQ points, researchers have suggested. The FT’s global health editor Sarah Neville rounds up the latest research on the neurological effects of the disease.Moderna chair defends its hiring process after CFO fiasco Last week, the top finance director stepped down one day after joining the vaccine maker, following an investigation at his former employer. But Noubar Afeyan says it would be wrong to conflate the sudden departure with a wider cultural problem at Moderna.Top economies battle to lead supercomputer race The US has made a new breakthrough in processing power that will have a big effect on climate change research and nuclear weapons testing. But the success is likely to be muted, as China passed this milestone first and has led the world in supercomputing for years.How do today’s musicians make money? Amazon Music, Apple Music, Spotify and YouTube Music, together have more than 560mn estimated subscribers and many more non-paying users. Unable to fight streaming giants, some artists are scrambling to develop their own business model.TravelHave you ever wondered what it is like to see the world through the eyes of a pilot? For Mark Vanhoenacker, great cities hold a special significance — and their post-pandemic reawakening is a joy to witness.

Cairo at 4am, as seen from a flight between Bahrain and London © Mark Vanhoenacker More

(Reuters) – Philadelphia Federal Reserve Bank President Patrick Harker on Wednesday said he believes the central bank can bring inflation down without sending the economy into a recession, in part because the labor market is currently strong. “We may have a few quarters of negative growth, but again, that’s not what I’m estimating, what I’m forecasting right now,” Harker said in a virtual event with the Mid-Size Bank Coalition of America, adding the economy can withstand a “measured” and “methodical” tightening of financial conditions that would bring down demand. “We don’t want to overdo it, but we have to act.” More

British inflation surged last month to its highest annual rate since 1982, with consumer price inflation hitting 9% in April, pressuring Sunak to do more to help those struggling to pay rising food, fuel and energy bills.”Our role in government is to cut costs for families. I cannot pretend this will be easy,” Sunak will say at a Confederation of British Industry dinner, according to extracts of his speech released in advance.”There is no measure any government could take, no law we could pass, that can make these global forces disappear overnight. The next few months will be tough.”Sunak has previously said he wants to wait to see the extent of a further rise in regulated domestic power tariffs in the autumn before deciding on how much more support households need.In his speech on Wednesday, he will also reiterate a promise made in March to cut business taxes later this year and encourage employers to do their bit to ease the economic pain for households by keeping up investment and innovation spending.”We need you to invest more, train more, and innovate more. In the Autumn Budget we will cut your taxes to encourage you to do all those things,” he will say.”That is the path to higher productivity, higher living standards, and a more prosperous and secure future.” CBI Director-General Tony Danker welcomed Sunak’s willingness to help households and provide incentives for business investment but said the need for support was immediate.”There’s a window now where firms are deciding whether to stick or twist on their spending plans, so not everything can wait until autumn,” he said. “Immediate delivery of existing commitments can help protect business confidence.” More