Economy

(Reuters) – A look at the day ahead in Asian markets. Asian markets are likely to open on the defensive on Thursday with sentiment badly dented by the continued rise in U.S. bond yields and mounting speculation the Federal Reserve won’t cut U.S. interest rates as much as investors had previously hoped.That shifting outlook sparked a sharp selloff in U.S. Big Tech stocks on Wednesday and the Nasdaq fell 1.6%, its biggest fall in nearly two months. World stocks, meanwhile, fell for a third straight day.That’s a bearish backdrop to Asian trading on Thursday, although the 8% surge in Tesla (NASDAQ:TSLA) shares after the close on Wednesday following the company’s third-quarter results may offer the tech sector some support.There’s a raft of top-tier local economic data due from Asia on Thursday, including purchasing managers index reports from Japan, India and Australia, third quarter GDP from South Korea, and inflation figures from Malaysia.In currency markets the spotlight remains fixed on dollar/yen. It rose above 152.00 on Wednesday, breaking technical resistance at the 200-day moving average in the process, which suggests the upward momentum has more room to run. This is fueling market chatter about possible intervention from Japanese authorities to slow the move. But with many top finance officials, including Bank of Japan Governor Kazuo Ueda, in Washington for the IMF and World Bank annual meetings and Japan’s general election only days away, intervention at this juncture may be a long shot.”I doubt they will do anything unless we were to fly through 160.00 for some reason,” reckons Brad Bechtel at Jefferies.Ministry of Finance officials were warning against what they described as speculative moves when the yen fell below 149 per dollar nearly three weeks ago. Japan last conducted yen-buying intervention in late July after the currency tumbled to a 38-year low below 161 per dollar.Ueda said in Washington on Wednesday it was “still taking time” for Japan to achieve its 2% inflation goal in a sustainable manner, adding that it is “very hard” to pin down the appropriate size of interest rate hikes from here on.Inflation figures for the capital Tokyo on Friday will give the latest steer on Japanese price pressures. A Reuters poll suggests consumer inflation in Tokyo in September was 1.7%, undershooting the BOJ’s 2% price target for the first time in five months. Elsewhere in Asian currencies, South Korea’s finance minister was reported on Wednesday as saying the won’s current level near 1,400 per dollar should be regarded as a “new normal”.Figures on Thursday are expected to show that the South Korean economy bounced back to growth in the third quarter after shrinking 0.2% in the second. Here are key developments that could provide more direction to markets on Thursday:- Japan, India, Australia PMIs (October)- South Korea GDP (Q3)- Malaysia inflation (September) More

Save over 65%$99 for your first yearFT newspaper delivered Monday-Saturday, plus FT Digital Edition delivered to your device Monday-Saturday.What’s included Weekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysis More

WASHINGTON (Reuters) -Bank of Japan Governor Kazuo Ueda said on Wednesday it was “still taking time” to sustainably achieve its 2% inflation target, signaling that the central bank will tread carefully in pushing up the country’s still near-zero interest rates.But he also warned of the cost of moving too slowly in raising rates, which could give speculators an excuse to trigger an unwelcome yen slide that pushes up import costs.”When there’s huge uncertainty, you usually want to proceed cautiously and gradually,” Ueda said at a panel at the International Monetary Fund on Wednesday.”But the problem here is if you proceed very, very gradually and create expectations that rates are going to stay at low levels for a very long time, this could lead to a huge build-up of speculative positions which could become problematic,” he said. “We need to strike the right balance.”The BOJ ended negative rates in March and raised short-term rates to 0.25% in July on the view Japan was making progress toward sustainably achieving its 2% inflation target.Ueda has said the bank will keep raising rates if the economy moves in line with its forecast. But he has also stressed the need to scrutinize global uncertainties, such as the U.S. economic outlook, in timing the next rate hike.Underlying inflation in Japan has been moving around zero before 2022, when it began to rise due to the spillover from global rises in energy and food prices, as well as a boost to wages from a tight labor market, Ueda said in the panel.”It’s still taking time for us to get to 2% in a sustainable manner,” Ueda said. “We want to use this opportunity to raise inflation expectations, underlying inflation, and move to a new equilibrium with 2% inflation in a sustainable way,” he said.”That’s why we maintain policy easy.”The BOJ is widely expected to keep interest rates steady at next week’s policy meeting. A slim majority of economists polled by Reuters saw the BOJ forgoing a hike this year, with most expecting the bank to raise rates again by March.When asked what keeps him awake at night, Ueda said, “What would be the right size of (policy) normalization going forward, and how best to allocate the total size” through rate hikes across time.He declined to elaborate, saying it was “very hard” to pin down the appropriate size of future hikes due to the difficulty of estimating Japan’s neutral rate of interest.”I have to say that we can’t telegraph all our future movements ex ante,” he said, referring to how the BOJ would not commit to a set timetable for raising rates. “What we can do is to explain carefully our basic monetary policy strategy.” More

Save over 65%$99 for your first yearFT newspaper delivered Monday-Saturday, plus FT Digital Edition delivered to your device Monday-Saturday.What’s included Weekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysis More

Global public debt will exceed $100 trillion by the end of 2024, per the IMF.
The U.S.’ and China’s rising fiscal deficits account for a significant share of increasing debt levels.
Poor nations in sub-Saharan Africa are struggling the most to raise taxes while ensuring fiscal programs.

A man walks past signage for the the 2024 IMF/World Bank Annual Meetings outside of the headquarters of the International Monetary Fund in Washington, DC on October 18, 2024. 
Daniel Slim | AFP | Getty Images

The International Monetary Fund warned Wednesday that the public debt situation worldwide could be more dire than most think, highlighting skyrocketing fiscal deficits in the U.S. and China.
Global public debt will rise above $100 trillion by the end of 2024, the agency projected in its annual Fiscal Monitor report. By the end of the decade, the IMF forecasts global public debt will reach 100% of world GDP. 

The U.S. and China account for a significant share of rising public debt levels. If the two countries were excluded from calculations, the global public debt to GDP ratio would fall around 20%, the IMF said. 
“Public debt may be worse than it looks,” the IMF’s director of fiscal affairs, Vitor Gaspar, said, adding that governments’ debt calculations suffer from an optimism bias and are prone to underestimation. 
Governments are facing a “fiscal policy trilemma,” per the report. That is, they are caught between needing to spend more to ensure security and growth — and also facing resistance toward higher taxation while public debt levels become less sustainable, the report found. Poor countries in sub-Saharan Africa are most under pressure between the need to spend to alleviate poverty, while struggling with lower tax capabilities and worse finance conditions. 
Unsustainable debt levels place countries’ markets at risk of a sudden sell-off if investors view a country’s fiscal health as too poor. This uncertainty, even across advanced economies with higher debt tolerance such as the U.S. and China, can lead to a spillover effect of higher borrowing costs to other economies.
The U.S. Treasury Department announced earlier in October that the nation’s budget deficit has risen to $1.833 trillion, the highest level outside of the pandemic era. In recent years, the U.S. has approached several government shutdowns as government funding bills become more contentious between politicians amid growing concerns about the country’s fiscal health.
In the IMF’s China country report released in August, it underscored local government spending’s outsized role in the country’s high fiscal deficit. While it noted that local government spending actually fell in 2023, the effects were offset by lower revenues from extended tax relief.

Don’t miss these insights from CNBC PRO More

Save over 65%$99 for your first yearFT newspaper delivered Monday-Saturday, plus FT Digital Edition delivered to your device Monday-Saturday.What’s included Weekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysis More

An escalation of trade and tariffs tensions between the U.S. and China would have economic consequences around the world, Gita Gopinath, deputy managing director of the International Monetary Fund said.
“Output is going to be much lower than what we are projecting for all countries in the world, there’s going to be pressure on inflation, so that’s not the direction in which we should be going,” she told CNBC.
China has also announced higher temporary tariffs on some imports from the U.S. as the tit-for-tat measures continue.

An escalation of trade and tariffs tensions between the U.S. and China would have “costly” economic consequences around the world, Gita Gopinath, deputy managing director of the International Monetary Fund told CNBC on Wednesday.
“We are seeing geopolitically driven trade around the world, which is why when you look at overall trade to GDP that’s holding up fine, but who’s trading with whom is certainly changing,” she said.

The U.S. and China are trading with one another less, and some parts of their trade is being re-routed through other countries, she added.
Trade tensions between the U.S. and China and the European Union and China have been mounting this year, with both the U.S. and EU implementing higher tariffs on some Chinese goods over what they claim are unfair trade practices from Beijing.
China has also announced higher temporary tariffs on some imports from the EU as the tit-for-tat measures continue.
If tariffs were escalated, modelling from the IMF suggests it would be “costly for everybody,” Gopinath told CNBC’s Karen Tso on the sidelines of the agency’s annual meeting in Washington.
“Output is going to be much lower than what we are projecting for all countries in the world, there’s going to be pressure on inflation, so that’s not the direction in which we should be going,” she explained.

Gopinath’s comments come after IMF Managing Director Kristalina Georgieva said last week that international trade would no longer be the “engine of growth” it once was, and that “retaliatory” trade measures could hurt those imposing them as much as their targets.
Tim Adams, CEO of the Institute of International Finance, also warned Wednesday that tariff proposals from U.S. presidential candidate Donald Trump would interrupt the path of disinflation and could lead to higher interest rates.
The IMF’s Gopinath said it would benefit both the U.S. and China to have “good working relations,” noting that this was also important for the rest of the world.
It is “in everyone’s self interest that these relationships are maintained,” she said.
The IMF warned in its recent World Economic Outlook report that increasing protectionist policies were a downside risk to growth.
“A broad-based retreat from a rules-based global trading system is prompting many countries to take unilateral actions. Not only would an intensification of protectionist policies exacerbate global trade tensions and disrupt global supply chains, but it could also weigh down medium-term growth prospects,” the report said.
— CNBC’s Jenni Reid contributed to this story More