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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.After a dog-off-the-leash start to the year, Japan’s Nikkei 225 Average has advanced to within striking distance of the once untouchable-looking “bubble” high of 38,915 points reached on December 29 1989. At one time on Wednesday, the difference between current trading levels of the Nikkei and a history-making stride into the unknown shrank to just over 7 per cent — a distance that, with the market in this mood, could be eliminated before January is out.There is, inevitably, a frisson around this proximity. And it is one that has focused attention both on how Japan got (back) here and how much it would mean for the country if its equity markets did, finally, beat that bubble. Less in focus is China’s potentially pivotal role in all this. A big new survey of Japanese companies suggests they may be ahead of the market in recognising this.The Japan-specific reasons that the 1989 bubble high is within reach were building throughout 2023. Bank of America’s latest survey of global fund managers confirms that a positive number of asset allocators have entered the year with Japanese stocks overweight in their portfolios, and the justifications for that seem to keep coming. The optimism derives from factors including the return of inflation and wage growth after a near 20-year absence, the still weak yen, the now (following the January 1 Noto peninsula quake) more muted prospect of an imminent interest-raising move by the Bank of Japan and the broad sense that, at the nudging of the Tokyo Stock Exchange, an increasingly shareholder-friendly attitude is taking root at an ever larger proportion of listed companies. Also critical has been the government’s invitation to the public to join the bubble-beating party. From January 1, individual Japanese — who hold about ¥1,113tn ($7.5tn) of the nation’s household assets in cash — can invest up to ¥18mn each in tax-protected accounts. They are more likely to trust their savings to the stock market, say brokers, once the 1989 high has been surpassed, and that era’s demons decisively slain.There are a number of ways, though, in which China — its population now in decline and its economy growing at one of the slowest paces in decades — could act as either propellant or decelerator of Japan’s bubble-beating ambitions.One clear positive is that, for global investors now either unwilling (for economic reasons) or unable (for geopolitical ones) to invest in China, Japan represents a more viable alternative destination than it has for many years.Buying Japan as Asia’s most liquid “not China” trade, say fund managers, remains a legitimate strategy. On the one hand, Japan’s is a market driven (for now) by interesting indigenous factors while China’s moulders. On the other, say analysts, many of Japan’s companies are better positioned through historic investment strategies to benefit from any surprise China rebound than their US and European counterparts, and as such represent a two-way bet. Another factor that could potentially benefit Japanese companies is the combination of the lead China has in electric vehicles and the colossal overcapacity and investment issues that overhang it. China’s pioneering EV makers are locked in a price war that will force some out of business while revealing the successful strategies and technology to the rest of the world. This may not be the worst moment for Japanese automakers to be on the sidelines taking notes.On the negative side, Japan’s exposure to China — in particular its trio of property, youth unemployment and consumer crises — could become a significant drag. If, as economists increasingly expect, China’s manufacturing overcapacity results in the global export of deflationary pressure, Japan’s fledgling wage-boosting inflation could prove shortlived.A survey of more than 1,700 Japanese companies, published this week by the Japan Chamber of Commerce and Industry in China, provides useful context for the questions that investors should ask as Japan’s 1989 bubble-era magic number approaches. Fifty-one per cent said China was either their most important market, or in their top three, while 78 per cent said that on policy and regulation in China they were either better off or no worse off than local Chinese companies. Some 39 per cent expect economic conditions in China to worsen in 2024, against a quarter who see some improvement. Just 15 per cent increased capital spending in China in 2023, while 25 per cent actively cut it.Investors may see destiny knocking at the Nikkei’s door; Japan’s companies can see that the bursting of China’s bubble could yet delay Japan’s ability to finally forget its [email protected] More

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DAVOS (Reuters) – Bank CEOs meeting in private at the World Economic Forum on Wednesday aired concerns about the competitive risks from fintech firms and private lenders, and complained about onerous regulations, a source familiar with the matter said.At the meeting in Davos, attended by dozens of CEOs including JPMorgan Chase & Co. (NYSE:JPM)’s Jamie Dimon, executives also discussed a challenging global economic picture, with shifting interest rate policies and rising debt, another person with knowledge of the meeting told Reuters. Bank leaders were observed going into the meeting by Reuters. Before the meeting, at least one banking CEO told Reuters they see geopolitical risks potentially derailing interest rate cuts. The private session was led by Barclays CEO C.S. Venkatakrishnan and Manulife CEO Roy Gori, according to a copy of the agenda seen by Reuters. The topics included navigating risk against a backdrop of geopolitical tension, macroeconomic uncertainty and technological disruption.The pushback on regulation comes after Wall Street banks this week urged the U.S. Federal Reserve to completely overhaul a draft rule hiking bank capital, seeking to water down the “Basel Endgame” proposal that bankers say will hurt the economy.UBS Chairman Colm Kelleher, speaking earlier in Davos, said regulators should focus on so-called shadow lenders that aren’t subject to the same rules and are more likely to cause the next crisis.Bank failures in the United States and Europe in March reignited a debate about the risks lenders can pose to the financial system, even if capital buffers among tightly regulated lenders helped stem contagion fears. Meanwhile, under a long-awaited move in the U.S., new regulations expected to be finalized this year should allow consumers to more easily transfer their data between financial services providers, which could prompt competition with financial technology firms. There were about 60 CEOs of global financial firms including banks and insurance companies present, the first source said. Among regulation concerns, UK supervisors were discussed by some as being particularly harsh, followed by European regulators, that source said. Officials for JPMorgan didn’t have an immediate comment. Spokespeople for Barclays and Manulife couldn’t immediately be reached. Officials at the European Central Bank (ECB) and Britain’s Prudential Regulation Authority declined to comment.The former chair of the ECB’s supervisory board said in September that the average capital requirements for banks deemed significant to the EU would be somewhat higher under U.S. rules. More

(Reuters) -A group of freelance writers and editors has sued the U.S. Department of Labor, claiming the Biden administration’s new rule making it more difficult for companies to treat some workers as independent contractors is illegal and should be struck down.The four freelance workers filed the lawsuit in Georgia federal court late Tuesday, alleging that the rule unveiled last week is so vague that it violates the U.S. Constitution.The lawsuit is the first to challenge the rule, which is scheduled to take effect March 11, but more legal challenges are expected and the U.S. Chamber of Commerce, the largest U.S. business lobby, has said it is considering suing. Republicans in Congress have also said they will move to repeal the rule through legislation. The freelancers said in their complaint that they would seek an order temporarily blocking the rule while their lawsuit plays out. The rule is widely expected to increase labor costs for businesses in industries that rely on contract labor or freelancers, including trucking, manufacturing, healthcare and app-based “gig” services.The Labor Department referred a request for comment to the U.S. Department of Justice, which declined to comment.When it issued the rule, the Labor Department said it was meant to clarify the test for determining whether workers are independent contractors or employees, who are entitled to legal protections such as a minimum wage and overtime pay. But the freelancers in their lawsuit said the department failed to explain why it was abandoning a simpler Trump-era rule that was favored by business groups. That 2021 rule said the key factors in determining worker classification were the degree of control a company exercises over a worker and the worker’s opportunity for profit or loss. The new rule looks at several additional factors including the permanence of a job, the degree of skill and initiative required, and whether work performed is integral to a company’s business. “Businesses are given no useful guidance on the scope of the statute and cannot structure their conduct to comply with its demands,” the freelancers said in the lawsuit. The workers said they have “a reasonable fear that they will lose business due to uncertainty or fear of liability risks under the Department’s new rule.” They are represented by the Pacific Legal Foundation, a libertarian group. On Friday, construction trade group Associated Builders and Contractors (ABC) said in a court filing that it also planned to challenge the new rule on behalf of businesses in the industry. The group had sued the Labor Department in 2021 when it first moved to rescind the Trump-era regulation, and a federal judge held that the agency did not adequately explain why it was scrapping that rule. The department appealed, and a New Orleans-based U.S. appeals court paused the case pending the release of the new rule.ABC last week asked the appeals court to send the case back to the lower court to decide whether the new rule is valid. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Argentina’s libertarian President Javier Milei has accused western leaders of abandoning “the values of the west” in a high-profile address to the World Economic Forum, where his debut on the world stage met with warm applause.“I am here to tell you that the western world is in danger . . . because those who are supposed to defend the values of the west have been co-opted by a vision of the world that inexorably leads to socialism, and therefore to poverty,” Milei told an audience in Davos on Wednesday.He said “international organisations” had been influenced by “collectivism”, “radical feminism” and a “cruel . . . environmental agenda”.Milei, a self-described anarcho-capitalist and former television pundit, was elected on an anti-establishment platform in November amid the troubled South American economy’s worst crisis in two decades.The head of a large European buyout firm came out of the congress hall “impressed” by Milei’s speech.Ahead of the speech, Daniel Pinto, JPMorgan president and chief operating officer, said Argentina’s new government “may be creating a new beginning for the country, bringing an end to 80 years of economic deterioration”. He warned of a “tough year” ahead, however, as Milei’s plans “require the population to be willing to go through the pain of [austerity]”.Milei’s economic policies have also won initial support from the IMF, whose technical staff approved a disbursement of funds to Argentina last week and whose deputy managing director Gita Gopinath told the Financial Times the new administration had “moved boldly to correct several of the misalignments that are there in the economy”.Milei’s Davos appearance, his first overseas trip as president, was his first chance to pitch his ultraliberal vision to the global elite following his shock election victory.Milei on Wednesday said: “The case of Argentina is an empirical demonstration that no matter how rich you may be, or how much you may have in terms of natural resource . . . if measures are adopted that hinder the free function of markets . . . the only possible fate is poverty.”Since taking office in December, the libertarian economist has moved rapidly to slash Argentina’s fiscal deficit and deregulate the economy.The IMF delivered a vote of confidence in Milei’s plans last week as its technical staff approved a $4.7bn disbursement of the country’s $43bn loan programme, enabling it to pay the fund back for earlier lending. Argentina is its largest debtor.The decision is pending approval by the IMF’s board. Milei met IMF managing director Kristalina Georgieva on Wednesday after his speech.Gopinath cited Milei’s 54 per cent devaluation of the official exchange rate in December as one of his administration’s “bold” moves.She said a “strong fiscal anchor” was an “important” condition for an improvement. “And that was what this administration did, which previous administrations were not able to do.”The IMF held tense, drawn-out talks last year with Argentina’s previous left-leaning Peronist government, which printed billions of pesos to fund pre-election cash handouts and publicly blamed the IMF for an unpopular currency devaluation in August.Argentina and the fund last week unveiled a target for the country to reach a fiscal surplus of 2 per cent of gross domestic product in 2024, revised upwards from a 0.9 per cent deficit target. The new goal would imply spending cuts and tax increases worth about 5 per cent of GDP.Markets have responded positively to Milei’s plans. Argentina’s deeply distressed 2030 dollar bonds, some of the most liquid, have risen 22 per cent since November’s election to 37 cents. However, there are concerns about the president’s ability to implement reforms. Milei’s party lacks a majority in both houses of congress, which could block some of his fiscal measures, and powerful labour unions oppose his plans.Analysts have said the fund will probably hold back from committing significant new financing to Argentina until Milei can show his reforms are sustainable.Gopinath said the “large scale” of the planned adjustment has “big implications for the economy” in a country where more than 40 per cent of people live in poverty.“This is something we have to be very careful about,” she said, noting that authorities had announced targeted support measures, including an increase to child benefit and food aid, for the “transition period”.“As of now, there seems to be quite a bit of ground support for the administration and what they are trying to do. I think there’s a recognition that . . . this is a tough period, but it is important to go down a path so you can . . . actually get to a point where inflation is lower, incomes start growing, [and you] are able to raise more people out of poverty.” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.When China’s premier, Li Qiang, announced at Davos on Tuesday that the country’s economy grew at an estimated 5.2 per cent in 2023 it caught economists off guard. Many had projected a figure close to Beijing’s 5 per cent growth target — but markets had not expected the data to come until Wednesday, as per the official release schedule. It is fair to say that this is not the only example of China’s hazy approach to reporting national statistics.Economists now largely consider Beijing’s official economic data to be only a reference point. While China puts significant resources into its National Bureau of Statistics, trust in its output has been dented by deteriorating transparency. The number of economic indicators made available by the agency has dropped significantly since President Xi Jinping became leader in 2013. At the same time, forecasters have become more sceptical over China’s official gross domestic product numbers. The country’s slowdown in trend growth over the past decade has increased the spotlight on its system of GDP targets. It is of course possible that China’s economy has done a consistently accurate job of hitting those targets. But limited transparency, including on its statistical methodologies, does not engender trust. Economists have meanwhile developed their own GDP estimates using directly observable statistics, such as night-light density, or data collected by surveys and international agencies. Staggeringly, Rhodium Group thinks China’s growth last year may have been as low as 1.5 per cent. Capital Economics’s “China Activity Proxy” suggests that Beijing has been overestimating its output notably since the start of 2022. Its modelling also implies faster growth in 2023 as official data may have lowballed the extent of Covid-19 disruption the year before.China is not the only country with unreliable growth statistics. India’s are spotty too. This is one of the fastest-growing major economies, and the most populated. Yet World Economics ranks the quality of the country’s GDP and population data around 90th place globally. A lot of India’s economic data is based on outdated surveys and information. Its existing numbers are also too frequently revised. While official estimates place annual average GDP growth between 2011-12 and 2016-17 at about 7 per cent, a Harvard study suggested it could be closer to 4.5 per cent.A lack of transparency, subpar methodologies and the scope for data manipulation are common in much of the so-called developing world. Indeed, researchers lament the dearth of credible economic data across Africa. Large informal sectors and limited resources mean measurement is not simple either. Even advanced economies have data problems; Britain’s labour market survey suffers from a potentially distorting low response rate. Yet as the economic and demographic centre of gravity shifts away from the west it is even more important that developing world data becomes less opaque. Domestic policymakers will struggle to tackle and identify barriers to economic growth without decent numbers. Foggy statistics add risk for investors, and can raise the cost of capital for developing nations. For China and India, in particular, trust in their data is important to maintain and attract the interest of multinationals and capital markets. Ambiguity is not good for companies. After lamenting the global “trust deficit” in his Davos speech, Premier Li should ensure the world’s second-largest economy greatly improves the transparency of its own economic statistics and methodologies. For its part, India needs to invest in updating its data systems. International agencies and the private sector should also step up their support — better technology, training and data sharing can help raise data standards. After all, given how important good data is for effective government, investment and business, as emerging economies rise so must the reliability of their statistics. More