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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.This article is an on-site version of our Unhedged newsletter. Sign up here to get the newsletter sent straight to your inbox every weekdayGood morning. Most people seemed happy about yesterday’s cooler inflation data. But not Jamie Dimon. “I think people are overreacting to short-term numbers,” the JPMorgan chief executive and longtime inflation hawk told Bloomberg. Nonetheless, JPM stock, along with most banks, liked the news. Below, we calibrate our elation levels. Email us: [email protected] and [email protected]. The good inflation newsNo one rings a bell when the rates cycle peaks. But Tuesday’s October consumer price inflation numbers were as close as you get to a neon sign flashing the words, “hey, idiot, soft landing imminent”. With a few minor caveats, the news was all good. Headline and core CPI undershot expectations due to quieter services inflation. Monthly core inflation rose just 0.2 per cent, or 2.8 per cent annualised.The market read the flashing sign. Bonds rallied; the two-year yield collapsed 21 basis points and the 10-year yield wasn’t far behind at 19bp. The S&P 500 rose 2 per cent and the rate-sensitive small-cap Russell 2000 popped 5 per cent. Futures markets now see no chance of any further rate rises.The most important detail was the significant deceleration in rental inflation, rising 0.3 per cent in October and reversing an uptick from last month. This keeps the rent disinflation trend intact, a non-negotiable part of any soft landing story. Falling rents on new leases have long indicated that CPI rental inflation, the most influential single component, would moderate. In the big picture this has been happening, though progress has been uncomfortably bumpy (note the spike in the light blue line):If you need reasons to worry, October’s inflation report contained one or two (as all of them do). A few services categories look persistently hot, especially auto insurance. Methodology quirks in the October health insurance data were supposed to depress medical care inflation; instead, it rose, powered by rising prices for hospital services. The inflation drag from falling used car prices, which has helped create core goods deflation in the last five inflation reports, is diminishing.But those are just quibbles. The market is right to like yesterday’s report in isolation. The bigger question is how good inflation numbers fit into one’s story of the economy. Here’s how we read it: yesterday’s data took a big bite out of inflation tail risk. After a couple months of CPI releases containing hints of a coming inflation re-acceleration, October’s numbers made that look far less likely. Thus the jubilant market reaction.Inflation that is trending down more convincingly doesn’t mean mission accomplished, though. There is a strong possibility of a soft landing; but two other scenarios are possible. First, looser financial conditions and falling inflation boost demand, and keep inflation stubborn. Second, inflation keeps falling, but only in fits and starts, forcing the Fed to keep monetary policy restrictive, raising the probability of a slowdown. (This is to say nothing of exogenous shocks such as, say, an oil price surge stemming from Middle East supply disruptions.)Suppose the Fed starts cutting rates next year to “normalise” the stance of policy, that is, to keep real rates steady as inflation falls. That would not mean monetary policy is much looser, but markets could interpret it that way. How will tight policy and looser financial conditions net out? This illustrates the complexities of ending a tightening cycle while inflation is above target and only falling slowly. Martin Wolf doesn’t exaggerate when he writes that “policymaking is now at a truly difficult point in the cycle”.We don’t mean to alarm, but to caution. It is a good thing that soft landing seems so attainable. But there is still a way to go. (Ethan Wu)Food (stock) poisoningFood stocks returns have been disgusting this year. It is hard to find a subsector of the market that has done worse. All 14 food stocks in the S&P 500 have underperformed the broader index by at least 8 percentage points. The cap-weighted return for the subsector is minus 12 per cent, a whopping 28 points behind the market. Even that nauseating number is pulled up by the not-terrible performance of Mondelez, which makes up a quarter of the group. Take Mondelez out and the group is down 18 per cent:This is particularly odd at a moment when, according to the latest edition of the Bank of America fund manager survey, professional investors are slightly overweight staples stocks. What is more staple-y than food? We have written several times in recent weeks about how defensive stocks have done poorly lately. No explanation of this is totally satisfying, but the most general is that staples outperformed during the wretched and scary year 2022, as one might expect, and now they are giving that outperformance back, while at the same time rising bond yields have made high-yielding staples less appealing as bond substitutes. But the case of food companies is extreme. Part of it can be explained idiosyncratically. Several of the S&P food stocks are simply performing badly. Many companies in the group are only generating revenue growth because of price increases; volumes are flattish. But ConAgra, Hormel and Tyson aren’t even managing price increases. Kraft Heinz is getting price, but only at the cost of falling volumes. Both Campbell’s and Smucker’s have made big acquisitions (Rao’s pasta sauce and Hostess snacks, respectively) that investors didn’t seem to like.But these individual failures, it seems to me, don’t quite account for the stomach-churning performance of the group. Mondelez (snacks) and Lamb Weston (frozen french fries) are succeeding on both price and volume; both companies have good fundamentals and good track records. Still, they lag the market. And a lot of the stocks in the group, even considering their sluggish growth, look very cheap. It can’t all be down to the GLP-1 diet drugs. I’m not sure what to make of this, except to say that during all of this year’s ups and downs, investors have not cared to play defence in stocks. Given today’s cheerful inflation report, they seem unlikely to start now. There will come a time to feast on food stocks, but not quite yet.  One good read“In British politics, the appearance of competence is more important than the evidence of it.”FT Unhedged podcastCan’t get enough of Unhedged? Listen to our new podcast, hosted by Ethan Wu and Katie Martin, for a 15-minute dive into the latest markets news and financial headlines, twice a week. Catch up on past editions of the newsletter here.Recommended newsletters for youSwamp Notes — Expert insight on the intersection of money and power in US politics. Sign up hereChris Giles on Central Banks — Your essential guide to money, interest rates, inflation and what central banks are thinking. Sign up here More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.This article is an on-site version of our Europe Express newsletter. Sign up here to get the newsletter sent straight to your inbox every weekday and Saturday morningGood morning. A scoop to start: The EU wants Denmark to step up controls of — and possibly detain — Russian oil tankers suspected of breaching the west’s oil price cap, as part of new measures designed to better enforce the sanctions.Today, Laura reveals Brussels’ plans to use legal migrants to fill the EU’s labour shortages, even as capitals call for tighter controls on irregular entries, and our trade correspondent explains the plan to combat Europe’s rampant honey fraud.Pooling workersBrussels wants to prop up the EU’s tight labour market by facilitating legal migration from countries outside the bloc, writes Laura Dubois.Context: European governments have announced more drastic measures to curb migration as the number of arrivals has increased. But at the same time, the bloc is lacking workers, with shortages in sectors such as construction, healthcare, tech and engineering shackling economies.The European Commission hopes to fill some of those gaps by making it easier for people from non-EU countries to apply for jobs.Today, the commission will propose to set up a “talent pool” that would help connect workers outside the EU with employers inside, focusing on sectors in which workers are needed the most, such as industries affected by the green and digital transitions. The online platform would be based on a similar one that already exists for workers within the EU, according to a draft of the proposal seen by the FT. “The EU talent pool is designed to help member states address skill gaps and labour shortages, where they can’t be addressed domestically or in the EU,” said Ylva Johansson, commissioner for migration.The participation of member states is voluntary, as they have a final say on immigration to their territory. But a number of EU countries such as Germany, Italy and Greece have already said they want to make it easier for foreign workers to come and work on their territory. The EU’s employment rate was at a record high last year of almost 75 per cent, and its unemployment rate historically low at around 6 per cent. Meanwhile, almost 3 per cent of jobs remained vacant, and the vacancy rate was even higher in countries such as the Netherlands, Belgium, Austria and the Czech Republic.The commission will also push for further agreements to foster legal migration with third countries, which the EU has already clinched with the likes of Bangladesh, Pakistan and Tunisia. All this is part of an effort to prod member states towards creating more legal avenues for migration and give people from countries with a low chance of receiving asylum in the EU an opportunity to come and work legally, as the bloc negotiates a reform that will address irregular migration.“It would help people avoid the desperate risks entailed in crossing the Mediterranean,” Johansson said. “Better legal migration options, like the talent pool are safer, they are transparent, and they are targeted.”The package the commission will present today also makes recommendations on how member states should recognise foreign qualifications.Chart du jour: Confidence in UkraineEuropean populations are not confident Ukraine can win the war against Russia in the next five years — and less confident than Americans — finds a survey released today by the European Council on Foreign Relations focused on US and Chinese power and global geopolitics.Honey launderingEU countries have agreed to crack down on honey fraud over fears that mixing honey with syrup imported from China and other countries is cheating consumers and putting domestic beekeepers out of business, writes Andy Bounds.Context: Almost half the imported honey tested by the European Commission this year broke EU rules, as it was blended with ingredients such as sugar syrups, colourings and water. Slovenia in 2020 started a campaign to better regulate the €2.3bn market.Yesterday, member state representatives backed a proposal to label honey by its country of origin, rather than simply by whether it comes from the EU or not. Manufacturers will also have to indicate the top four countries where the highest share of ingredients comes from.They also asked the commission to come up with a testing method to check imports comply with the bloc’s rules, according to documents seen by the FT.The changes are a revision of the so-called “breakfast directive” which sets marketing and quality standards for fruit juices, jams and the like.They are likely to be agreed by the European parliament, whose position is similar to that of the member states, and then become law within the next few months.“The mandate to start negotiations with the parliament is an important step in improving consumer information on honey blends,” said an EU diplomat. “It is also a step towards having a more level playing field for EU beekeepers and ensuring EU shoppers get only the highest honey quality.”What to watch today European Commission presents its autumn economic forecast.EU general affairs ministers meet.Now read theseRecommended newsletters for you Free lunch — Your guide to the global economic policy debate. Sign up hereTrade Secrets — A must-read on the changing face of international trade and globalisation. Sign up hereAre you enjoying Europe Express? Sign up here to have it delivered straight to your inbox every workday at 7am CET and on Saturdays at noon CET. Do tell us what you think, we love to hear from you: [email protected]. Keep up with the latest European stories @FT Europe More

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Plunder: Private Equity’s Plan to Pillage America by Brendan Ballou (PublicAffairs)There have always been two ways to make money: value creation and plunder. A good society is one in which the first outweighs the latter. In this powerfully argued book, Ballou, currently at the antitrust division of the US Department of Justice, insists that private equity’s returns derive in substantial part from plunder. That is particularly likely where those profits are made at the expense of the powerless — prisoners, patients or the elderly. Given the incentives, the outcomes he describes seem inevitable.Digital Empires: The Global Battle to Regulate Technology by Anu Bradford (Oxford University Press)The arrival of the digital economy, now accelerated by the emergence of artificial intelligence, has inevitably — and properly — created a political and regulatory response. In this comprehensive and important tome, Bradford of Columbia Law School elucidates the contrasting approaches of China, the US and the EU. She notes that the latter two confront China, “in the name of saving democracy from the autocracy”. But there is a battle to save democracy from the power of unbridled tech, too. This one is crucial: it is about whether tech controls democracy or democracy controls tech.A Crash Course on Crises: Macroeconomic Concepts for Run-ups, Collapses, and Recoveries by Markus Brunnermeier and Ricardo Reis (Princeton University Press)“Economies sometimes go through macro-financial crises.” Indeed, they do, as we have so painfully learned in recent decades. In this excellent and blessedly brief book, two distinguished scholars bring students and busy professionals up to date on the best thinking about how these crises originate and unfold and how policymakers need to respond. A valuable guide for those who need to understand what contemporary economics has to say on this vital topic.Economics in America: An Immigrant Economist Explores the Land of Inequality by Angus Deaton (Princeton University Press)Deaton, winner of the Nobel memorial prize, is also an immigrant to the US. In this highly enjoyable book of essays, he focuses largely on the country in which he now lives. He also condemns international aid. This is surprising and also too sweeping. Yet Deaton emerges from the book as a decent human being who wants to make the world a better place. Unfortunately, he has also come to the conclusion that economics and economists are not as good at that as he would wish.The Chile Project: The Story of the Chicago Boys and the Downfall of Neoliberalism by Sebastián Edwards (Princeton University Press)“The story of Chile’s free-market reforms may be summarised with two words: success and neglect.” Thus does Edwards, himself of Chilean origin, summarise the outcome of this “experiment”. These reforms originated in dictatorship, made Chile “within one generation Latin America’s brightest star”, at least economically, then, somewhat surprisingly, survived the transition to democracy and finally foundered in popular reaction against inequality and perceived injustices. Edwards tells this complex and controversial story superbly. The Eight Per Cent Solution: A Strategy for India’s Growth by Nikhil Gupta (Bloomsbury)This is an outstanding book. The author, chief economist at Motilal Oswal Financial Services, explains and applies the “sectoral balances” approach to the Indian economy. This analysis illuminates the weak financial position and deteriorating savings of households and, more recently, also of the unlisted corporate sector. In view of the likely weakness of household consumption, government spending and exports, there is little chance of the desired boom in investment. The balance of this decade must be, he argues, a time of healing, before growth can accelerate. Legacy: How to Build the Sustainable Economy by Dieter Helm (Cambridge University Press)Helm of Oxford university puts forward a passionate case for moving to a sustainable economy based on the principle that each generation bequeaths a stock of capital — physical and, far more important, natural — as good as what it inherited. To make this approach operational, we should embrace the twin ideas of “polluter pays” and the “precautionary principle”. Helm argues that implementing such ideas requires a concept of citizenship. Unfortunately, the challenges of making this idea work globally are daunting.The Trade Weapon: How Weaponizing Trade Threatens Growth, Public Health and the Climate Transition by Ken Heydon (Polity)Trade has become a weapon. Heydon, a former Australian trade official, argues that this approach — in the form of trade sanctions, pursuit of self-reliance in value chains, use of trade remedies in the cause of “national security”, and curtailing imports necessary for the climate transition — are “bad for the world economy, as it diminishes and distorts the benefits of international flow of goods and services.” A brave and necessary book. Seven Crashes: The Economic Crises That Shaped Globalization by Harold James (Yale/ Princeton UK)In this fascinating book James, a leading historian of both economies and economic policy, analyses the impact of seven economic crises on the history of globalisation: the famines of the 1840s, the financial crisis of 1873, the first world war and subsequent hyperinflations of 1914-23, the Great Depression of the 1930s, the inflation of the 1970s, the Great Recession of 2008, and the lockdowns of 2020-22. His surprising conclusion is that supply shocks promote globalisation, while demand shocks inhibit it.Freedom from Fear: An Incomplete History of Liberalism by Alan Kahan (Princeton University Press)The roots of both the market economy and the democratic state lie in liberalism. In this remarkable book, Kahan recounts in persuasive detail the history of this transformative set of ideas. Today, as often before, liberalism confronts enemies, essentially because “The liberal project of creating a society where none need be afraid frightens those who think that some people and/or some groups ought to be afraid.” Liberals cannot concede on this. But they must, he suggests, add a moral/religious pillar to their more traditional political and economic ones.Ours Was the Shining Future: The Story of the American Dream by David Leonhardt (Random House)Leonhardt demonstrates the failure of American capitalism to generate widely shared prosperity since 1980, labelling this the “Great American Stagnation”. The story is not narrowly economic. Life expectancy has, for example, fallen well behind levels in other high-income countries, while the life expectancy of those who did not go to college has actually fallen. Leonhardt, a senior writer for The New York Times, brings these realities to life. Partly as a result of the trends he describes, American democracy is at risk. This is an important book.Visions of Inequality: From the French Revolution to the End of the Cold War by Branko Milanovic (Belknap Press)Inequality is back, as a political topic and as a focus of study. In this fascinating book, Milanovic, one of the world’s most influential scholars of inequality, examines what leading economists of the past have had to say on this issue. He moves from Quesnay to Kuznets, via Smith, Ricardo, Marx and Pareto. At the end, he looks at the work of Thomas Piketty. Today, he argues, we have more theories, more data and a wider focus on both national and global inequality. We also have more concern. The field is duly booming.The Capitalist Manifesto: Why the Global Free Market Will Save the World by Johan Norberg (Atlantic)Norberg is perhaps the world’s most effective defender of free-market capitalism. In this book he returns to the theme that “freedom of choice and competition” are the engines of economic progress. He is, of course, correct. Moreover, the evidence is also that more prosperous societies are in general happier ones. Yet what he says is far from entirely true. Not only are the social and political underpinnings of free markets hard to build, but their social and political consequences can be damaging: capitalism is good; unbridled capitalism is not.My Journeys in Economic Theory by Edmund Phelps (Columbia University Press)In this lovely little book, Phelps, a winner of the Nobel memorial prize in economics, describes his journey of intellectual creativity. He is famous for his contribution, with Milton Friedman, to the idea of the “natural rate” of unemployment. Subsequently, he became engaged in ideas of economic justice pioneered by the philosopher John Rawls, and so recommended wage subsidies. Most recently, he has focused on the idea that economic progress is the fruit of dispersed creativity. Societies that encourage this achieve “mass flourishing”; but those that do not do not.Making Sense of China’s Economy by Tao Wang (Routledge)This is an indispensable book for those trying to understand the Chinese economy. The author grew up in mainland China and is currently chief China economist at UBS investment bank in Hong Kong. Her analysis is well-informed and penetrating. She concludes that China’s annual rate of growth is likely to average 4-4.5 per cent between 2021 and 2030, a marked drop from the 8 per cent achieved from 2010 to 2019. But it could even be as low as 3 per cent, as domestic and external constraints interact. It is very unlikely to exceed 5 per cent.Revitalizing the World Trading System by Alan Wolff (Cambridge University Press)Wolff, former deputy director-general of the World Trade Organization, has written the definitive guide to the past, present and possible future of the multilateral trading system. Somewhat surprisingly, given rising hostility to the WTO and trade itself in the US, his own country, and the lack of enthusiastic support elsewhere, notably including China and the EU, he is optimistic: “Autarky cannot be achieved . . . There can be no decoupling of major economies except at unacceptably high cost.” The WTO is the only place where the needed international co-operation can be sustained because it, like trade itself, is global.For further recommendations, see Summer Books 2023 All this week, FT writers and critics share their favourites. Some highlights are:Monday: Business by Andrew HillTuesday: Environment by Pilita ClarkWednesday: Economics by Martin WolfThursday: Fiction by Laura Battle and Andrew DicksonFriday: Politics by Gideon RachmanSaturday: Critics’ choiceTell us what you thinkWhat are your favourites from this list — and what books have we missed? Tell us in the comments belowJoin our online book group on Facebook at FT Books Café More

The UK is struggling to attract foreign direct investment, with projects down nearly 30 per cent from a peak in 2016-17, according to headline government figures. Analysis by the Financial Times of official data and other sources showed that the drop in the number of FDI projects has been particularly acute in some key sectors since the Brexit referendum. But although foreign investment is a key driver of growth in productivity and living standards, there is uncertainty around its performance because of a lack of comprehensive data on the topic. While the government and analysts track the number of FDI projects, estimates of their economic impact are often based on incomplete information, making it difficult to understand what is needed to improve Britain’s attractiveness to investors. How much have FDI project numbers declined? Figures published by the Department for Business and Trade showed that the UK secured 1,654 FDI projects in the year ending in March 2023, up 4 per cent from 2021-22 but down 27 per cent from 2016-17.It also showed that the number of projects in many of the UK’s key sectors — including business and consumer services, media and the creative industries, and electronics and communication — was sharply down year-on-year in 2022-23, and had dropped more than 60 per cent compared with 2016-17.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Nigel Driffield, professor of international business at Warwick Business School, said that with Brexit ending the UK’s status as the “English-speaking bridge between the EU and the rest of the world”, the country was “not attracting the sorts of investment that is focused on selling and generating products in the richest markets in the world, the [EU] single market”. He added that investment requiring large economies of scale, such as in the automotive and biotechnology sectors, were also affected. Economists warn that high inflation, low economic growth, policy U-turns and political turmoil over the past two years have also had a negative effect on the UK’s appeal to foreign investors. “What is killing investment at the moment is uncertainty,” said Driffield. How does UK FDI compare with other countries? The UK is trying to attract more investment at the same time as the US and EU are launching ambitious programmes of their own.The US Inflation Reduction Act, a $369bn measure aimed at incentivising investment in green technologies, offers investors hundreds of billions of dollars in subsidies and tax credits. Meanwhile, NextGenerationEU is a €800bn instrument to help the bloc build a greener and more digital economy. These schemes have “significant implications for the long term growth prospects of the UK and could trigger a negative spiral that would be difficult to revert without a new clear UK value proposition for foreign investors”, said Riccardo Crescenzi, professor of economic geography at the London School of Economics.However, Lord Dominic Johnson, UK minister for investment, insisted that the UK also has a “huge amount of money” available to support growing industries across different programmes. “What we need to do is make sure that we’re marketing cleverly our current support subsidies and grants and investment programmes,” he said. But the EY European attractiveness survey found that last year the number of FDI projects secured in France outstripped the number in the UK. The consultancy also reported that Britain’s share of European digital tech projects dropped from a decade average of 28.3 per cent to 19.8 per cent in 2022.Data from fDi Markets, an FT-owned company that tracks overseas greenfield projects across the world, showed that the UK global market share of FDI projects peaked in 2015 and has declined almost uninterruptedly since then. The share of projects has been rising in the US over the same period. By contrast, the UK’s financial services sector continues to attract strong investment, according to government data, with the number of FDI projects rising compared with last year and 2016-17. You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Data from consultancy EY also showed that the UK remained the most attractive European destination for financial services investment last year. Jonathan Portes, professor of economics at King’s College London, said the figures suggested that “Brexit has made the UK a less attractive investment proposition for global supply chains in advanced manufacturing, but has not stopped the high productivity service sector from going from strength to strength”.What is the value of UK FDI? One reason behind the falling number of projects in the UK could be that the government is prioritising projects that deliver more jobs and add higher value. “We have shifted our focus from just checking boxes in terms of numbers of FDI projects that we’re supporting . . . to value,” said Johnson.However, figures around the value of FDI projects are uncertain because the government and other organisations often base estimates of how much foreign companies invest and the number of jobs they create on incomplete information. Moreover, official figures are affected by factors such as company valuations and exchange rate fluctuations. fDi Markets data showed there was a record level of foreign capital invested in the UK last year, driven mainly by renewable energy projects.Government data around FDI projects supported by the business department showed that their economic impact fell 18 per cent year-on-year.Complicating the picture further, Britain’s Office for National Statistics and other international organisations report FDI data in terms of flows, which can be distorted by single large mergers and acquisitions. They also look at FDI stocks, which measure the book value of all existing FDI, rather than the sum of investment over time. These are subject to changes in the valuation in company accounts as well as exchange rate fluctuations, so their values can change year-on-year even without new investment. The latest ONS figures showed that FDI flows dropped from a peak of 9.6 per cent of GDP in 2016 to minus 2.3 per cent in 2021, while the stock of FDI, or investment accumulated over time, was up slightly in 2021. On those metrics, the UK slipped down in the OECD ranking for FDI flows over the past seven years, but remained competitive in terms of stock, which reached a record high value of nearly $2.7tn in 2022, according to the latest World Investment Report. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Japan’s economy contracted more sharply than expected in the third quarter, underscoring the fragility of its post-pandemic recovery and complicating the Bank of Japan’s efforts to gradually unwind its easing measures.Gross domestic product declined 2.1 per cent on an annualised basis on weak household consumption and business spending, much deeper than the average 0.4 per cent fall forecast by economists. The reading translated into a 0.5 per cent contraction on a quarterly basis, according to preliminary figures released by the cabinet office on Wednesday.Japan’s economy had rebounded from the Covid-19 pandemic during the first six months of the year, mainly on the strength of resurgent car exports and the return of inbound tourists. But some economists have warned the economy is starting to lose steam as the weak yen and higher living costs damp domestic consumption. Companies have also held off on investments due to rising prices and economic uncertainty in the US and China. “Weakness in consumption is going to keep growth trends pretty restrained overall,” said Stefan Angrick, a senior economist at Moody’s Analytics, projecting that a recovery in consumption was unlikely until the middle of next year.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Consumption was flat for the three months to September, while capital expenditure fell 0.6 per cent on the previous quarter, after both gauges fell in the April to June quarter. Prime Minister Fumio Kishida this month announced a $113bn stimulus plan to address the pain from high inflation with temporary income and residential tax cuts and cash handouts to low-earning households.But economists said the measures, which also included extending energy subsidies and support for businesses to raise wages, would offer only a minimal boost to the economy. The economic slowdown over the summer is expected to complicate an already challenging environment for the BoJ to plot its exit from decades of ultra-loose monetary policy. The weak yen and higher inflation, which after decades of deflation has proven more persistent than expected, have put increasing pressure on the BoJ to dial back its easing measures.The central bank last month took a significant step to end its seven-year policy of capping long-term interest rates, saying it would allow the yields on 10-year Japanese government bonds to rise above 1 per cent. Most economists expect the BoJ to also end its short-term negative interest rates — the only ones remaining in the world — by next spring at the latest. The yen has edged close to a 33-year low against the dollar this week, fuelled by the yawning gap between US and Japanese borrowing costs. But Kazuo Ueda, the BoJ’s governor, told the Financial Times Global Boardroom conference last week that unwinding the central bank’s sweeping stimulus policies would be “a serious challenge”, adding that it would proceed carefully with raising interest rates. “The BoJ will want to avoid weakening the yen further,” said Angrick. “At the same time, if it pulls back on monetary support too quickly, . . . it will kill the domestic economy and that’s not going to help with the exchange rate either. It’s a headache for the BoJ.” More