Economy

TOKYO (Reuters) -Japan’s wholesale inflation accelerated in October as renewed yen falls pushed up import costs for some goods, data showed on Wednesday, complicating the central bank’s decision on how soon to raise interest rates.The corporate goods price index (CGPI), which measures the price that companies charge each other for goods and services, rose 3.4% in October from a year earlier, Bank of Japan data showed, above market forecasts for a 3.0% gain.It followed a 3.1% increase in September.The yen-based import price index fell 2.2% year-on-year last month, less than the 2.5% drop in September, the data showed. On a month-on-month basis, the index rose 3.0% after falling 2.8% in September.A spike in the price of rice, coupled with the increasing cost of nonferrous metals, food and oil, pushed up overall wholesale inflation, the data showed, a sign companies remained under pressure from rising raw material costs.The BOJ ended negative interest rates in March and raised short-term interest rates to 0.25% in July on the view Japan was making progress towards sustainably achieving its 2% inflation target.BOJ Governor Kazuo Ueda has stressed the bank’s readiness to raise interest rates again if inflation becomes driven more by robust domestic demand and higher wages, rather than rising raw material costs. More

NEW YORK (Reuters) -Even with some recent bouts of volatility, it appears money market liquidity levels remain robust, a top New York Federal Reserve official said on Tuesday, suggesting the case for the Fed to press on with its balance sheet drawdown can proceed.While the volatility that struck markets at the end of September is something that argues for central bankers to keep a close eye on markets, even with the churn, “I want to make clear that there is considerable evidence that reserve supply remains abundant – quarter-end pressures do not appear to be induced by a scarcity of reserves,” said Roberto Perli, who manages the implementation of monetary policy at the Federal Reserve Bank of New York, in the text of a speech. “Although we are monitoring events closely, there are few obvious and foreseeable risks to our continuing to implement monetary policy efficiently and effectively” at the command of the rate setting Federal Open Market Committee, he said.The Fed has for just over two years been allowing Treasury and mortgage bonds to mature and not be replaced, in a process called quantitative tightening, or QT. That has taken Fed holdings from a peak of $9 trillion to the current $7 trillion mark.Fed officials have widely argued they have plenty of room to run in shrinking holdings and are closely watching market indicators for signs of money market tightness. Some in markets have argued that stress seen on the final business day of September, with the end of the third quarter, signals a tightness that could auger an imminent QT end. Instead, Perli, in his remarks, said quarter-end pressures were contained and usage of the Fed’s Standing Repo Facility was modest historically speaking.“I, like many market participants, have observed the greater levels of volatility in overnight repo around financial reporting dates like quarter-end,” Perli said, while adding “this slow rise in repo rates has been modest and orderly overall.” He added the rise in repo rates “is an entirely expected and arguably healthy development – a sign that money markets are normalizing as liquidity declines and as Treasury net issuance continues to grow.” The QT process aims to take out liquidity added during the coronavirus pandemic and its aftermath, and has been part of a broader normalization of monetary policy. The fate of QT has been in the minds of many observers because the Fed is now in a rate cutting scenario.The Fed is aiming to leave the financial system with enough liquidity to allow for normal market volatility while affording it firm control over the federal funds rate, its chief lever for achieving its job and inflation goals. More

(Reuters) – The U.S. Justice Department said on Tuesday that insurance magnate Greg Lindberg had pleaded guilty to a $2 billion fraud and money laundering scheme operated through a network of companies based in North Carolina, Bermuda, Malta, and elsewhere.Lindberg, 54, pleaded guilty to one count of conspiracy to commit offenses against the U.S. and one count of money laundering in connection with a scheme to defraud insurance regulators and policyholders lasting from 2016 through 2019, the Justice Department said in a statement. More

(Reuters) -The Federal Reserve’s policy rate continues to act as a brake on the resilient labor market and on inflation that is still above the 2% target, two U.S. central bankers said on Tuesday, a view that appears to argue for more interest rate cuts, even as both signaled they were not ready to judge how fast or by how much.”In my judgment we are still in a modestly contractionary stance, but ultimately the economy will guide us, in terms of how far we are needing to go” in cutting the Fed’s benchmark for short-term borrowing costs, Minneapolis Fed President Neel Kashkari said at a Yahoo Finance event.Speaking earlier, Richmond Fed President Thomas Barkin called the current level of rates “somewhat less restrictive” than it had been, and said he could see scenarios where demand rises and the central bank needs to focus on containing inflation, and others where businesses start laying off workers and it needs to turn more to protecting the job market.”With the economy now in a good place and interest rates off their recent peak but also off their historic lows, the Fed is in position to respond appropriately regardless of how the economy evolves,” Barkin said at an event in Baltimore. The Fed cut its policy rate last week by a quarter of a percentage point to the 4.50%-4.75% range. Short-term borrowing costs are now 75 basis points below where they were two months ago, just before the central bank started reducing rates to bring them more in line with falling inflation and what appeared to be a quickly cooling labor market.In September, Fed policymaker projections were consistent with another quarter-percentage-point rate cut in December, and four more like-sized reductions next year, bringing the policy rate to the 3.25%-3.50% range.  Since then, a lot has happened that could complicate the central bank’s next steps.Inflation by the Fed’s targeted measure was 2.1% in September, just above its target, but measures of underlying inflation that strip out volatile energy and food prices have been stuck higher, with little sign of recent progress. Economists expect more of the same when the U.S. Labor Department releases the consumer price index for October on Wednesday.Monthly job gains have dropped, but unemployment, at 4.1%, is low by historical standards. Policymakers are watching for signs of further weakening – which would suggest the need for more rate cuts – or of continued resilience, and they will get just one more monthly employment report before their Dec. 17-18 meeting.NEW ADMINISTRATIONRepublican President-elect Donald Trump’s victory in last week’s election also creates fresh uncertainty. Trump, who will take over from Democratic President Joe Biden in January, has promised to cut taxes, impose new tariffs on imports, and deport a record number of immigrants. While financial markets have generally moved to price in faster economic growth and fewer interest rate cuts as a result, central bankers say they can’t plan a response until it’s clear exactly what policies will be enacted.Asked what could prompt the Fed to pause rate cuts at the December meeting, Kashkari said he feels there is too little time between now and then for the data to show a reheating of the labor market.”I think there’d have to be a surprise on the inflation front to change the outlook so dramatically,” Kashkari said. “The bigger question long run is where are we going to settle?”Kashkari said he believes the level of borrowing costs that neither stimulates nor restricts the economy – the so-called neutral rate – is likely higher than in the past, perhaps because productivity has increased. Although a higher neutral rate could be one argument for fewer rate cuts ahead, Kashkari steered clear of making predictions, as did Barkin. “I think we all agree we are above neutral now,” Kashkari said. “But over the course of the next year, we’re going to get a lot more information about where neutral is.” More

This article is an on-site version of our FirstFT newsletter. Subscribers can sign up to our Asia, Europe/Africa or Americas edition to receive the newsletter every weekday. Explore all of our newsletters hereIn today’s newsletter: Trump’s foreign policy team takes shapeA deadly car-ramming attack in ChinaHow Big Oil disguises its methane emissionsGood morning. Donald Trump has signalled a tough new stance on China with hawkish appointments to top foreign policy roles, according to experts in Washington, as the president-elect’s cabinet begins to take shape.Trump yesterday named Mike Waltz, a Florida congressman and former Green Beret who has called China an “existential” threat, as his security adviser, and is expected to nominate Senator Marco Rubio, another leading China hawk, as his secretary of state.The president-elect’s pick for ambassador to the UN, representative Elise Stefanik, has also been extremely critical of Beijing.Foreign policy experts who believe the US should take a tougher line on China than that pursued by Democratic President Joe Biden welcomed the personnel moves.“This is like Christmas morning for China hawks,” said Eric Sayers, managing director at the Beacon Global Strategies consultancy. Read more about the Trump appointees and their views on China.We have more recommended reads on US-China relations:Zhuhai air show: China unveiled its latest stealth fighter, as Beijing competes with Washington for air superiority amid growing tensions in the region. Climate diplomacy: China has called for the US to engage in “constructive dialogue” to tackle climate change in future, in a thinly veiled swipe at the incoming Trump administration during the UN COP29 summit in Baku.Here’s what else we’re keeping tabs on today:Economic data: The US reports CPI inflation data for October.Xi Jinping: The Chinese leader travels to Peru for a summit of the Asia-Pacific Economic Cooperation forum. During his visit Xi is expected to inaugurate a Chinese-built megaport on the Latin American country’s Pacific coast.Results: Chinese internet giant Tencent reports third-quarter earnings.Five more top stories1. Police in southern China’s Zhuhai city have arrested a driver accused of ramming his vehicle into people in a busy pedestrian zone, killing 35 and injuring 43. The incident on Monday evening is the latest in a series of cases of apparently random attacks that analysts have said hint at rising social tensions in China.2. Shares in Nissan jumped as much as 20 per cent yesterday after a fund managed by activist investor Effissimo Capital Management was revealed to have taken a stake in the struggling Japanese automaker. Singapore-based Effissimo, a secretive hedge fund run by Japanese managers, is known for its high-profile campaigns against some of the biggest names in corporate Japan.3. The chief executive of Neom, Saudi Arabia’s $500bn futuristic development in the desert, has been abruptly replaced after six years in charge of Crown Prince Mohammed bin Salman’s flagship project. The company gave no reason for the departure of Nadhmi al-Nasr, whose tenure was often marked by controversy as he oversaw the highly ambitious development.4. Baidu has unveiled artificial intelligence-powered smart glasses as Chinese tech groups race with global rivals to capitalise on AI-integrated hardware. The company said the glass, which run Baidu’s large language model Ernie, would “become a private assistant” for wearers.5. Wall Street bonuses are on course to rise by as much as 35 per cent this year, according to pay consultancy Johnson Associates. Activity levels for corporate deals, stock sales and debt transactions have gradually recovered in 2024, following two fallow years. Here are the investment bankers most likely to make the biggest gains. More US news: Wall Street investors Scott Bessent and Howard Lutnick are the leading contenders to be Trump’s Treasury secretary after hedge fund billionaire John Paulson dropped out of the race for the job.The Big ReadMethane is responsible for an estimated 30 per cent of the world’s warming since the industrial revolution. Some methane comes from natural sources, such as volcanic gas. But the bulk of emissions are caused by human activity. An FT analysis found that oil and gas companies regularly hide leakages of the deadly greenhouse gas, despite being one of the easiest climate fixes there is.We’re also reading . . . Trump’s mandate for retribution: There are few theoretical limits on what the president-elect can do to carry out his vows of revenge against perceived enemies, writes Edward Luce.Emerging markets: Big changes are coming for the US dollar and currencies across Asia if Trump imposes larger tariffs.The problem with self-driving cars: The better an automated system performs, the more complacent — and dangerous — we become, writes Sarah O’Connor.Chart of the dayIt is so much easier to blame the disappearance of US manufacturing jobs on China than on domestic consumers and automation, writes Martin Wolf. But fetishising manufacturing will not restore the old labour force, and Trump’s threatened tariffs on Beijing will cause further malign side-effects. Some content could not load. Check your internet connection or browser settings.Take a break from the newsGeorgina Adam reports on Art Week Tokyo and why foreign gallerists are saying there is a “new obsession with Japan.”Installation view of the AWT Focus show at Okura Museum of Art, Tokyo More

(Reuters) -Commonwealth Bank of Australia’s first-quarter cash earnings came in slightly better than market expectations on the back of improved volumes in its home lending and household deposits portfolio and buoyant margins amid high interest rates. Despite deposit price competition and temporary volatility from preparing to repay a large loan from the Reserve Bank of Australia in the second half, CBA’s retail bank saw growth in transaction accounts, up by 121,000, while home loans grew by A$8.6 billion.CBA, which holds a quarter of the country’s A$2.2 trillion ($1.46 trillion) mortgage market, logged common equity tier 1 ratio, a measure of spare cash, of 11.8% as at September-end.CBA cautioned that Australia’s economic growth remains sluggish due to a 12-year high interest rate of 4.35%, which is dampening consumer spending.”Inflation is moderating, but at a slowing pace, and global geopolitical tensions are creating uncertainty … we remain optimistic on the overall outlook and the Australian economy remains fundamentally sound,” CEO Matt Comyn said in a statement.While the high interest rate environment helped Australian banks fill their coffers, a price war, fuelled by elevated interest rates and living costs, has forced the lenders to sacrifice their market share or margins to survive.The country’s biggest lender said its cash net profit after tax was A$2.50 billion ($1.63 billion) for the quarter ended Sept. 30, compared with A$2.50 billion a year earlier. That compares to a Visible Alpha consensus estimate of A$2.48 billion, as per Citi.Costs went up by 3% during the quarter, mainly because of higher wages, more spending on improvements, and one extra day in the quarter, CBA said. The bank set aside A$160 million for potential loan losses in the quarter, with a slight increase in overall provisions.The number of late payments on home loans stayed steady, while there was a small seasonal improvement in overdue unsecured consumer loans. The amount of problematic and non-performing loans saw a slight uptick.($1 = 1.5307 Australian dollars) More

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