Economy

Sanctions have complicated Russia’s trade with its major partners such as China or Turkey, as local banks are extremely cautious with Russia-related transactions to avoid scrutiny from Western regulators. This year, Russia permitted the use of cryptocurrencies in foreign trade and has taken steps to make it legal to mine cryptocurrencies, including bitcoin. Russia is one of the global leaders in bitcoin mining. “As part of the experimental regime, it is possible to use bitcoins, which we had mined here in Russia (in foreign trade transactions),” Siluanov told Russia 24 television channel. “Such transactions are already occurring. We believe they should be expanded and developed further. I am confident this will happen next year,” he said, adding that international payments in digital currencies represent the future.Earlier this month, President Vladimir Putin said that the current U.S. administration was undermining the role of the U.S dollar as the reserve currency by using it for political purposes, forcing many countries to turn to alternative assets.He singled out bitcoin as an example of such assets, saying that no-one in the world could regulate bitcoin. Putin’s remarks indicated that the Russian leader backs the extensive use of cryptocurrencies. More

Analysts at BofA Securities indicate that Trump’s calls for NATO members to ramp up defense spending to 5% of GDP.As per BofA Securities, NATO’s focus on strengthening capabilities in air defense, offensive weapons systems, and nuclear deterrents, combined with rising budget commitments, underscores a favorable outlook for European defense firms. The alliance’s recent moves to boost spending targets to 3% of GDP, alongside Trump’s push for more robust commitments, signal a shift that is likely to sustain higher valuations for the industry. The increased expenditure demands come amid a backdrop of rising geopolitical tensions, particularly in Eastern Europe and the Arctic regions.Currently, European defense companies are trading at a modest premium to their U.S. counterparts, a shift from historical norms when they typically lagged behind. Analysts attribute this change to an improved growth trajectory and the rising recognition of Europe’s key role in global security dynamics. The higher valuations reflect optimism about the sector’s earnings potential and its ability to capitalize on expanding budgets across NATO countries.Additionally, the emergence of new defense technology firms is altering the competitive landscape on both sides of the Atlantic. Companies like Helsing in Europe and Anduril in the U.S. are increasingly challenging traditional defense contractors with innovative offerings, such as drone swarm technologies and precision munitions systems. The analysts at BofA flag this trend as an important dimension of future industry dynamics, with new entrants injecting fresh momentum into the sector.Overall, the combination of geopolitical pressures, policy shifts within NATO, and disruptive technological advancements sets a supportive stage for the European defense industry. BofA Securities projects that the sector’s strong premium valuation will persist through 2025, supported by both strategic imperatives and market confidence in the industry’s resilience and adaptability. More

ANKARA (Reuters) – Expectations of a Turkish central bank rate cut strengthened on Wednesday after a less-than-requested minimum wage hike, economists said, as it showed the government’s determination to reach disinflation targets.The 30% rise will test the government’s efforts to fight years of chronic high inflation as it could pressure prices.Turkey’s net monthly minimum wage will be 22,104 Turkish lira ($627) in 2025. The government said the level was set to maintain fiscal discipline and continue the fight against inflation. The workers union had requested an increase around 70%.Economists said the wage rise, impacting some 9 million workers, made it certain the central bank will start policy easing later this week.”Expectations for a rate cut have risen, and I’ve revised my own forecast from a 150 basis point cut to 200 basis points. However, a 250 basis point cut wouldn’t be a surprise,” said Filiz Eryılmaz, chief economist at ALB Yatırım.According to a Reuters poll published last week, the central bank is expected to start an easing cycle after eight months of steady policy. Economists expected the first rate cut to be between 150-250 basis points from the current policy rate of 50%.”This (minimum wage) increase, which is at the lower end of expectations, is expected to have an additional CPI impact of less than 1 point, and we believe it has eased the central bank’s hand in initiating interest rate cuts,” said Haluk Burumcekci, founding partner at Burumcekci Consulting.According to previous central bank research, a one percentage point increase in the minimum wage contributes 0.06 to 0.2 points to inflation. It is estimated that the new hike, which could impact inflation between 1.8-6 points, is mostly taken into account in its year-end inflation forecast of 21%.Turkish inflation declined to 47.09% in November from an annual high of 75% in May, mainly due to tight monetary and fiscal policies. However, the improvement in the print was slower than previously forecast according to the central bank.The bank will announce its policy rate decision at 1100 GMT on Thursday. ($1 = 35.2599 liras) More

TOKYO (Reuters) -Japan’s government is set to compile a record $735 billion budget for the fiscal year from April due to larger social security and debt-servicing costs, adding to the industrial world’s heaviest debt, a draft seen by Reuters showed.The 115.5 trillion yen draft budget is being compiled as the Bank of Japan shifts away from its decade-long stimulus programme, putting more burden on the government to stimulate the economy.In an attempt to improve public finances, however, the government plans to trim new bond issuance next fiscal year to 28.6 trillion yen from this fiscal year’s initially planned 35.4 trillion yen, helped by tax revenue growth, the draft showed.It is the first time in 17 years that new bond issuance will drop below 30 trillion yen.Decades of stop-start fiscal spending and reform have left Japan with the industrial world’s heaviest public debt burden – more than double the size of its annual economic output.The BOJ’s retreat from a decade of radical stimulus adds to pressure on Japan’s fiscal health, as the government can no longer count on the central bank to effectively bankroll debt. The BOJ ended negative interest rates in March and raised its short-term policy target to 0.25% in July. Governor Kazuo Ueda signalled on Wednesday that the next rate hike is nearing, saying wage and price developments indicate the economy will move closer to sustainably achieving the central bank’s 2% inflation target next year.The draft budget, up from this fiscal year’s 112.6 trillion yen, is expected to be approved by Prime Minister Shigeru Ishiba’s cabinet on Friday for submission to parliament for deliberation early next year.Tax revenue is projected to rise 8.8 trillion yen from this year’s initial estimate to a record 78.4 trillion yen, thanks in part to a recovery in corporate profits, according to the draft.The primary budget balance, which excludes new bond sales and debt servicing costs, will be in deficit of less than 1 trillion yen, keeping alive the possibility of achieving the government’s goal of delivering a primary budget surplus by the next fiscal year.The budget draft assumes the yield on the benchmark 10-year government bond rises to 2% next fiscal year from this year’s 1.9%, topping 2% for the first time in 13 years.That would boost debt-servicing costs for interest payments and debt redemption to 28.2 trillion yen from 27 trillion yen for this fiscal year.The government on Wednesday revised its economic outlook, estimating the real economic growth rate for the current fiscal year at 0.4%, down from 0.7% projected in November as a Chinese economic slowdown weighed on exports.The growth projection for the next fiscal year was kept at 1.2%.($1 = 157.2200 yen) More

The probe, which was launched on Jan. 5 and due to be completed in a year, will be extended to April 5 due to the “complexity” of the investigation, the ministry said in a brief statement, without elaborating. The ministry previously said the probe could be extended by six months under special circumstances.Preliminary findings from the probe have shown dumping of EU brandy threatens to damage China’s sector, the ministry said in October as it imposed temporary measures on EU brandy imports, hitting French brands including Hennessy and Remy Martin. The probe was widely seen as the outcome of France’s support of EU tariffs on China-made electric vehicles. French President Emmanuel Macron previously called the probe “pure retaliation”.The Chinese measures require China’s importers to pay security deposits of nearly 40% if they wish to import brandy from the bloc, making it more costly upfront to ship brandy from the EU. France’s trade ministry previously called the Chinese measures “incomprehensible”, and that they had violated free trade. Last month, the EU Commission said it had formally brought the provisional Chinese anti-dumping measures to the World Trade Organization.French brandy shipments to China reached $1.7 billion last year and accounted for 99% of the country’s imports of the spirit. More

BEIJING (Reuters) – In China’s take on Squid Game, fraudsters are preying on the financially distressed in a slumping economy with promises of prize money, debt restructuring and other schemes that are not always what is promised. Unlike the dystopian South Korean TV series, which returns to the small screen for a second season on Thursday, Chinese players taking on “self-discipline” challenges do not risk their lives if they lose. But courts have found some participants in isolation challenges – who pay hundreds of dollars to stay in a room for days, following prescribed rules in the hopes of winning as much as 1 million yuan ($140,000) – are being scammed. And regulators are warning people about dodgy debt relief claims.Isolation challenges, often advertised on Douyin, as TikTok is known in China, have risen in popularity this year as the world’s second-biggest economy slows. It grew at the weakest pace in more than a year in the three months to September, spurring policymakers to pledge fresh measures to boost household incomes among other steps.The long lists of rules in the challenges include toilet breaks not exceeding 15 minutes and bans on touching the alarm clock more than twice a day. Many players cry foul when they do not survive their first day for infractions caught on surveillance cameras, which they dispute.In October, a court in the eastern province of Shandong ordered an organiser to refund 5,400 yuan ($740) in sign-up fees to a player surnamed Sun, ruling the contract was unfair and “violated public order and good morals”. Sun was trying to win 250,000 yuan by surviving a 30-day isolation challenge with rules forbidding smoking, use of electronic devices, consumption of alcohol and contact with anyone outside the room.On the third day of the challenge, organisers said Sun had covered his face with a pillow, breaking a prohibition on players obscuring their faces.The Cyberspace Administration of China, which regulates the country’s internet, and ByteDance, owner of Douyin, did not respond to Reuters requests for comment. The National Financial Regulatory Administration (NFRA) warned the public on Tuesday not to fall for “debt intermediaries” claiming to help people restructure their borrowings or improve their credit profiles.Touting their services through phone, texts, flyers and ads on social media, such intermediaries claim they can help secure new loans or provide temporary funds, but the regulator warned the services come with a high fee.Intermediaries charge as much as 12% of the loan value in “service fees”, the state-backed National Business Daily said.Another scheme involves charging large fees to ostensibly help debtors repair their credit records, according to the NFRA, which cautioned that borrowers’ personal information might also be leaked or sold.China’s household loans totalled 82.47 trillion yuan ($11.3 trillion) in November, according to central bank data. ($1 = 7.2988 Chinese yuan renminbi) More

TOKYO (Reuters) -The Bank of Japan expects the economy to move closer to sustainably achieving the central bank’s 2% inflation target next year, Governor Kazuo Ueda said on Wednesday, suggesting the timing of its next interest rate increase was nearing.But he warned of the need to scrutinise the fallout from “high uncertainties” surrounding overseas economies, especially the economic policies of the incoming U.S. administration of President-elect Donald Trump.The outlook for next year’s wage negotiations between Japanese firms and unions is also key, Ueda said in explaining factors the central bank would scrutinise in setting policy.”The timing and pace of adjusting the degree of monetary accommodation will depend on developments in economic activity and prices as well as financial conditions going forward,” Ueda said in a speech to business lobby Keidanren.The remarks underscore the BOJ’s resolve to keep pushing up short-term rates from the current 0.25% next year. Most analysts expect the bank to raise rates to 0.5% in January or March.The BOJ ended negative interest rates in March and raised its short-term policy target to 0.25% in July. It has signalled a readiness to hike again if wages and prices move as projected.Consumption has shown signs of improvement as intensifying labour shortages push up wages, Ueda said, stressing progress Japan has made in durably achieving the BOJ’s price target after years of aggressive monetary stimulus.In the current phase of transition towards achieving 2% inflation in a sustainable manner, the BOJ will support the economy by keeping its policy rate lower that levels neutral to the economy, Ueda said.But if the economy continues to improve, the BOJ will raise rates, as maintaining excessive monetary support for too long could heighten inflationary risks, he said.”Our projection is that the virtuous cycle will further intensify and that Japan’s economy will move closer to sustainable and stable 2% inflation, accompanied by wage increases,” Ueda said on the prospects for 2025.”Prices of a wide range of goods and services have begun to rise moderately recently, reflecting increasing wages. Against this background, we judge that sustainable and stable achievement of our 2% inflation target is now within sight.”The speech followed remarks Ueda made last week calling for the need to await more information on Trump’s policy stance and domestic wage developments before hiking borrowing costs again.Those remarks at a press conference after the BOJ kept rates steady, were interpreted by investors as dovish, helping push the yen to its weakest since July and triggering warnings by Japanese authorities.Japan must see wages rise at levels consistent with 2% inflation, Ueda said on Wednesday, adding that high profits achieved by big firms must be distributed to smaller firms and households for the economy to durably meet the BOJ’s inflation target.”We will examine how wage hikes by small and midsize firms will evolve, using our network of branches,” Ueda said.The BOJ will release its quarterly report on regional economic conditions on Jan. 9, which will likely include its view on whether wage hikes are spreading nationwide.The report will likely be among factors the BOJ’s board will scrutinise for its next policy decision on Jan. 24. More

China will vigorously promote the reform of the commercial housing sales system, and expand the scope of urban village renovation beyond the addition of 1 million units, the report said.China will strictly control the supply of commercial housing, while increasing the supply of affordable housing to help solve the living problems of a large number of new citizens, young people and migrant workers, it said.Policymakers have stepped up efforts to revive the real estate by introducing new measures to encourage home demand after a government-led campaign to rein in highly leveraged developers triggered a crisis in 2021.Since September, measures aimed at encouraging homebuying have included cutting mortgage rates and minimum down-payments, as well as tax incentives to lower the cost of housing transactions.The real estate market has shown some momentum of stabilising, with home transactions in October and November seeing year-on-year and month-on-month growth for two consecutive months, said the conference.China’s home prices fell at the slowest pace in 17 months in November, supported by government efforts to revive the sector, official data showed.An official of the Central Financial and Economic Affairs Commission in December called for policy measures with direct impact on stabilising the real estate market to be adopted as soon as possible, with local governments getting greater autonomy to buy housing stock.(This story has been corrected to say that home transactions showed year-on-year and month-on-month growth, not double growth, in paragraph 6) More