Economy

SYDNEY (Reuters) – Asian shares eased on Monday after a run of upbeat economic data from the United States and globally lessened the risk of recession, but also suggested interest rates would have to rise further and stay up for longer. Bond markets took a beating on Friday following stunning reports on jobs and services, catching speculators very short of dollars and sending the currency sharply higher.The dollar extended its rally on the yen to a three-week top of 132.60 on Monday amid reports the Japanese government had offered the job of central bank governor to the current deputy, Masayoshi Amamiya.Amamiya has been closely involved with the Bank of Japan’s current super-easy policies and is considered by markets to be more dovish than some other contenders.The early gains were later pared to 131.94 yen but still helped the dollar hold firm on a basket of currencies at 103.090, having jumped 1.2% on Friday. The euro was huddled at $1.0791 after shedding 1.1% on Friday.In equity markets, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.7%, with South Korea down 1.0%. Japan’s Nikkei added 1.1%, encouraged by hopes the BOJ would keep policy easy.S&P 500 futures dipped 0.2%, while Nasdaq futures lost 0.3% as the stellar January payrolls report forced investors to price in the risk of more hikes from the Federal Reserve, and less chance of cuts later in the year.Futures are almost fully priced for a quarter point rate rise in March, and likely another in May, leaving the peak at 5.0% from 4.9% ahead of the jobs data.Likewise, yields on two-year Treasuries were now up at 4.35%, compared to 4.09% before the data, while 10-year yields climbed to 3.56%.A host of Fed officials are set to speak this week, led by Chair Jerome Powell on Tuesday, and the tone could be hawkish. Policy makers from the European Central Bank and the Bank of England will also be making appearances. Bruce Kasman, head of economic research at JPMorgan (NYSE:JPM), noted recent surveys on manufacturing globally had also shown a bounce in January.”The data decisively quiet the near-term recession narrative,” wrote Kasman in a note. “It appears that underlying growth momentum did not materially slip through a noisy turn into the new year, and the U.S. expansion remains firmly on its feet.””Importantly, we see material risk that developed market rates will need to rise well above market estimates of terminal rates for the cycle, even as we expect the Fed to signal a pause next quarter.”Higher rates, and thus yields, will stretch equity valuations and challenge the market’s bullish outlook for assets including commodities.Gold, for one, slid 2% on Friday and was last stuck at $1,865 an ounce. [GOL/] Oil futures steadied on Monday, having lost 3% post-payrolls. Brent edged up 11 cents to $80.05, while U.S. crude firmed 13 cents to $73.52 per barrel. [O/R] More

BEIJING (Reuters) -China’s policymakers plan to show more support for domestic demand this year but are likely to stop short of splashing out big on direct consumer subsidies, keeping their focus mainly on investment, three sources close to policy discussions said.In recent weeks, top policymakers have repeatedly signalled their intention to work towards harvesting the consumer power of China’s 1.4 billion people, after economic growth in 2022 slumped to one of its weakest levels in nearly half a century.That has raised expectations that large-scale household stimulus measures could be announced at an annual parliament meeting in March. Prominent academics have felt emboldened to speak publicly about sizeable demand-side measures such as 1 trillion yuan ($148.28 billion) or more in nationwide consumption vouchers.The sources close to policy discussions, however, expect China to stick more closely to its familiar playbook of policies to support key industries and splurge on infrastructure, aiming to shore up jobs and incomes which will eventually lift consumer sentiment off record lows.    “There are limited options to stimulate consumption,” said one insider, who like the other sources spoke on condition of anonymity due to the closed-door nature of policy debates. “The possibility of giving cash handouts is small.”China’s National Development and Reform Commission, the top state planner, did not immediately respond to a request for comment.Last year was dismal for Chinese consumers, who bore the brunt of harsh COVID-19 curbs that were abruptly lifted in December. Retail sales fell 0.2%, the second worst performance since 1968, while per capita disposable income rose just 2.9%, the second smallest rise since 1989. REBALANCING OVERDUE    Many economists have argued for years that the world’s No. 2 economy should rebalance, relying more on domestic consumption and reducing its reliance on debt-backed investment, which now produces more debt than growth.Reviving consumer demand quickly is even more critical for an economic recovery this year as the country’s exports falter amid a global slowdown and the crisis-hit property market struggles to get back on its feet.  But policymakers’ apparent reluctance to veer too swiftly, or too far, from their old investment playbook highlights the difficulty of any rebalancing act for the $18 trillion economy.    Since the Communist Party’s Central Economic Work Conference in December, top policymakers have repeated their intention to boost consumer’s spending power, without saying how.    President Xi Jinping said on Wednesday that China should take steps so that consumers “dare to spend without worrying about the future.”    World Bank data shows investment as a share of China’s GDP is almost 20 percentage points above the global average, while household consumption is almost 20 points below, a greater imbalance than Japan’s in the 1980s, before its long stagnation.    MUST ‘GUARANTEE’ GROWTH    Change is easier said than done.Chinese leaders have signalled their intention to boost domestic consumption many times in the past decade, without much follow-through.    Policymakers worry that large cash handouts would worsen wealth inequality, lower productivity and fan inflation risks, said the sources involved in internal policy discussions. Some economists also say any sales gains could be short-lived.    “The government prefers to invest and launch projects,” said Guo Tianyong at Beijing’s Central University of Finance and Economics.    Given such concerns, arguments for Beijing-funded consumer vouchers in excess of 1 trillion yuan made by influential academics such as Yao Yang, dean of the National School of Development at Peking University, or for bolstering China’s barely noticeable social safety net made by most advocates of a consumer-centric growth model, are losing ground. Advisers to Chinese policymakers worry that weakening demand in the West endangers manufacturing jobs. They argue that a range of industries, including emerging technologies such as AI, require support and that infrastructure spending needs to continue if youth unemployment is to be brought down from near-record levels.    “We must guarantee economic growth of above 5% this year. If economic growth revives, companies will have money and people will have jobs and incomes,” said an adviser to the Chinese cabinet.    The government is expected to widen its budget deficit to around 3% of GDP this year to accommodate those spending needs, policy insiders said, adding to overall debt in the economy.    Some analysts say pent-up demand during the pandemic may be enough for consumption to grow with little policy support. They point to new household savings reaching 17.8 trillion yuan last year, an increase of 7.9 trillion yuan from 2021.    But others warn that a large chunk of the rise may be explained by consumer’s safety-first reallocations into bank deposits and that many such deposits have long-term maturities.    “The increased household deposits in China are unlikely to be fully transmitted to private consumption,” ANZ economists wrote.    LEAVE IT TO LOCAL GOVERNMENTS    Consumption-boosting policies still have their place on the agenda, but they are likely to be local in nature and modest, government advisers said.     Several Chinese cities have already offered about 5 billion yuan in consumption vouchers and subsidies in total since December. The Jiangsu provincial government has pledged to subsidize shopping festivals, while other jurisdictions have promised to subsidize purchases of electric vehicles or senior care services, local media reported.    “Calls for issuing consumption vouchers and direct subsidies are growing, but we should let local governments to do the job based on local conditions,” said a third source close to policy discussions.($1 = 6.7440 Chinese yuan renminbi) More

LONDON (Reuters) – Proposals to reimburse hundreds of millions of pounds to scam victims in Britain are “fundamentally flawed” and are taking too long to come into force, lawmakers said in a report published on Monday.Banks will have to refund within 48 hours customers tricked into sending money to fraudsters under plans drawn up by watchdog the Payment Systems Regulator (PSR) unveiled in September.So-called “authorised push payment” scams have become Britain’s largest type of payment fraud and cost customers 583 million pounds ($715 million) in 2021.Lawmakers on Britain’s powerful Treasury Select Committee criticised the plans and said mandatory reimbursements should begin this year at the latest, and not as late as 2024.The PSR’s proposal for Pay.UK – which operates Britain’s faster payments system – to handle reimbursements would lead to “inherent conflict of interest” as it is guaranteed by the financial services industry, the committee added.”Putting an industry body in charge of reimbursing scam victims is like asking a fox to guard the henhouse,” said Harriett Baldwin, chair of the Treasury committee.The PSR said it would consider all feedback before publishing its final position in May this year, adding it regulated payment system operators including Pay.UK.A Pay.UK spokesperson said its bank guarantors did not influence its decision-making. “Our governance model is approved and supervised by the Bank of England and the PSR to ensure our independence,” the spokesperson added.Some of the banks that would be affected by the new rule include HSBC, NatWest, Lloyds (LON:LLOY), Barclays (LON:BARC), Santander (BME:SAN) UK and Virgin Money (LON:VM).Lenders have long said they should not pick up the full bill for online fraud and that tech platforms exploited by criminals to lure victims should also pay up.Bank lobby group UK Finance said a reimbursement model was necessary, but added “we need greater cross-sector action, including shared accountability for fraud prevention and reduction, to help tackle the threat at source.” ($1 = 0.8159 pounds) More

Rui Costa said on TV GloboNews that the announcement will be made on Feb. 14 in Bahia state as part of several trips by the leftist president until March to initiate programs that boost the economy and quickly benefit the population.The focus of the housing program, which means “my home, my life”, would be on the resumption of unfinished works and on one that involves greater government subsidy, Costa said.According to Costa, the program had been “extinct” under the administration of former President Jair Bolsonaro. Now, around 120,000 unfinished units will be resumed, he said. Created in 2009 during Lula’s second presidential term, the program offers federal subsidies for home ownership, boosting works carried out by homebuilders such as MRV and Tenda.Costa also said that the president would visit the state of Sergipe on Feb. 15 to resume a highways program. More

(Reuters) – Japan’s government is intensifying its search for a successor to central bank governor Haruhiko Kuroda, a choice that will affect how soon the Bank of Japan (BOJ) could phase out ultra-loose monetary policy.The Nikkei newspaper reported the government has sounded out BOJ Deputy Governor Masayoshi Amamiya as the next governor, citing anonymous government and ruling party sources.The government will present a nominee for BOJ governor, and that for two deputy governors, to parliament later this month. Approval by both houses is considered a near certainty due to the ruling coalition’s solid majority.Kuroda’s term ends on April 8, while those of deputy governors Amamiya and Masazumi Wakatabe expire on March 19.Below are possible candidates for the posts:MASAYOSHI AMAMIYA – VERY STRONG CONTENDER FOR GOVERNORCurrently deputy governor, Amamiya has spent most of his career at the central bank drafting monetary policy ideas and is nick-named “Mr. BOJ” for masterminding many of the bank’s unconventional monetary easing ideas.He played a key role in drafting Kuroda’s huge asset-buying programme in 2013 and consistently called for keeping ultra-low interest rates. But he also said in July the BOJ must “always” think about the means of exiting ultra-loose monetary policy.Many market players see a choice of Amamiya as governor as heightening the chance the BOJ will maintain the status quo for the time being and phase out Kuroda’s legacy stimulus only gradually.An avid fan of classical music, Amamiya is known for his deep contacts with lawmakers and bureaucrats that help him read which way the political wind is blowing in steering policy.HIROSHI NAKASO – POSSIBLE CONTENDER FOR GOVERNORA career central banker who served as deputy governor until 2018, Nakaso played a key role in navigating an exit from the BOJ’s first spell of quantitative easing in 2006.With long experience overseeing the BOJ’s market operations and international affairs, Nakaso has repeatedly warned of the drawbacks of prolonged monetary easing such as the distortion its huge presence could create in bond and money markets.Nakaso laid out his idea of an exit from ultra-easy policy in a book published in May. Under that plan, the BOJ would first ditch its 10-year bond yield target, then raise short-term interest rates and finally move to reduce its balance sheet.Some market players see Nakaso as having dropped out of the BOJ race, after he said last week he has taken up a post heading an Asia-Pacific Economic Cooperation (APEC) advisory council.HIROHIDE YAMAGUCHI – POSSIBLE CONTENDER FOR GOVERNORA career central banker, Yamaguchi served as one of the two deputies of former BOJ Governor Masaaki Shirakawa and played a key role in crafting an asset-buying scheme under which the bank first began purchasing exchange-traded funds (ETF) in 2010.Since retiring from the BOJ in 2013, he has criticised Kuroda’s stimulus as relying too much on the view central banks can influence public perceptions with monetary policy.Warning of the rising cost of prolonged easing, Yamaguchi has also called for ending the BOJ’s huge asset purchases and abandoning an yield cap he describes as unsustainable.TAKEO HOSHI – POSSIBLE DEPUTY GOVERNORAn economics professor at the University of Tokyo, Hoshi is well-versed in Japanese monetary policy and is a regular member of government panels and the BOJ’s academic workshops.At one of the BOJ workshops held in November, Hoshi explained how structural changes in Japan’s labour market could push up average wages more than in the past.”The BOJ must start worrying about the possibility of inflation accelerating more than expected,” he told Reuters, adding the BOJ may abandon its yield cap as early as this year.FEMALE DEPUTY GOVERNOR CANDIDATESNo female has yet served as BOJ deputy governor or governor, a tradition Kishida may seek to change to enhance diversity.One possible candidate is Tokiko Shimizu, who rose up the ranks in the male-dominated institution and now serves as executive director overseeing international affairs. People close to her describe Shimizu as dovish on monetary policy.Other candidates include think tank head Yuri Okina, who calls for phasing out the BOJ’s yield cap, and former BOJ board member Sayuri Shirai, who proposes a review of the current stimulus so the bank can adjust interest rates more flexibly.FINANCIAL BUREAUCRAT DEPUTY GOVERNOR CANDIDATESIf a former BOJ executive becomes governor, there is a strong chance one of the deputy governor posts will be filled by top finance ministry bureaucrats such as Shigeaki Okamoto and Yasushi Kinoshita.Kinoshita told Reuters the BOJ should eventually head for an exit from ultra-loose policy, and in doing so must move “cautiously and steadily” to avoid causing huge market turbulence.Ryozo Himino, a former head of Japan’s financial watchdog, is also considered a dark horse candidate. People close to him describe Himino as critical of the BOJ’s negative rates policy for the damage it is inflicting on commercial banks’ profits. More

TOKYO (Reuters) -Japan’s government has sounded out Bank of Japan (BOJ) Deputy Governor Masayoshi Amamiya to succeed incumbent Haruhiko Kuroda as central bank governor, the Nikkei newspaper reported early on Monday, citing anonymous government and ruling party sources.The next BOJ chief will face the delicate task of normalising ultra-loose monetary policy, which is drawing increasing public criticism for distorting market function.A career central banker who has drafted many of the BOJ’s monetary easing tools, Amamiya has been seen by markets as a top contender to take over as next governor.Prime Minister Fumio Kishida’s administration is in the final stages of deciding on Kuroda’s successor along with two new deputy governors, and is in discussions with the ruling coalition about the process, the Nikkei saidThe government’s nominees will be presented to parliament later this month and take effect upon approval by both houses of parliament, which is effectively a done deal due to the ruling coalition’s solid majority in Japan’s national legislature known as the Diet.The Nikkei report did not say whether Amamiya accepted the offer.When asked about the Nikkei report, Finance Minister Shunichi Suzuki told reporters he had not heard that the government offered Amamiya the job. The prime minister’s office and the BOJ were not immediately available to comment.Jiji news agency said Amamiya did not comment to reporters, when asked whether he has been sounded out about becoming BOJ governor.Kishida’s choice of a successor to Kuroda, whose five-year term ends on April 8, will likely affect how soon the central bank could phase out its massive stimulus as inflation hit 4% in December, double its 2% target.The dollar was last up 0.5% at 131.85 yen, following the Nikkei report. Earlier, it rose as high as 132.60 yen as Amamiya is seen by markets as more dovish than other contenders for the post, reaching above the 132-level for the first time in more than three weeks.If Amamiya becomes governor, it would frustrate investors long on the yen and hoping for someone more hawkish, such as former deputy governor Hirohide Yamaguchi, to get the job, said Chris Weston, head of research at Pepperstone.”Amamiya, if accepts, will have full reign on policy changes and the idea of policy continuation is true here,” he said, adding that investors whose base case was for the BOJ to tweak its yield control policy in late April would now be reviewing that call.Amamiya played a key role in drafting Kuroda’s asset-buying programme in 2013 and consistently called for keeping ultra-low interest rates. But he also said in July the BOJ must “always” think about the means of exiting ultra-loose monetary policy.Amamiya and Masazumi Wakatabe are currently serving as deputy governors, but their five-year terms end on March 19. More

TOKYO (Reuters) – Japan’s government is intensifying its search for a successor to central bank governor Haruhiko Kuroda, a choice that will affect how soon the Bank of Japan (BOJ) could phase out ultra-loose monetary policy.The Nikkei newspaper reported on Monday the government has sounded out BOJ Deputy Governor Masayoshi Amamiya as the next governor, citing anonymous government and ruling party sources.Kuroda’s second five-year term ends in April. Below are key dates to watch:BOJ LEADERSHIP RACEPrime Minister Fumio Kishida will hand-pick nominees for the governor and deputy governor posts from a list crafted by his close aides and finance ministry officials.The government is expected to present the nominees to parliament next week, sources have told Reuters, which is most likely to be approved as the ruling coalition holds a majority in both houses of parliament.The nominees will then appear in both houses of parliament to testify their views on monetary policy.Kuroda’s term ends on April 8, while those of his deputies Masayoshi Amamiya and Masazumi Wakatabe expire on March 19.There is a slim chance Kuroda might step down early from his post, so that the new governor can assume the post together with the new deputies on March 20.People seen as top candidates for the BOJ governor post include Amamiya, as well as former deputy governors Hiroshi Nakaso and Hirohide Yamaguchi.BOJ RATE-SETTING MEETINGSThe final policy-setting meeting for Kuroda and his two deputies will be held on March 9-10.The subsequent meeting will be held on April 27-28 under a new BOJ leadership. At the April meeting, the BOJ will issue for the first time its quarterly growth and inflation projections for fiscal 2025, which will offer clues on how quickly the central bank could move toward an exit from ultra-easy policy.By the time the BOJ holds its April meeting, big firms would have agreed with unions on next year’s annual pay in “shunto” spring wage negotiations.OTHER KEY EVENTSJapan’s economic and inflation data will remain in the spotlight as the BOJ gauges the timing of an interest rate hike.Core consumer inflation hit 4.0% in December, double the BOJ’s price target, as companies hike prices to pass on higher raw material costs to households. Analysts expect it to stay above the BOJ’s 2% target for several more months, before slowing due to recent declines in global commodity costs.Consumer inflation data for February is due out on March 18.In a positive sign for policymakers, data due out on Feb. 14 will likely show Japan’s economy returned to growth in the last quarter of 2022 as consumption made a delayed recovery from the COVID-19 pandemic’s wounds.The new BOJ governor will be busy with international meetings. The first major one involving travel will likely to be the spring International Monetary Fund (IMF) meetings to be held in Washington D.C. on April 10-16.Japan will also chair this year’s Group of Seven (G7) meeting of advanced economies, where inflation and monetary policy will likely be among key topics of debate. More

“We can build a green bridge across the Atlantic and build joint green … markets,” the German economy ministry on Sunday quoted Habeck saying, in an itinerary of the planned meetings also involving his French counterpart Bruno Le Maire.Reuters on Saturday quoted French officials as saying Habeck and Le Maire would use the meetings to press senior U.S. officials not to try to actively poach green investments from Europe amid European concerns about U.S. green tech subsidies.Under the multi-billion dollar Inflation Reduction Act (IRA), Washington will subsidise products ranging from electric cars to solar panels as long as they meet requirements on being locally produced. “The USA is now gearing its economy towards green markets and driving forward cost reductions in the development of climate-friendly technologies,” Habeck said.”That’s good, but it’s important that this happens in friendly, fair competition and thus leads to progress in climate-neutral technologies.” EU governments are worried the IRA could not only put European producers at an unfair disadvantage but lure investment away from Europe to the United States. They are likely to want to explore exceptions when the United States implements the plans.In addition to Yellen, the two will also meet U.S. Trade Representative Katherine Tai and Commerce Secretary Gina Raimondo, the German ministry statement said.The talks will be focused on the U.S. subsidy package in the context of future trade relations between the EU and the United States. More