Economy

LONDON (Reuters) – The European Central Bank will deliver 50 basis point interest rate rises at each of its next two meetings, according to economists polled by Reuters, whose forecasts still risk lagging behind policymakers’ guidance on how high rates will go.Rate setters have failed to convince markets about their commitment to continue increasing borrowing costs to rein in inflation, evident in the poll, which showed the central bank would stop when the deposit rate reaches 3.25% next quarter.The latest poll findings come despite ECB President Christine Lagarde telling investors in Davos last week they should “revise their positions”, adding weight to earlier comments from Dutch and Latvian policymakers.Although the euro zone’s central bank has been raising rates at its fastest pace on record, it has so far failed to bring inflation anywhere near its 2% target. Prices rose 9.2% in December from a year earlier, official data showed last week. Lagarde and her Governing Council will take the deposit rate to 2.50% on Feb. 2, said 55 of 59 economists in the Jan. 13-20 poll. They are likely to follow that up with another 50 basis point lift in March.The central bank will then add 25 basis points next quarter before pausing, giving a terminal rate in the current cycle of 3.25%, its highest since late 2008. In December’s poll, the rate was put at 2.50% at end-March and was seen topping out at 2.75%. GRAPHIC: Reuters Poll – ECB deposit rate outlook – https://fingfx.thomsonreuters.com/gfx/polling/movakjzjyva/Reuters%20Poll%20-%20ECB%20deposit%20rate%20outlook.png Asked how the risks were skewed to their terminal deposit rate forecasts, over two-thirds of respondents, 23 of 33, said it was more likely it ends higher rather than lower than they currently expect.”The risk is they will actually be as aggressive as they have claimed. Lagarde and others have said they are in for the long haul where we are going to raise rates meeting by meeting in 2023,” said Silke Tober at the Macroeconomic Policy Institute (IMK).”It’s a very clear risk but I happen to think it would be a mistake.” The refinancing rate was expected to rise 50 basis points to 3.00% next week and reach a peak of 3.50% in March.The U.S. Federal Reserve, which began raising rates many months before the ECB, is forecast to end its tightening cycle after a 25 basis point hike at each of its next two policy meetings. It is then expected to hold rates steady for at least the rest of the year, according to a recent Reuters poll.GROWTH UPGRADEInflation has already peaked in the 20-nation EU, the poll found, and will drift down, but was not seen at the ECB’s target until at least 2025. Inflation will average 6.0% this year and 2.5% next but will be 2.0% across 2025.A mild winter so far, falling gas prices and recent positive economic data meant some quarterly growth forecasts were upgraded in the latest poll from a December survey.Although a technical recession was still predicted – with a 0.2% contraction last quarter and 0.3% in the current one – the economy was now expected to grow 0.1% next quarter rather than flatline. It is forecast to expand 0.3% in the following two quarters, unchanged medians showed.When asked in an extra question whether the downturn is likely to be deeper, or shallower, than expected, all but one of the 36 economists said it was more likely to be shallower than deeper.”Not only has the risk of severe, energy-driven recessions diminished markedly but the direction of travel of leading indicators, including our PMI data, signals a rising likelihood of an earlier pick-up in growth than expected,” said Ken Wattret at S&P Global (NYSE:SPGI).Across this year, growth was pegged at 0.1%, a turnaround from the 0.1% contraction forecast last month. In 2024 it was expected to grow 1.3%, unchanged from December’s prediction.(For other stories from the Reuters global long-term economic outlook polls package: More

WASHINGTON (Reuters) – The U.S. Internal Revenue Service kicks off the 2023 income tax filing season on Monday armed with 5,000 new customer service representatives to slash call waiting times as the Biden administration implements $80 billion in new IRS funding.The new hires and technology improvements to more efficiently process paper tax returns and documents represent an early emphasis on improving services, according to U.S. Treasury officials.Such efforts are taking precedence over increasing the number of audits as Republicans in Congress prepare to demand a scaling-back of the new funding provided by President Joe Biden’s signature climate, health and tax bill, the Inflation Reduction Act (IRA).U.S. Deputy Treasury Secretary Wally Adeyemo told reporters that the 5,000 new customer service hires will be trained by Feb. 20, when call volume from taxpayers typically increases.He said the goal for the tax agency was to halve the average hold time for callers to 15 minutes, and for 85% of callers to reach a human operator, up from 15% last year.Other improvements include fully staffing the 361 IRS taxpayer service centers to triple the number of Americans that receive in-person help with their taxes, as well as creating new online portals to allow taxpayers to upload documents rather than sending them by mail.Although the tax agency has greatly reduced a massive pandemic-induced backlog of paper returns, it still had some 3.7 million unprocessed returns as of Dec. 2, more than three times its stated goal of shrinking the backlog to pre-pandemic levels. It is introducing new technology to more accurately scan millions of paper returns into digital documents that can be processed as if they were filed electronically, Adeyemo said.FUNDING FIGHTThe improvements come as the Treasury and IRS are preparing to unveil a 10-year spending plan for the $80 billion in IRS funding, six months after the IRA was enacted.”The resources provided by the IRA will continue to support a years-long transformation of the agency,” Adeyemo said. “In just five months since the IRA’s passage, we’ve made meaningful progress to deliver the service American taxpayers deserve.”But the bulk of the funding is earmarked to improve tax compliance and enforcement to shrink the tax gap – the difference between taxes owed and those paid – which the IRS has estimated could exceed $1 trillion annually because of evasion. Democrats passed the funding to reverse a more than decade-long slide in IRS funding that has reduced its staffing and audit levels.Some Republicans, emboldened by their party’s new control of the House of Representatives this year, are looking to curtail the IRS funding, which they claim will result in the hiring of an “army” of 87,000 new “agents” to harass middle-class taxpayers and small businesses. The bulk of the new hires will replace retiring employees and increase customer service and information technology staffing, but the claims are perpetuated on social media and in statements to the media. A recent report by the Treasury Inspector General for Tax Administration said that the IRS is looking to hire about 3,000 additional revenue agents in coming years. More

Eighteen months ago, the online used car retailer Carvana had such great prospects that it was worth $80 billion. Now it is valued at less than $1.5 billion, a 98 percent plunge, and is struggling to survive.Many other tech companies are also seeing their fortunes reverse and their dreams dim. They are shedding employees, cutting back, watching their financial valuations shrivel — even as the larger economy chugs along with a low unemployment rate and a 3.2 annualized growth rate in the third quarter.One largely unacknowledged explanation: An unprecedented era of rock-bottom interest rates has abruptly ended. Money is no longer virtually free.For over a decade, investors desperate for returns sent their money to Silicon Valley, which pumped it into a wide range of start-ups that might not have received a nod in less heady times. Extreme valuations made it easy to issue stock or take on loans to expand aggressively or to offer sweet deals to potential customers that quickly boosted market share.It was a boom that seemed as if it would never end. Tech piled up victories, and its competitors wilted. Carvana built dozens of flashy car “vending machines” across the country, marketed itself relentlessly and offered very attractive prices for trade-ins.“The whole tech industry of the last 15 years was built by cheap money,” said Sam Abuelsamid, principal analyst with Guidehouse Insights. “Now they’re getting hit by a new reality, and they will pay the price.”Cheap money funded many of the acquisitions that substitute for organic growth in tech. Two years ago, as the pandemic raged and many office workers were confined to their homes, Salesforce bought the office communications tool Slack for $28 billion, a sum that some analysts thought was too high. Salesforce borrowed $10 billion to do the deal. This month, it said it was cutting 8,000 people, about 10 percent of its staff, many of them at Slack.Even the biggest tech companies are affected. Amazon was willing to lose money for years to acquire new customers. It is taking a different approach these days, laying off 18,000 office workers and shuttering operations that are not financially viable.Carvana, like many start-ups, pulled a page out of Amazon’s old playbook, trying to get big fast. Used cars, it believed, were a highly fragmented market ripe for reinvention, just the way taxis, bookstores and hotels had been. It strove to outdistance any competition.The company, based in Tempe, Ariz., wanted to replace traditional dealers with, Carvana said grandly, “technology and exceptional customer service.” In what seemed to symbolize the death of the old way of doing things, it paid $22 million for a six-acre site in Mission Valley, Calif., that a Mazda dealer had occupied since 1965.More on Big TechLayoffs: Some of the biggest tech companies, including Alphabet and Microsoft, have recently announced tens of thousands of job cuts. But even after the layoffs, their work forces are still behemoths.A Generational Divide: The industry’s recent job cuts have been eye-opening to young workers. But to older employees who experienced the dot-com bust, it has hardly been a shock.Supreme Court Cases: The justices are poised to reconsider two crucial tenets of online speech under which social media networks have long operated.In the Netherlands: Dutch government and educational organizations have spurred changes at Google, Microsoft and Zoom, using a European data protection law as a lever.Where traditional dealerships were literally flat, Carvana built multistory car vending machines that became memorable local landmarks. Customers picked up their cars at these towers, which now total 33. A corporate video of the building of one vending machine has over four million views on YouTube.In the third quarter of 2021, Carvana delivered 110,000 cars to customers, up 74 percent from 2020. The goal: two million cars a year, which would make it by far the largest used car retailer.An eye-catching Carvana car vending machine in Uniondale, N.Y.Tony Cenicola/The New York TimesThen, even more quickly than the company grew, it fell apart. When used car sales rose more than 25 percent in the first year of the pandemic, that created a supply problem: Carvana needed many more vehicles. It acquired a car auction company for $2.2 billion and took on even more debt at a premium interest rate. And it paid customers handsomely for cars.But as the pandemic waned and interest rates began to rise, sales slowed. Carvana, which declined to comment for this article, did a round of layoffs in May and another in November. Its chief executive, Ernie Garcia, blamed the higher cost of financing, saying, “We failed to accurately predict how all this will play out.”Some competitors are even worse off. Vroom, a Houston company, has seen its stock fall to $1 from $65 in mid-2020. Over the past year, it has dismissed half of its employees.“High rates are painful for almost everyone, but they are particularly painful for Silicon Valley,” said Kairong Xiao, an associate professor of finance at Columbia Business School. “I expect more layoffs and investment cuts unless the Fed reverses its tightening.”At the moment, there is little likelihood of that. The market expects two more rate increases by the Federal Reserve this year, to at least 5 percent.In real estate, that is trouble for anyone expecting a quick recovery. Low rates not only pushed up house prices but also made it irresistible for companies such as Zillow as well as Redfin, Opendoor Technologies and others, to get into a business that used to be considered slightly disreputable: flipping houses.In 2019, Zillow estimated it would soon have revenue of $20 billion from selling 5,000 houses a month. That thrilled investors, who pushed the publicly traded Seattle company to a $45 billion valuation and created a hiring boom that raised the number of employees to 8,000.Zillow’s notion was to use artificial intelligence software to make a chaotic real estate market more efficient, predictable and profitable. This was the sort of innovation that the venture capitalist Marc Andreessen talked about in 2011 when he said digital insurgents would take over entire industries. “Software is eating the world,” he wrote.In June 2021, Zillow owned 50 homes in California’s capital, Sacramento. Five months later, it had 400. One was an unremarkable four-bedroom, three-bath house in the northwest corner of the city. Built in 2001, it is convenient to several parks and the airport. Zillow paid $700,000 for it.Zillow put the house on the market for months, but no one wanted it, even at $625,000. Last fall, after it had unceremoniously exited the flipping market, Zillow unloaded the house for $355,000. Low rates had made it seem possible that Zillow could shoot for the moon, but even they could not make it a success.Ryan Lundquist, a Sacramento appraiser who followed the house’s history closely on his blog, said Zillow realized real estate was fragmented but perhaps did not quite appreciate that houses were labor-intensive, deeply personal, one-to-one transactions.“This idea of being able to come in and change the game completely — that’s really difficult to do, and most of the time you don’t,” he said.Zillow’s market value has now shrunk to $10 billion, and its employee count to around 5,500 after two rounds of layoffs. It declined to comment.The dream of market domination through software dies hard, however. Zillow recently made a deal with Opendoor, an online real estate company in San Francisco that buys and sells residential properties and has also been ravaged by the downturn. Under the agreement, sellers on Zillow’s platform can request to have Opendoor make offers on their homes. Zillow said sellers would “save themselves the stress and uncertainty of a traditional sale process.”That partnership might explain why the buyer of that four-bedroom Sacramento house, one of the last in Zillow’s portfolio, was none other than Opendoor. It made some modest improvements and put the house on the market for $632,000, nearly twice what it had paid. A deal is pending.“If it were really this easy, everyone would be a flipper,” Mr. Lundquist said.An Amazon bookstore in Seattle in 2016. The store is now permanently closed.Kyle Johnson for The New York TimesThe easy money era had been well established when Amazon decided it had mastered e-commerce enough to take on the physical world. Its plans to expand into bookstores was a rumor for years and finally happened in 2015. The media went wild. According to one well-circulated story, the retailer planned to open as many as 400 bookstores.The company’s idea was that the stores would function as extensions of its online operation. Reader reviews would guide the potential buyer. Titles were displayed face out, so there were only 6,000 of them. The stores were showrooms for Amazon’s electronics.Being a showroom for the internet is expensive. Amazon had to hire booksellers and lease storefronts in popular areas. And letting enthusiastic reviews be one of the selection criteria meant stocking self-published titles, some of which were pumped up with reviews by the authors’ friends. These were not books that readers wanted.Amazon likes to try new things, and that costs money. It took on another $10 billion of long-term debt in the first nine months of the year at a higher rate of interest than it was paying two years ago. This month, it said it was borrowing $8 billion more. Its stock market valuation has shrunk by about a trillion dollars.The retailer closed 68 stores last March, including not only bookstores but also pop-ups and so-called four-star stores. It continues to operate its Whole Foods grocery subsidiary, which has 500 U.S. locations, and other food stores. Amazon said in a statement that it was “committed to building great, long-term physical retail experiences and technologies.”Traditional book selling, where expectations are modest, may have an easier path now. Barnes & Noble, the bricks-and-mortar chain recently deemed all but dead, has moved into two former Amazon locations in Massachusetts, putting about 20,000 titles into each. The chain said the stores were doing “very well.” It is scouting other former Amazon locations.“Amazon did a very different bookstore than we’re doing,” said Janine Flanigan, Barnes & Noble’s director of store planning and design. “Our focus is books.” More

After six months of declines, inflation seems to be turning a corner. But the road back to normal is an uncertain one.Martin Bate, a 31-year-old transportation planner in Fort Worth, spent the middle of 2022 feeling that he was “treading water” as high gas prices, climbing food costs and the prospect of a big rent increase chipped away at his finances.“I was really starting to feel financially squeezed in a way that I hadn’t felt ever before, since finishing college,” Mr. Bate said. Since then, he has received a promotion and a raise that amounted to 12 percent. Gas prices have fallen, and local housing costs have moderated enough that next month he is moving into a nicer apartment that costs less per square foot than his current place.“My personal situation has improved a good amount,” Mr. Bate said, explaining that he’s feeling cautious but hopeful about the economy. “It’s looking like it might shape out all right.”People across the country are finally experiencing some relief from what had been a relentless rise in living costs. After repeated false dawns in 2021 and early 2022 — when price increases slowed only to accelerate again — signs that inflation is genuinely turning a corner have begun to accumulate.Inflation has slowed on an annual basis for six straight months, dipping to 6.5 percent after peaking at about 9 percent last summer, partly as gas has become cheaper. But the deceleration is true even after volatile food and fuel are stripped out: So-called core consumer prices have climbed 0.3 percent or less for each of the past three months. That’s faster than the 0.2 percent month-to-month changes that were typical before the pandemic but much slower than the 0.9 percent peak in April 2021. More

Financial markets expect the Bank of England to raise interest rates by 0.5 percentage points next month owing to high underlying inflation, strong wage growth and broad unexpected resilience in the economy. Analysts said the flow of official data over the past two weeks was largely supportive of further monetary tightening by the central bank.The economy grew unexpectedly in November, with gross domestic product increasing by 0.1 per cent compared with October. It suggested the UK did not fall into recession in the final three months of the year, as had been widely anticipated.The labour market remained buoyant. In the three months to November, 27,000 jobs were added compared with the previous three months, and nominal wage growth rose to a near-record high. Inflation meanwhile edged down to 10.5 per cent in December, from 10.7 per cent in November. But growth in the prices charged by services companies, considered a better measure of domestic inflationary pressure, accelerated.Markets are pricing in a 67 per cent probability that the BoE will raise interest rates by 0.5 percentage points next month, from the current level of 3.5 per cent. Rates were at a historic low of 0.1 per cent in November 2021, but have risen sharply since then as the central bank strives to curb high inflation.

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The BoE Monetary Policy Committee at its February 2 meeting “may well conclude that it has more [monetary] tightening to do to bring medium-term inflationary pressure to heel”, said Sandra Horsfield, economist at Investec.The recent economic data “skew the risks towards [a 0.5 percentage point] hike [in interest rates] in February,” said Ruben Segura-Cayuela, economist at Bank of America. The rise in gross domestic product in November means the UK could have avoided a recession in 2022 after the economy contracted in the third quarter. A technical recession is often defined as two consecutive quarters of decline. “The economy appears to have been remarkably resilient so far to the dual drags of high inflation and higher interest rates,” said Ruth Gregory, economist at Capital Economics.She attributed the resilience in part to the recent fall in wholesale gas prices as well as government financial support for households and businesses with their energy bills.

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The FTSE 100 index has been close to record highs in January and Susannah Streeter, analyst at Hargreaves Lansdown, said investors had been buoyed “by more resilient [UK] consumer spending in November and China’s [lifting of Covid-19 restrictions], which is fuelling expectation that supply chains problems, which have caused goods shortages, will ease further”.However, James Smith, economist at ING, said “it’s too early to say conclusively that the [UK] economy is proving more resilient”. Some data has highlighted clear weakness in the economy. The GfK consumer confidence survey deteriorated in January, to a 50-year near-record low. Retail sales unexpectedly fell by 1 per cent in December compared with the previous month, as Britons responded to the cost of living crisis by further tightening their belts.The property market showed further signs of a sharp downturn, with the official house price index recording a fall in November.

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Elizabeth Martins, economist at HSBC, said while strong private sector pay growth and high services inflation provided “hawkish data”, and made the case for a [0.5 percentage point interest rate rise], the disappointing retail sales “are a reminder that there is a dovish case [on monetary policy] to be made too”.She added the decline in the housing market data “may be just the beginning” of a larger fall in consumer spending. Given the mixed data since December, Holger Schmieding, economist at Berenberg, said he expected divided views on the size of any interest rate rise among the MPC’s nine members at the February meeting.Interest rate rises affect the economy with a considerable time lag, and market expectations that they will peak at 4.5 per cent this summer could unleash a recession in 2023. Most economists expect a prolonged downturn.“The bulk of the drag on real activity from high inflation and high interest rates probably has yet to be felt,” said Gregory. “This is one reason why we still think there will be a recession this year.”Streeter said high interest rates “will pile more pressure on borrowers, will further weaken a rapidly slowing housing market” and erode already low consumer confidence. It means that “a recession may only have been delayed, and not avoided”, she added.With most analysts expecting an economic expansion in the US and the eurozone in 2023, the UK will continue to be a laggard. Britain is the only G7 country not to have restored GDP to pre-pandemic levels.

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Many factors that analysts blame for the UK’s underperformance could continue to drag on growth this year. More people in Britain than in most other developed countries have left the labour force since the start of the pandemic, limiting production and adding to price pressures. Over the past three years, the UK has been missing much of the export dynamism of other industrialised nations.British inflation is higher than in many other large economies, and UK business investment has been lagging behind historical averages, due to the uncertainty unleashed by the 2016 Brexit referendum. Yael Selfin, economist at KPMG, said “the bottom line is that growth has slowed across all main sectors of the [UK] economy and that will likely result in a technical recession this year”. More

Ambulance workers in England and Wales will walk out on Monday, in the latest industrial action to hit the NHS as staff demand higher pay amid the cost of living crisis.Health secretary Steve Barclay said it was “hugely disappointing” that thousands of ambulance workers were going on strike again.But Sharon Graham, general secretary of Unite, one of the main ambulance worker unions, said ministers were making no sincere efforts to resolve the pay dispute.Rishi Sunak is grappling with a wave of industrial action across the public and private sectors, with NHS, rail and postal workers striking over pay and working conditions.The NHS dispute appears deadlocked, with ministers so far not acceding to union demands that the government reopen the pay settlement for staff in 2022-23.Sharon Graham, Unite general secretary © Charlie Bibby/FT“We are absolutely not in pay talks and this is the problem, that we haven’t got an honest partner at the other side of the table,” Graham told Sky News.Christina McAnea, general secretary of Unison, another union that covers ambulance workers, said: “The public wants the government to end the dispute, so do NHS staff, but most ministers look like they’d rather dig in and do nothing instead of boost pay and help turn the ailing NHS around.”Barclay said in a statement that while contingency plans were in place to mitigate risks to patient safety during Monday’s ambulance worker walkout, there would inevitably be “further disruption” to the NHS.“It is hugely disappointing some ambulance workers are continuing to take industrial action,” he added.Employers have offered ambulance workers in England a 4 per cent pay increase for 2022-23. Inflation stood at 10.5 per cent in December.Barclay also said he had “constructive talks” with ambulance worker unions about the pay settlement for 2023-24.Strikes by NHS staff began last month, and unions are planning to escalate industrial action in the coming weeks.Meanwhile, teachers in Scotland will this week continue with industrial action over pay.Members of the EIS union are striking at two different councils each day until each of the country’s 34 local authority areas has experienced industrial action.Scottish first minister Nicola Sturgeon defended the Scottish government’s reluctance to improve on its 5 per cent pay increase for teachers for 2022-23.She said Scotland’s teachers were the best-paid in the UK, meaning higher wage increases were not justifiable. More

(Reuters) – The 20 best performing hedge fund managers earned $22.4 billion for investors in 2022, marking their slimmest gains since 2016 as many firms, including Tiger Global Management, struggled with slumping financial markets, LCH Investments data show.The top 20 managers, led by Ken Griffin’s Citadel, Bridgewater Associates and D.E. Shaw Group, made less than half of the $65.4 billion the group returned in 2021 when rising stock prices led to a record return. In comparison, they made $63.5 billion in 2020 and $59.3 billion in 2019. In 2022, when fears of rising interest rates and geopolitical uncertainty weighed on markets, investment firms that focused on trading strategies and bet on macroeconomic trends reaped gains. Those with strategies linked to market moves stumbled.Rick Sopher, chairman of LCH, a fund of funds firm that tracks returns and is part of the Edmond de Rothschild Group, said 2022 was a year of “great divergence” in which several of the top 20 managers managed to make gains for their investors despite the significant falls in equity and bond markets.Last year will mostly be remembered as a tough one, with the broader S&P 500 index losing 20% and blue chip hedge fund managers like Tiger Global and Third Point nursing losses. Overall, hedge funds lost $208 billion in 2022 for clients, marking the biggest single-year decline since 2008, when they lost $565 billion, LCH data showed.Hedge funds, which were jointly managing $3.3 trillion on Dec. 31, 2022, according to eVestment data, often promise to outperform, especially when markets are stumbling.There was a shakeup among the very best performers as Griffin’s Citadel, which earned $16 billion, moved into the top spot ahead of Bridgewater, which earned $6.2 billion.D.E. Shaw, Millennium Management, Soros Fund Management, Elliott Management, and Viking Global Investors also ranked in the top 10.Caxton Associates and Moore Capital, firms helped by macro trading in 2022, made it back onto the list, LCH said, while Tiger Global, whose founder Chase Coleman got his start at Julian Robertson’s Tiger Management, and Third Point dropped off the list. Citadel, which was founded by Griffin in 1990, saw its flagship Wellington portfolio gain 38% last year while its fixed income fund was up 33%, according to a person familiar with the numbers. More

TOKYO (Reuters) -Government representatives who attended the Bank of Japan’s policy meeting in December were granted a half-hour adjournment to contact their ministries, minutes showed, a sign the decision to tweak its yield control policy may have been hastily arranged.At the Dec. 19-20 meeting, the BOJ kept its ultra-easy monetary policy but shocked markets with a surprise tweak to its yield curve control (YCC) policy that allowed long-term interest rates to rise.Before the nine-member board voted on the steps, the government representatives requested that the meeting be adjourned for about 30 minutes, the minutes showed on Monday.Governor Haruhiko Kuroda approved the request as chair of the BOJ meeting, according to the minutes.”The government understands the matters discussed today were aimed at conducting monetary easing in a more sustainable manner with a view to achieving the BOJ’s price target,” a Ministry of Finance (MOF) official attending the meeting was quoted as saying, referring to the central bank’s inflation objective.Another government representative, who belonged to the Cabinet Office, urged the BOJ to be vigilant about the fallout from rising inflation, supply constraints and market volatility on Japan’s economy, the minutes showed.The two representatives did not voice opposition to the yield control tweak nor any other elements of the BOJ’s discussion, the minutes showed.Two government representatives – one from the MOF and another from the Cabinet Office – are legally entitled to attend BOJ policy meetings and voice the government’s views on policy decisions, though they cannot cast votes.The apparent reason for the representatives to request an adjournment would have been to contact their ministries on what government view to express on the BOJ’s decision to tweak YCC – indicating that they had not been expecting it and that the meeting had been arranged quickly.Under YCC, the BOJ sets the short-term interest rate target at -0.1% and that of the 10-year bond yield around 0% with a small tolerance band.At the December meeting, the band set around the 10-year yield target was doubled to 0.5 percentage point up and 0.5 percentage point down, a move aimed at ironing out market distortions caused by the BOJ’s heavy bond buying. More