Economy

TOKYO (Reuters) – Japan is seeking to organise a Sri Lanka creditors’ conference, hoping it could help solve the South Asia nation’s debt crisis, but uncertainties cloud the outlook for any talks, three people with knowledge of the planning said.Tokyo is open to hosting talks among all the creditor nations aimed at lifting Colombo from its worst debt crisis since independence, but it is not clear whether top creditor China would join and a lack of clarity remains about Sri Lanka’s finances, one source told Reuters.Japan would be willing to chair such a meeting with China if that would speed up the process for addressing Sri Lanka’s debt, estimated at $6.2 billion on a bilateral basis at the end of 2020, this source said.President Ranil Wickremesinghe told Reuters last week that Sri Lanka would ask Japan to invite the main creditor nations to talks on restructuring bilateral debts. He said he would discuss the issue with Prime Minister Fumio Kishida in Tokyo next month, when he is expected to attend the funeral of the assassinated former premier Shinzo Abe.Tokyo, the number two creditor, has a stake in rescuing Sri Lanka, not just to recoup its $3 billion in loans but also its diplomatic interest in checking China’s growing presence in the region.S&P Global (NYSE:SPGI) this month downgraded Sri Lanka’s government bonds to default after it missed interest and principal payments. The island nation of 22 million people off India’s southern tip, with debt at 114% of annual economic output, is in social and financial upheaval from the impact of COVID-19 pandemic on top of years of economic mismanagement.An International Monetary Fund (IMF) team met Wickremesinghe on Wednesday to discuss a bailout, including restructuring $29 billion in debt, as Colombo seeks a $3 billion IMF aid programme.The president met the same day with Japan’s ambassador.Tokyo believes a new “platform” is needed to pull creditors together, the sources said.”Sri Lanka is running out of time since it defaulted on its debt. The priority is for creditor nations to agree on an effective scheme,” one source said.”Japan is keen to move this forward. But it’s not something Japan alone can raise its hand and push through,” said the source, adding that the cooperation of other nations was crucial.Japan’s Foreign Ministry declined to comment. Sri Lanka’s central bank and Finance Ministry did not immediately respond to requests for comment. An IMF spokesperson declined to comment.NEW FRAMEWORK NEEDEDConcerns include rivalry and territorial tensions between big creditors China and India, while Sri Lanka would have to commit to reforming its finances and disclose more information about its debt, the sources said.Last month, shortly after Wickremesinghe took office when his predecessor fled the country, Chinese President Xi Jinping wrote to him that he was “ready to provide support and assistance to the best of my ability to President Wickremesinghe and the people of Sri Lanka in their efforts”.But the sources said getting Beijing’s cooperation on a debt restructuring was complicated by factors such as a large number of lenders and that China was baulking at taking a “haircut” on its loans and at reducing Colombo’s debt burden.A Chinese foreign ministry spokesman told Reuters that Beijing was “willing to stand with relevant countries and international financial institutions and continue to play a positive role in helping Sri Lanka respond to its present difficulties, relieve its debt burden and realise sustainable development.”Japan hopes to see a new debt restructuring framework resembling one set up by the Group of 20 big economies targeting low-income countries. Sri Lanka does not fall under this “common framework” because it is classified as a middle-income emerging country.”It must be a platform where all creditor nations participate” to ensure they all shoulder a fair share in waiving debt, another source said. The third said, “Until these conditions are met, it would be difficult for any talks to succeed.”The common framework, launched by the G20 and the Paris Club of rich creditor nations in 2020, provides debt relief mainly through extension in debt-payment deadlines and reduction in interest payments.Some people involved think an initial creditors’ meeting could be held in September, but one source said it would “take a little while, possibly several months”.Restructuring talks are only possible after the IMF scrutinises Sri Lanka’s debt, the sources said. More

Maduro’s government has succeeded in lowering consumer price growth, which was 137% year-on-year through July, by increasing the supply of foreign cash in local banks, limiting the expansion of credit, reducing public spending and increasing taxes.But in recent weeks the central bank has sold fewer dollars and the government has increased spending, raising demand and sending the official dollar exchange rate soaring by 21.7% in six days.”It’s impossible to think of exchange stability with the level of prices in Venezuela,” said economist Luis Arturo Barcenas. “The balance between the official rate and the non-official one was very fragile because it was based on the injection of foreign currency.”The central bank on Wednesday proposed a new strategy to deal with demand for dollars, asking banks to share the foreign currency figure needed by businesses and propose an exchange rate that will then be evaluated by the government, two sources said.The central bank did not respond to a request for comment.”The changes this week (in the dollar) have been very strong and those who are disadvantaged are those of us who earn bolivares,” said 62-year-old snack seller Alicia Rodriguez, who feared the cost of her merchandise may increase by up to 30%.The minimum wage in local currency is equivalent to some $19 per month.Venezuela’s economy grew 17.04% year-on-year in the first quarter of 2022, the central bank said on Tuesday.”All the indicators show progress in the first half of the year,” said economist Leonardo Vera, referring to food production, tax collection and other indicators.But oil production may stagnate in the coming months, he added, which would diminish growth.Faced with lower oil production and U.S. sanctions, Maduro in 2019 relaxed currency controls, breathing new life into certain sectors. More

The company said sales, particularly at its Kmart unit that includes Target-branded stores, improved in the second half of the year as COVID curbs eased, and that momentum has held up into the new fiscal year. Government-mandated store closures in the first half of fiscal 2022 to quell COVID outbreaks in Australia had contributed to higher expenses and led to staff absenteeism. Retailers including Wesfarmers have also been grappling with higher prices of raw materials and lower demand as inflation-hit consumers prioritize essential goods.”Kmart is uniquely positioned in an inflationary environment to extend its low-price leadership and profitably grow its share of customer wallet,” the company said in a statement Retail trading conditions have remained robust through the first seven weeks of the new financial year, Wesfarmers said. “While general inflation remains elevated, prices for some inputs such as cotton, timber and plastic resins have moderated in recent months,” the company said. Solid Australian retail sales data from last quarter underscored that Australian consumer spending remained robust even as inflation hit a 21-year high. Performance at the company’s home improvement chain Bunnings, which contributed nearly two-thirds to Wesfarmers’ annual profit, improved after a weak first half, with total store sales rising 7.8% in the latter six months. Wesfarmers net profit after tax, excluding one-off costs, fell 2.9% to A$2.35 billion ($1.64 billion), but beat analysts’ estimate of A$2.22 billion, according to Refinitiv data.The company expects net capital expenditure of between A$1 billion and A$1.25 billion for fiscal 2023, compared with A$884 million a year earlier. ($1 = 1.4331 Australian dollars) More

President Biden is offering what independent analysts suggest would be his most targeted assistance yet to middle-class workers — while trying to repair what he casts as a broken bridge to the middle class.WASHINGTON — The big winners from President Biden’s plan to forgive hundreds of billions of dollars in student loans are not rich graduates of Harvard and Yale, as many critics claim.In fact, the benefits of Mr. Biden’s proposals will largely go to the middle class. According to independent analyses, the people eligible for debt relief are disproportionately young and Black. And they are concentrated in the middle band of Americans by income, defined as households earning between $51,000 and $82,000 a year.The Education Department estimates that nearly 90 percent of affected borrowers earn $75,000 a year or less. Ivy League graduates make up less than 1 percent of federal student borrowers nationwide.Economists say the full scope of Mr. Biden’s plan, including significant changes meant to reduce the payments that millions of borrowers will make for years to come, will help middle-income earners from a wide range of schools and backgrounds.“You’ll have a lot more people who are making zero payments and will have significant loan forgiveness in the future,” said Constantine Yannelis, an economist at the University of Chicago’s Booth School of Business. “The relief to borrowers is going to be more targeted to the people who really need it.”Yet despite the appeal of such debt relief, the program still has set off a contentious debate as economists and political figures assess the full consequences of the plan. By some estimates, it will cost as much as a half-trillion dollars over the course of a decade, imposing a future burden on American taxpayers.The plan also could encourage colleges to raise tuition even faster than they already are. Schools could try to persuade borrowers to take on as much debt as possible to cover higher tuition, with the belief that the federal government would help pay it back.Some conservative and Democratic economists also say the program could add significantly to what is already the highest inflation rate in four decades. Evidence suggests those claims are overstated, however, and American shoppers are not likely to see prices spike because of the program.The announcements Mr. Biden made, including both debt forgiveness and a restart next year of loan payments for all borrowers after a nearly three-year pause, will most likely be a wash for consumer prices, a wide range of economists say.“Debt forgiveness that lowers monthly payments is slightly inflationary in isolation,” analysts from Goldman Sachs wrote in a research note on Thursday, “but the resumption of payments is likely to more than offset this.”What to Know About Student Loan Debt ReliefCard 1 of 5What to Know About Student Loan Debt ReliefMany will benefit. More

He took part in studies that found the widening ideological divide to be the largest since post-Civil War Reconstruction.Prof. Howard Rosenthal, a political scientist whose pioneering research confirmed quantitatively that Congress is more politically polarized than at any point since Reconstruction, died on July 28 at his home in San Francisco. He was 83.His son Prof. Jean-Laurent Rosenthal, a professor at the California Institute of Technology, said the cause was heart failure.There was good news from the algorithm that Professor Rosenthal and his colleagues developed to analyze congressional roll-call votes: The ideological gap between the left and right had grown so great that, mathematically at least, it could not get much worse.“Professor Rosenthal was a trailblazing figure in political science, who collaborated with economists and drew on game theory and other formal methods to help define the modern subfield of political economy,” said Prof. Alan Patten, chairman of the politics department at Princeton, where Professor Rosenthal taught between stints at Carnegie Mellon University in Pittsburgh and New York University.“With his co-authors,” Professor Patten said, “he was especially known for work measuring and analyzing political polarization, a phenomenon that is of more relevance than ever in contemporary American politics.”With his fellow professors Keith T. Poole of the University of Georgia and Nolan McCarty of Princeton, Professor Rosenthal systematically calculated the conservatism or liberalism of members of Congress.In 2002, they concluded that a representative’s votes can generally be predicted on the basis of his or her previous positions on issues regarding race and on government intervention in the economy, like tax rates and benefits for the poor.Their analysis showed that a legislator’s party affiliation was a much better augur of voting behavior than it had been 25 years earlier.Moreover, they concluded, from 1955 to 2004 the proportion of unalloyed centrists in the House of Representatives had declined to 8 percent from 33 percent, and the number of centrist senators had dropped to nine from 39.In 2013, with Professors Poole and McCarty and Prof. Adam Bonica of Stanford, Professor Rosenthal investigated why the nation’s political system had failed to come to grips with growing income inequality.Among other conclusions, they found a correlation between the changes in the share of income going to the top 1 percent and the level of polarization between the political parties in the House.The researchers also documented an increase in campaign contributions to Democratic candidates from millionaires listed in the Forbes 400 — as that list included more technology innovators than oil and manufacturing magnates — and a tack in the party’s platform from general social welfare policies to an agenda focused on identities of ethnicity, gender, race and sexual orientation.In 2014, Professors Rosenthal and Poole and their collaborators wrote in The Washington Post that “Congress is now more polarized than at any time since the end of Reconstruction” in the 19th centurySamuel L. Popkin, a professor emeritus of political science at the Massachusetts Institute of Technology who befriended Professor Rosenthal when they were classmates there, said in an email that he was “the instigator or spark for most of the advances” in studying legislatures and voting. He credited Professor Rosenthal with developing new statistical measurements for analyzing data.Howard Lewis Rosenthal was born on March 4, 1939, in Pittsburgh to Arnold Rosenthal, a businessman, and Elinor (Lewis) Rosenthal, a homemaker.He received a Bachelor of Science degree in economics, politics and science in 1960 and a doctorate in political science in 1964, both from M.I.T. He was a professor at Carnegie Mellon from 1971 to 1993 and at Princeton from 1993 to 2005, and had been at N.Y.U. since 2005.His marriage to Annie Lunel ended in divorce. His second wife, Margherita (Spanpinato) Rosenthal, died before him. In addition to his son Jean-Laurent, from his first marriage, he is survived by a daughter from that marriage, Illia Rosenthal; a son, Gil, from his second marriage; a sister, Susan Thorpe; and four granddaughters.Predicting votes by members of Congress on the basis of statistical models built on previous votes was initially considered controversial. But one byproduct of those predictions, applied to election voters, went a long way toward establishing the model’s credibility.“Challenged by a detractor to predict the 1994 midterm elections,” John B. Londregan, a political scientist at Princeton and a partner in one project, said in a statement, “we predicted a Republican majority in the U.S. House for the first time in almost 40 years, something that met with incredulity on the part of many colleagues.” They were, of course, right.Professor Rosenthal was awarded the Duncan Black Prize from the Public Choice Society in 1980, the C.Q. Press Award from the American Political Science Association in 1985 and the William H. Riker Prize for Political Science from the University of Rochester in 2010.In 1997, he and Professor Poole published “Congress: A Political-Economic History of Roll Call Voting.” With Professor McCarty, they wrote “Polarized America: The Dance of Ideology and Unequal Riches” (2006).In 2007, after analyzing 2.8 million roll-call votes in the Senate and 11.5 million in the House, Professors Rosenthal and Poole produced an updated version of their 1997 book, which had predicted “a polarized unidimensional Congress with roll-call voting falling almost exclusively along liberal-conservative ideological lines.”“We were right,” the authors concluded. “This makes us feel good as scientists, but lousy as citizens.” More

FRANKFURT (Reuters) -Pilots at Lufthansa have rejected a wage offer by Germany’s flagship carrier and could go on strike anytime, union VC said on Thursday, as a dispute over pay continues.They had voted in favour of industrial action last month, threatening further disruption during the busy summer travel season.VC said Lufthansa’s most recent offer had been a step in the right direction but remained short of the union’s demands, which include a 5.5% pay rise this year for its pilots and automatic inflation compensation thereafter.”The legal and organisational preparations for strike action have been started. Nevertheless, it is clear that (VC) remains reachable,” the union said.Lufthansa said it had taken note of the union’s response after submitting an offer to the pilots of Lufthansa and Lufthansa Cargo on Thursday morning.”At the same time, we want to discuss the flexible form of this offer with the VC and have therefore proposed further dates to the union to hold talks. We are available to continue talks at any time,” the airline said.Strikes and staff shortages have already forced airlines including Lufthansa to cancel thousands of flights this summer and caused hours-long queues at major airports, frustrating holidaymakers keen to travel after COVID-19 lockdowns.Earlier this month, Lufthansa’s management reached a pay deal with ground staff, averting further walkouts after a strike had forced it to cancel more than 1,000 flights.It also faces possible walkouts by pilots at Eurowings, whose ballot for industrial action ends on Aug. 31. More

The waiting is almost over. U.S. Federal Reserve Chair Jerome Powell delivers his Jackson Hole speech on the economic outlook on Friday, which will give direction to every financial market in the near term, and set the tone until the Fed’s September 20-21 policy meeting. A flurry of Fed officials on Thursday shared their thoughts on the economy, inflation and interest rates, the most notable market impact of which was a bull-flattening U.S. yield curve to its most inverted in a week. U.S. yield curve: https://tmsnrt.rs/3QTB77i Wall Street also recovered a bit more ground. The Nasdaq’s rise of around 1.5% was also helped by a 6% jump in Hong Kong’s tech index overnight, the biggest rise in almost four months during market talk that Sino-U.S. audit discussions have made progress.Fresh stimulus measures from Beijing to help support China’s creaking economy, while not on a game-changing scale, will boost local sentiment, at least temporarily.But there is only one game in town – Powell’s speech at the Kansas City Fed’s annual policy symposium in Wyoming. How hawkish will he be? Will he hint at a policy pivot? On the Asian corporate front, the most keenly-awaited event on Friday is Chinese property developer Longfor Group Holdings half yearly results. The property sector is in trouble, and sources told Reuters earlier this month that state-owned China Bond Insurance Co Ltd was asked to guarantee Longfor’s bond issues. Japanese inflation is expected to rise to a fresh eight-year high of 2.5% in August from 2.3%, putting further pressure on the Bank of Japan’s policy of buying unlimited quantities of government bonds to cap the 10-year yield at 0.25%.If and when inflation tops 2.8%, it will be the highest since the peak of Japan’s boom in the early 1990s.Other key developments that should provide more direction to markets on Friday: U.S. PCE inflation (July)U.S. UMich inflation expectations (Aug, final) More

The US and China are close to an agreement to allow US regulators access to audits of Chinese companies that are listed on US exchanges, a potential breakthrough in talks that have languished for more than a decade. Bankers in Hong Kong were informed of a possible deal earlier this week, according to people familiar with the matter. American depository receipts linked to shares in Chinese companies — including Baidu, JD.com and Pinduoduo — started trading higher on Tuesday, suggesting a resolution was in the works. The US has demanded that Chinese companies and auditors make their financial audits available for inspection every three years by the Public Company Accounting and Oversight Board, a US auditor watchdog, or face a ban from Wall Street listings. But China does not allow foreign regulators to inspect Chinese company audits, citing a desire to protect state secrets. Earlier this month, five state-owned Chinese companies said they would voluntarily delist from US exchanges before they were ousted in 2024 as a result of the pending ban.Additional information about the potential deal and the timing of a possible announcement could not be learnt, but the PCAOB has said any agreement would include full US access to Chinese auditors. The PCAOB declined to comment on Thursday.Thanks for reading FirstFT Asia. Have a restful weekend — EmilyFive more stories in the news1. Shelling disconnects nuclear plant from Ukraine’s grid Fears of a catastrophic accident at one of Europe’s largest nuclear power plants escalated after Ukraine’s Zaporizhzhia reactor complex was cut off from the country’s electric grid owing to shelling. Ukraine’s state nuclear power company said the temporary interruption was the first time the plant had been disconnected from the grid. But it added that there were “no concerns” over a full-scale accident after back-up systems kicked in.2. Hedge funds build biggest bet against Italian debt since 2008 Amid turmoil in Rome and the country’s dependence on Russian gas imports, the total value of Italy’s bonds borrowed by investors to wager on a fall in prices hit its highest level since January 2008 this month, at more than €39bn, according to data from S&P Global Market Intelligence.3. China unveils $44bn in aid to bolster battered economy Beijing has announced tens of billions of dollars in stimulus measures in a bid to shore up confidence as China’s economy is battered by a snowballing property sector downturn and President Xi Jinping’s stifling zero-Covid policies.4. Myanmar regime arrests former UK ambassador Vicky Bowman, the UK’s envoy to Myanmar from 2002 to 2006, and her husband, artist and former political prisoner Htein Lin, were arrested yesterday by the military regime, which seized power in a coup against Aung San Suu Kyi’s government in February last year.5. Yen weakness forces unprecedented PlayStation price rise Sony has raised the price of its PlayStation 5 console in Europe, Japan, China and other key markets by as much as 10 per cent, as surging inflation and the plunging yen force the company to break with years of marketing strategy.How well did you keep up with the news this week? Take our quiz.The days aheadJianzhi Education Technology Group to start trading on Nasdaq When the education group filed for a US IPO last year, it was the first Chinese online firm to do so since Beijing tightened rules on overseas listings. (SCMP)Federal Reserve chair Jay Powell in spotlight Powell will be the headline act in Jackson Hole, where central bankers are gathered this week. The audience will be keen to hear guidance on the US rate-setting path. His comments are likely to be hawkish given recent data on the US jobs market and views from the Federal Open Market Committee.Opinion: The Fed’s travails over inflation show that narrative matters at least as much as models, writes Gillian Tett. Asia Cup Twenty20 International The cricket tournament will kick off in the UAE on Saturday and run through to September 11. Afghanistan and Sri Lanka will play in the opener in Dubai. What else we’re reading China’s distressed asset funds struggle to profit from collapsing property sector Almost a dozen distressed investment funds told the Financial Times that they had not increased their exposure to residential and commercial properties, usually the most popular form of collateral in Chinese debt restructurings, despite soaring defaults in the real estate sector.

Higgin Kim: ‘People are genuinely rough. Art works like a tenderiser’ There is a rich recent history of South Korean conglomerates spending big on art in Seoul as part of their philanthropic activities. Conglomerate boss Kim has taken a different tack. The art is all his own, not Byucksan’s, and he has decided against building it a dedicated home.Capital Group: the slow-moving giant in dangerous waters In a sea full of predators, Capital Group is like a whale shark: slow-moving, friendly and enormous. Its collaborative culture, low fees and dedication to active stock picking make it a well-respected outlier in the increasingly cut-throat world of asset management.The budget drone changing global warfare The sleek Bayraktar TB2 is fast, cheap — with a seven-figure price tag — and deadly. Ukraine’s drone of choice has made Turkey one of the world’s top drone powers, pointing to a new era in which the technology becomes accessible to regimes that cannot buy from more established arms producers.Big budget blockbusters land amid ‘peak TV’ fears Audiences can enjoy some of the most expensive programmes ever produced this autumn, from Amazon Prime’s The Rings of Power to HBO Max’s House of the Dragon. But the shows are being served at subsidised prices by streaming platforms making record losses, begging the question: have we finally reached “peak TV”? Reader pollThis week, a group of Apple workers launched a petition as part of efforts to resist an order from chief executive Tim Cook to return to the office. Other Silicon Valley companies are more relaxed. Facebook’s owner Meta has embraced virtual working as a permanent alternative while Dropbox has declared itself a “Virtual First” company. Do you think staff should be forced back to the office? Vote in our latest poll. More