Economy

The deal, which aims to reinforce the pair’s securities businesses domestically, will see SBI issue new shares, Nikkei reported without stating where it obtained the information. The newspaper also said SBI may also take a small stake in SMFG.SBI said in a Tokyo bourse filing on Wednesday it was true it was exploring opportunities to partner SMFG, including through a capital tie-up as reported by some media.Sumitomo Mitsui said in a statement it was exploring opportunities with SBI, but that nothing has been decided.A new share issuance would beef up SBI’s financial standing which has been stretched since its $1 billion bid last year for midsize lender Shinsei Bank Ltd.Shares of SBI traded up around 4% in early Wednesday trade after rising as much as 6.9%. Shares of SMFG were almost flat.The partnership could see SMFG introduce SBI’s online securities business to its retail banking customers.The two have already teamed up to create a digital stock exchange to provide a trading platform alternative to the Tokyo Stock Exchange.SMFG, Japan’s second-largest lender by assets after Mitsubishi UFJ (NYSE:MUFG) Financial Group Inc, has its own brokerage unit, SMBC Nikko Securities Inc, which has been under investigation following the arrest of some of its executives over alleged market manipulation. SMBC Nikko said it was conducting its own investigation into the matter.SBI aims to become Japan’s fourth-largest banking group after Mizuho Financial Group Inc. It already owns the country’s largest online brokerage, an online bank and an asset manager.Hoping to create a nationwide network, it has been taking stakes in Japanese regional lenders and raised its stake in Shinsei Bank to 48% through a tender offer last year.($1 = 135.3300 yen) More

TOKYO (Reuters) -The yen’s rapid decline was among key topics of debate at the Bank of Japan’s April policy meeting with some board members fretting that excessive volatility could disrupt corporate business plans, minutes of the meeting showed on Wednesday.But many board members stressed the need to maintain the BOJ’s massive stimulus programme to support a still-fragile economy, the minutes showed, a sign they saw no need to tweak Japan’s ultra-low interest rates to stem the yen’s slide.The BOJ must communicate to markets its monetary policy aims at achieving price stability, not at controlling exchange rate moves, some members were quoted as saying.”A few members said excessive fluctuations in the foreign exchange market over a short period of time, such as those observed recently, would raise uncertainties about the future and make it more difficult for firms to formulate their business plans,” the minutes showed.One member said a weak yen benefited the economy at a time like now, when the output gap was still large and underlying inflation was “extremely low.”At the April 27-28 meeting, the BOJ strengthened its commitment to keep interest rates ultra-low by vowing to buy unlimited amounts of bonds daily to defend its yield target, triggering a fresh sell-off in the yen.The weak yen has become a fresh challenge for Japanese policymakers as it hurts the economy by inflating already rising costs of importing fuel and raw material goods.The yen plunged to a new 24-year low of 136.71 per dollar early on Wednesday, as investors continued to focus on the contrast between the BOJ’s ultra-loose policy and the U.S. Federal Reserve’s rate hike plans to combat soaring inflation.It last traded around 136.32 per dollar.While inflation exceeded the BOJ’s 2% target in April for the first time in seven years, governor Haruhiko Kuroda has said the bank won’t tweak ultra-easy policy unless price rises are driven more by strong demand and accompanied by higher wages.At the April meeting, some BOJ board members pointed to the risk inflation could overshoot expectations, if wage hikes pick up the pace and add to upward pressure from prolonged rises in commodity prices, the minutes showed.But others disagreed. “The challenge of monetary policy in Japan was not to curb inflation, as in the case of the United States and Europe, but to overcome inflation that was still too low,” one member was quoted as saying. More

BRASILIA (Reuters) – An “assertive” action by the Brazilian central bank is necessary for inflation to converge to the government’s official target, the central bank’s director of international affairs, Fernanda Guardado, said on Tuesday.Speaking at an event about the relationship between the country and the OECD, she said the global economy would slow in the following quarters, while Brazil would face more moderate growth. More

(Reuters) – Blockchain-based payments company Roxe Holding Inc is nearing a deal to go public through a merger with blank check company Goldenstone Acquisition Ltd at a combined valuation of $3.65 billion, according to people familiar with the matter.The deal bucks an unfavorable market environment with cryptocurrencies plunging in value and investors largely losing interest in special purpose acquisition companies (SPACs) of this sort partly because of disappointing returns.None of the Roxe investors plans to sell their stakes, the sources said. Goldenstone raised just $57.5 million in its initial public offering in March this year, a slither of the deal’s value. Roxe investors are also entitled to an earnout for additional shares in the combined company if certain stock price targets are met, according to the sources.A deal could be announced later on Tuesday, the sources said, requesting anonymity ahead of an official announcement.Founded in 2019, Roxe connects banks, payment firms and remittance companies, facilitating cross-border payments using their private blockchain tokens. It does not use cryptocurrencies, whose market value has been volatile.Bitcoin fell below $20,000 on June 18 for the first time since December 2020. It has plummeted around 60% this year. The overall crypto market has slumped to around $900 billion, down from a record $3 trillion in November. [L1N2Y503U]This would be Roxe’s founder Haohan Xu’s second SPAC merger this year after he agreed to take crypto exchange Apifiny public earlier this year in a $530 million deal.About 600 SPACs that went public in the past couple of years are still trying to complete deals, according to data from Dealogic. A little over six months into 2022, 26 SPAC mergers have been terminated in the United States, according to data from industry tracker Spac Research. That compares with a total of 18 in the whole of 2021, and 7 in 2020. (This story corrects to change company name from Roxe Holdings to Roxe Holding) More

ROSEBUD, South Dakota (Reuters) -U.S. Treasury Secretary Janet Yellen said on Tuesday the department’s new Office of Tribal and Native Affairs will to try to address chronic tax and financing inequities faced by tribes, but will need Congress to sustain it beyond the Biden administration.Yellen told reporters the office, to be headed by newly appointed U.S. Treasurer Marilynn Malerba, the first Native woman to hold the post, will aim for parity on certain tax issues, such as prohibitions for tribes to access low-income housing tax credits and to be able to offer tax credits to attract business investment.During a visit to the Rosebud Sioux Tribe in South Dakota, Yellen called for a “rethink” of some tax credit programs to allow tribes to participate, and to reduce barriers to financing on tribal lands.”We heard a lot about treaty obligations that haven’t been met and long standing barriers to economic development — lack of access to capital for example,” Yellen told reporters after a meeting with Rosebud tribal officials.Malerba, permanent chief of the Mohegan Indian Tribe, said that because of tribes’ current tax status, they cannot offer tax credits to attract business, jobs and revenues, while non-tribal state and local governments can.”So we’re looking for parity on some of those issues,” Malerba said. “We should be able to compete just as every other municipality, whether it’s a local municipality or state government, for business on our lands and to be able to create some of those opportunities for our tribal members,” she added.Rosebud Sioux Tribe President Scott Herman said that the tribe has struggled to bring down a chronically high unemployment rate of around 80% of its members due to lack of financing. He said banks are reluctant to lend to tribes because traditional mortgages are not possible because tribal lands are held in trust by the federal government.The new office, announced along with Malerba’s appointment, also will assist tribes in making the most of some $30 billion in COVID-19 assistance funds for tribal communities.Yellen said the office has been set up for the duration of the Biden administration, but Congress would need to pass legislation to make it permanent, with regular future funding.The American Rescue Plan COVID-19 State and Local Fiscal Relief Fund, including money for tribes, must be obligated by the end of 2024, and fully spent by the end of 2026. More

BENGALURU (Reuters) – The Federal Reserve will deliver another 75-basis-point interest rate hike in July, followed by a half-percentage-point rise in September, and won’t scale back to quarter-percentage-point moves until November at the earliest, according to economists polled by Reuters.Last week the Fed hiked the federal funds rate by three-quarters of a percentage point, its largest rate increase since 1994, after official data just a few days earlier showed inflation unexpectedly rose despite expectations it had peaked.The latest poll results, released on Wednesday before Fed Chair Jerome Powell was due to appear before the Senate Banking Committee as part of his twice-yearly monetary policy testimony to Congress, show momentum is still behind the U.S. central bank doing more, not less, despite rising recession concerns and a steep sell-off in financial markets. Bond yields are up sharply and major Wall Street equity indexes are already trading in a bear market, defined as 20% down from their peak. In the June 17-21 Reuters poll, nearly three-quarters of economists, 67 of 91, expected another 75-basis-point U.S. rate hike in July. That would take the fed funds rate to a range of 2.25%-2.50%, roughly the neutral level where the Fed estimates the economy is neither stimulated nor restricted. A strong majority expect the central bank to hike its policy rate by another 50 basis points in September, with opinion more split on whether it will hike by 25 or 50 basis points in November. A majority expect the Fed to raise rates by 25 basis points at its December meeting. That would take the fed funds rate to a range of 3.25%-3.50% by the end of this year, 75 basis points higher than thought in a poll published just two weeks ago.Powell last week signaled that a pause in the current tightening cycle would only be possible after a meaningful decline in inflation, which currently looks to be a more distant prospect than thought just a few weeks ago.”Since the Fed is still underestimating the inflation problem … not recognizing that a wage-price spiral has already started, we expect they will have to raise rates faster than they now expect,” Philip Marey, senior U.S. strategist at Rabobank, wrote in a note. “Unfortunately, the hiking path is also likely to be followed by a recession.” Graphic: Reuters Poll – US economy and Federal fund rate outlook – https://fingfx.thomsonreuters.com/gfx/polling/egvbkgazjpq/Reuters%20Poll-%20US%20economy%20and%20Fed%20rate%20outlook.PNG Inflation will remain above the Fed’s 2% target until at least 2025, according to its own projections and a separate Reuters poll. [ECILT/US]Although the Fed was expected to shift down to 25-basis-point rate hikes in November, a significant minority, around 40%, expected a 50-basis-point hike at that month’s meeting. Only a handful said the Fed would pause its rate hikes at some point this year.Around three-quarters of respondents, 68 of 91, saw the end-year rate at 3.25%-3.50% or higher, in line with the Fed’s own “dot plot” showing policymakers’ projections. Aggressive rate hikes come with their own risks, as reflected in the Fed’s economic projections where forecasts for the U.S. unemployment rate were raised significantly and economic growth was predicted to average below trend.The poll predicted only one 25-basis-point hike in the first quarter of next year, pushing the federal funds rate to 3.50%-3.75%, the possible terminal rate.The Fed was expected to pause in the second and third quarters of 2023 and cut rates by 25 basis points in the final quarter of next year, according to the median forecast from a smaller sample. But forecasts for where the fed funds rate will be by the end of 2023 ranged between 2.50%-2.75% and 4.25%-4.50%, underscoring high uncertainty.Despite Powell saying the Fed was not trying to induce a recession, a few primary dealers have either started predicting one as early as this year or have brought forward their recession calls. More

WASHINGTON (Reuters) – Centrist U.S. Representative Henry Cuellar was clinging to a razor-thin lead early on Wednesday against progressive challenger Jessica Cisneros in a high-profile south Texas Democratic primary battle that illustrated sharp dividing lines over immigration and abortion rights.The election on Tuesday in a district along the U.S.-Mexico border was the third contest between Cuellar, who has held the seat since 2005, and Cisneros, a 28-year-old attorney who failed to unseat him in 2020 but forced him to a runoff in the state’s March primary this year.A tally by Edison Research showed Cuellar up by just 177 votes with 92% of the estimated vote counted. Major media outlets held off on calling the race.Despite the slim margin, Cuellar declared victory. Cisneros, however, declined to concede, saying every ballot needed to be counted.The race took on new urgency in recent weeks after a leaked Supreme Court opinion indicated that it could overturn a 1973 ruling that legalized abortion nationwide. Cuellar, 66, is the lone House Democrat to oppose abortion rights, and abortion-rights groups have spent at least $160,000 to bolster Cisneros’ campaign.Cuellar has said that Cisneros would risk public safety and hurt the local economy by cutting law enforcement funding in a district where many voters work for border patrol agencies.Cisneros has since distanced herself from her previous call to eliminate U.S. Immigration and Customs Enforcement.Political analysts have said that a Cisneros win could threaten Democrats’ chances to hold the seat in the Nov. 8 election, when Republicans hope to win control of the House of Representatives.But Cuellar’s strength in the general election should not be a foregone conclusion, said Joshua Blank, research director of the Texas Politics Project at the University of Texas in Austin.”The reality is that Cisneros has come very close to unseating Cuellar twice at this point,” Blank said. “If he can’t defeat Cisneros, then I think the logic underlying that should come into question.”Cisneros has benefited from increased name recognition and an FBI investigation that saw raids on Cuellar’s home and office.Financial disclosures on Friday showed she has out-raised him by almost $1.4 million, and has around $400,000 more cash on hand than Cuellar.The race is one of several midterm primary battles between incumbent House Democrats and progressive challengers.In primary contests last week, Jamie McLeod-Skinner looks set to oust moderate incumbent Kurt Schrader in Oregon, while progressive Summer Lee won the Democratic nomination over Steve Irwin in Pennsylvania’s 12th Congressional District. Other progressive challengers like Nina Turner in Ohio have lost. More

WASHINGTON (Reuters) -U.S. Democrats said on Tuesday they were hopeful of reaching a $52 billion bipartisan deal to subsidize U.S. semiconductor manufacturing and boost U.S. competitiveness with Chinese technology.House Speaker Nancy Pelosi, Senate Majority Leader Chuck Schumer, both Democrats, met with House Republican Leader Kevin McCarthy and Senate Republican Leader Mitch McConnell to try to hammer out a compromise but did not announce an agreement. Pelosi and Schumer issued a statement urging swift action and said they believed there was no reason the bill should not through Congress in July.”Democrats have already made accommodations in the name of reaching an agreement, which we are optimistic can happen soon,” they said.McCarthy and McConnell did not immediately comment.A persistent shortage of chips has disrupted the automotive and electronics industries, forcing some firms to scale back production.The two chambers have passed similar bills but key differences must be resolved.The Senate legislation, passed in June 2021, included $52 billion for chips subsidies and authorized another $200 billion to boost U.S. scientific and technological innovation to compete with China.The House version, passed in February, is nearly 3,000 pages long and includes a number of trade proposals not in the Senate bill. Some House provisions are likely to be removed for lack of approval in the Senate, officials say.Democrats have warned that major investments in new U.S. chip production could be jeopardized without action from Congress. Democratic Senator Mark Warner told Reuters last week “the clock is ticking.”Michigan Governor Gretchen Whitmer and Indiana Governor Eric Holcomb said in a joint opinion piece https://www.ibj.com/articles/eric-holcomb-gretchen-whitmer-congress-needs-to-pass-innovation-legislation-soon for the Indianapolis Business Journal that governors of both parties “overwhelmingly agree that federal action is critical not only to address the semiconductor shortage we all face but also to realign national research and economic development priorities and leapfrog our adversaries.” More