Economy

Turkish authorities have raised the pressure on the country’s banks to limit corporate clients’ purchases of foreign currency in an effort to halt a renewed slide of the lira.Bankers in Istanbul, Turkey’s financial centre, say that they are facing increased interference from the central bank, with officials probing corporate FX transactions worth as little as $1mn. “Even for $1mn or $2mn, they are calling to check: who is the buyer?” said one senior Turkish banker. “They’re really anxious about the corporate flow.”The interference is the latest unconventional tactic Turkish officials have deployed to steady a currency that has fallen by 45 per cent against the dollar over the past 12 months, sending inflation soaring. With the financial sector under strong political pressure from president Recep Tayyip Erdoğan, bankers say they have little choice but to comply with the demands to seek advance approval from the central bank for big-ticket foreign currency purchases. In some cases, commercial banks have been ordered to refuse to facilitate FX purchases for their clients altogether, especially those worth more than $5mn. While Turkish authorities have repeatedly interfered in the running of banks and corporates in recent years, another banker said that the meddling “has been intensifying” and they were “coming under closer scrutiny”.A person with close links to the Turkish banking sector said the situation has created anxiety in the business community. “This is leading to worries among corporates that they might not be able to buy as much FX as they need.” Businesses need dollars and euros for an array of reasons, from paying for raw materials bought from abroad to serving their large foreign currency debt burden. Turkish authorities, however, have raised concerns that some firms are engaging in speculation against the lira. After four months of relative stability, the currency has lost close to 4 per cent against the dollar since the middle of last week. Foreign currency sales by the central bank and unorthodox policy measures aimed at encouraging savers to park their cash in lira accounts had acted as a sticking plaster during the opening months of 2022. On Monday, the lira fell through the symbolic threshold of TL15 to the dollar, denting public confidence in a currency seen as a barometer of the health of the broader economy. The latest wave of pressure on Turkish companies and banks to limit their foreign exchange transactions comes at a time when liquidity in the country’s currency markets is limited, meaning that relatively small purchases of dollars or euros can have an outsized impact.One of the bankers said officials were “respectful” in their requests and added: “The guys at the central bank know this cannot be a permanent solution.”The central bank declined to comment.

Erdoğan, a life-long opponent of high interest rates, has used a string of unconventional methods to try to stabilise the lira while maintaining ultra-low real borrowing costs as he gears up for presidential and parliamentary elections that must be held before June 2023. With the country’s benchmark lending rate at 14 per cent, the real interest rate stands at minus 56 per cent once annual inflation of 70 per cent is taken into account, creating a strong disincentive for holding lira assets.A widening trade imbalance, fuelled by soaring global energy costs, is another source of weakness and has exacerbated demand for foreign currency. The central bank — long seen as having insufficient foreign exchange reserves — spent around $24bn on defending the lira in the first three months of 2022, according to Haluk Burumcekci, an Istanbul-based analyst. A government savings scheme, unveiled in December, has attracted $55bn by promising to protect individual savers and corporates from foreign currency risk if they switch their money to lira. In January, exporters were told that they must sell 25 per cent of their foreign currency revenues to the central bank — a ratio that was lifted to 40 per cent in [email protected] More

The writer is president of the Peterson Institute for International Economics and a former member of the Bank of England’s Monetary Policy CommitteeSometimes, reality bites. The UK outlook for stagflation of rising prices and slowing economic growth this year and next reflects the realities that Brexit has wrought. Of course, the Covid pandemic, the difficulties of reopening the economy, and now energy and food price surges are not caused by Brexit. But the UK’s vulnerability to those shocks, and therefore the amplification of their inflation impact, is largely due to Britain’s departure from the EU. This is why the Bank of England will end up having to raise interest rates over the next year more than it forecast this month, and even more than markets have already priced in. Given the very hard Brexit, the Bank of England and the UK economy have been dragged part way back to the 1970s. By that, the Bank’s Monetary Policy Committee is no longer able to look past external economic shocks as they did during the 1992 European Exchange Rate Mechanism exit or 2009 sterling depreciation. In these cases, they had the luxury of setting monetary policy solely in terms of hard domestic forecast data. But after Brexit, the MPC would have to worry more about the “spillover” of international events into inflation expectations.This is due to a combination of the UK being a smaller economy on its own, less buffered by its integration in the EU, and an erosion of trust in UK governments to run disciplined economic policies. Hence, any shocks are likely to result in higher and more lasting inflation than they did before Brexit.Additionally, because the UK has waged a trade war on itself, Brexit has a direct effect on inflation. There is a down shift in purchasing power — a one-time but significant move that is taking some years to play out as various aspects are implemented. This takes the form of administrative costs and regulatory barriers as well as tariffs and diminished policy choices. There also has been a reduction in both the level of labour supply and its elasticity with the effective exclusion of European migrant workers. Labour is a differentiated good with no simple substitution when workers in a given industry, skill set or region are no longer available. Critically, this has meant a growing mismatch of available workers to jobs, as well as the perceived bargaining power of domestic workers in certain sectors. The UK avoided the US’s 2021 mistake of distributing too much fiscal stimulus in too brief a period when the economy was recovering but short of labour; if anything, fiscal policy was too austere. The UK, like the EU, also avoided Washington’s error in tying Covid aid to workers laid off or fired, by instead subsidising jobs and furlough schemes. Yet, the UK inflation rate is high, similar to US levels, and has been for some time. It is higher than the rate for the eurozone, even though price rises accelerated across the bloc predominantly as a result of Russia’s war in Ukraine. It is Brexit wot done it. Because of the limitations of today’s UK labour market, the British economy faces much the same worker shortages and wage pressures as the US.UK price rises reflect, in part, the idiosyncrasies of Britain’s natural gas and food markets. However, the lack of sourcing supply options for agricultural labour and fuel made those inflationary effects worse and more persistent. Implementing trade barriers and new standards between the UK and the EU single market only compound the problem.I do not share the MPC’s assessment that the forecast decline in real incomes and the planned monetary tightening will be sufficient to bring inflation back to target within two to three years. Monetary policy has to be exercised because in a small closing economy with an inflationary trend — similar to Britain in the 1970s — inflation does not self-correct with general movements in demand. Wage increases are not keeping up with inflation but this is precisely why monetary policy has to tighten further now, not wait. Preserving the real income for working households is exactly why the Bank should be fulfilling its mandate to maintain stable prices around the 2 per cent target.  More

If the world’s second-largest economy shows any sign of recovery from its Covid-induced slump, Wang Neng should be among the first to know. But so far, he sees few indications of that. Like many small businesses in China, Wang’s cement mixing station in central Henan province has been hit hard by controversial lockdowns in dozens of cities ordered by President Xi Jinping to stamp out outbreaks of the Omicron variant. Two months after Beijing promised vague measures to support the economy through the crisis — and despite Xi’s assurance of an “all out” infrastructure drive — Wang’s business is still struggling. “Looking at cement demand, there are few signs of an infrastructure pick-up,” he says. His station is running at only 20 per cent capacity and he has cut his fee for mixing cement by almost one-quarter from last year. Wang’s business was already feeling pressure thanks to delayed payments from clients under stress further along the industrial chain. Even before the lockdowns hit, China’s economy had been badly affected by Xi’s “rectification” of the highly leveraged property sector, which is estimated to account for about one-third of the country’s economic output. Now, lockdowns imposed to salvage the president’s strict zero-Covid policy are making matters worse.Xi’s administration has been here before. When Covid erupted out of central China in January 2020, Hubei province and its capital, Wuhan, were quickly locked down, with the rest of the country soon following. This time, the Japanese brokerage Nomura estimates that 41 cities with a combined population of 290mn and responsible for about 30 per cent of national economic output were under full or partial lockdowns as of May 10. Some residents in lockdown have been left totally reliant on deliveries of food © Tingshu Wang/ReutersYet there are crucial differences between the successful nationwide clampdowns at the start of the pandemic and the current series of rolling closures.The 2020 measures were a relatively short, sharp shock. They coincided with the annual lunar new year holiday — China’s equivalent of the western Christmas and New Year break — during which many manufacturers routinely close for two or three weeks. After an extended holiday, most of the country reopened within a month. Only Hubei and Wuhan were subjected to longer restrictions, and even these were lifted by late March. The impact on growth mirrored the brevity of the closures, with a 6.9 per cent year-on-year decline in first-quarter economic output, followed by a steadily accelerating recovery for the rest of the year.By contrast, this spring’s lockdowns have been ad hoc and open-ended. They are ultimately controlled by low-level district or neighbourhood officials who respond — often brutally — to sometimes contradictory policy signals from the top of the Chinese Communist party. Policy whiplashAt a May 5 meeting of the party’s most powerful body, the Politburo Standing Committee, Xi reiterated that he would not tolerate any let-up in the effort to eliminate all Covid cases from China. More worryingly for business owners such as Wang, he did so without his previous reassurances to “reconcile zero-Covid with growth” or to “minimise the impact of the pandemic on the economy”.The effects could be severe. While China’s first-quarter data did not capture the worst of this spring’s lockdowns, a portent of things to come could be seen in a 3.5 per cent year-on-year fall in retail sales in March. Trade figures for April showed a marked slowdown in year-on-year export growth — 3.9 per cent compared to almost 15 per cent in March — yet even that was better than expected. Anecdotal evidence and surveys taken ahead of the release of key domestic data such as real estate and infrastructure investment on May 16 suggest a reckoning is coming. April vehicle sales fell 48 per cent year-on-year, according to industry data released on Wednesday.

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“We won the battle to defend Wuhan,” Xi said at the meeting, according to state media. “We will certainly be able to win the battle to defend Shanghai.” Since the start of the pandemic, such martial rhetoric has been a common refrain for Xi, who has embraced the crisis as an opportunity to prove himself a leader in the war on Covid. He added a warning: “Relaxing prevention and control measures will inevitably lead to large-scale infections, serious illnesses and death, and will seriously affect economic and social development.” The admonition was a nod to his administration’s success in limiting official Covid deaths to just a few thousand — the US has suffered nearly 1mn. But it also highlights the government’s failure to vaccinate the elderly and other vulnerable people. A similar omission in Hong Kong led to a catastrophic outbreak there this year in which more than 9,100 people died, most of them elderly and unvaccinated. On May 9, researchers at Fudan University in Shanghai estimated a similar surge across China could kill as many as 1.6mn people in just three months. The highest profile, and most controversial, Chinese lockdown has been the one imposed on all of Shanghai’s 26mn residents since April 1. Within hours of Xi’s comments on Covid control last week, police and enforcement officials in areas of Shanghai were imposing some of their harshest measures to date — including the forced transfer of all residents in a given building to centralised quarantine if even one of them tested positive. Many residents have complained of being unable to receive food deliveries.Viral videos of overzealous enforcement have spread panic across the city. In one of them a police officer tells residents: “You can’t do what you want, like in America. This is China. So listen carefully [and] don’t ask me why, there is no why!”The Forbidden City is shutting indefinitely from Thursday, amid fears that Beijing could be subject to a full lockdown next © Noel Celis/AFP/Getty ImagesEver stricter measures adopted in Beijing over recent weeks have raised fears that the capital city could be subject to a full lockdown next. The main commercial district, Chaoyang, is already effectively closed for business and the Forbidden City is shutting indefinitely on Thursday. According to one popular Chinese Covid tracker service, more than 600 Beijing residential compounds were subject to moderate to severe restrictions on May 8 — up from 239 at the end of April. James Zimmerman, a China lawyer at Perkins Coie who recently underwent a five-week quarantine ordeal to return to Beijing from the US, says 10 of his 30 colleagues in the capital have been caught in random residential lockdowns, with “more expected to get the call to stay at home at any time”.“The uncertainty and unpredictability of the whiplash policy changes is a dismal experience,” he added. “It’s now a cat-and-mouse game to avoid crossing lines into areas on lockdown or near lockdown.” Health vs prosperityThe government finds itself in the difficult position of trying to fight “two battles simultaneously: containing Covid and preventing the deterioration of the economy”, says Chen Long at Plenum, a Beijing-based consultancy. “Officials are told to win both,” he adds, “but the reality is they must prioritise one over the other. Zero-Covid still trumps the economy for now.”This is true even while fears for the economy are being voiced by the premier Li Keqiang or by vice-premier Liu He, Xi’s most-trusted economic adviser who is particularly concerned about the lockdowns’ impact on the property and financial sectors. Last weekend, Li warned that China’s “current employment trends are complex and grim” and called on “all localities” to prioritise protecting jobs to “ensure economic stability”. On Wednesday night, the State Council promised more relief measures for workers and employers, citing the pandemic’s “larger than expected impact” on the economy. But the localised approach to lockdowns makes it difficult for even municipal officials, let alone party leaders in Beijing, to assess their extent and economic impact. One such official in the city of Nanjing, Jiangsu province, who asked not to be identified because he was not authorised to speak to foreign media, voiced his frustration: “The Politburo Standing Committee made it clear last week that fighting Covid was our top priority,” he says. “But we can’t ignore the economy, which is in freefall.”A worker in protective clothing directs occupants of buildings to go for Covid testing in Shanghai. The city’s 26mn residents have been under lockdown since April 1 © Aly Song/ReutersHis dilemma illustrates another difference between these local lockdowns and the national one two years ago. Because of the interconnected nature of China’s sprawling economy, companies in areas subject to moderate or even no controls can still be severely disrupted by the knock-on effects of those elsewhere.The official says his “main job” has become lobbying his counterparts in Shanghai, 270km to the east, to authorise production at suppliers that Nanjing-based manufacturers rely on. “How can large firms operate normally when most of their suppliers are still under lockdown?” he says. “Stimulus won’t work if factories can’t return to normal.”Foreign investors are also caught in the turmoil. Last week 60 per cent of more than 370 respondents to a survey by the EU Chamber of Commerce in China said they were lowering revenue forecasts for the year, while about one-quarter said they would move existing or planned investments out of China.“If the current situation continues, [our members] will increasingly evaluate alternatives to China,” said Joerg Wuttke, the chamber’s president. “A predictable, functioning market is better than one that, despite having high growth potential, is volatile and suffers from supply-chain paralysis.” The limits of stimulusWang’s difficulties in Henan are common across the cement industry. According to a nationwide survey by 100NJZ, a construction industry consultancy, shipments from 506 cement companies fell more than one-third in April.An executive at state-owned Tangshan Jidong Cement Co, one of the largest in the industry, says new projects are not getting off the ground because of a lack of funding for local government financing vehicles, or LGFVs, which are crucial motors for the economy. “Stalled projects are everywhere,” he says.

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Bond issuance by LGFVs was just Rmb758bn ($112bn) over the first four months of this year, down almost 25 per cent from the same period in 2021. Many Chinese banks now prefer to lend to infrastructure projects led by large state-owned enterprises rather than LGFVs, which they see as too risky.They take a similar view of small and medium-sized enterprises in the private sector, which account for half of government tax revenues, 60 per cent of economic output and 80 per cent of employment. In March, researchers at Peking University surveyed more than 16,500 such businesses nationwide. First-quarter revenues were, on average, 73 per cent below the same period in 2019 — nine months before the pandemic hit. Average profit margins were 0.1 per cent, down from 1.8 per cent at the end of last year.

An executive at Bank of China’s branch in Zhengzhou, Henan province, who asked not to be named, explained the problem many lenders face. “The banking regulator asked us to beef up support for the economy by making more loans to LGFVs and SMEs,” he says. “But we will face heavy punishment in the event of defaults.”Such reticence seems widespread. According to a nationwide survey of more than 100 loan officers by Shanghai-based Guosheng Securities, 44 per cent of respondents said their banks wanted to reduce exposure to LGFVs in coming months. About two-thirds said they expected loans for infrastructure and real estate development in the second quarter would either fall or, at best, match first-quarter issuance.

Attitudes such as these frustrate efforts by the State Council and People’s Bank of China to direct more credit to companies by cutting the level of reserves banks must maintain. Michael Pettis, a professor of finance at Peking University, says this kind of targeted easing “doesn’t solve the problem” in a lockdown-afflicted economy. “If you force banks to lend under [such] circumstances, the way they lend is not by satisfying unmet demand but by lowering their lending standards.”Government officials and policy advisers say central bank officials want to boost growth by ensuring “appropriate financing demand” for LGFVs’ investments. But the securities regulator and planning ministry are more cautious. At the end of April the planning ministry issued new restrictions limiting LGFVs’ issuance of dollar-denominated bonds to 40 per cent of net assets.“The authorities are trying to strike a difficult balance between supporting growth and keeping debt pressures from spiralling out of control,” says one Shanghai-based government policy adviser. They have good reason for concern. The total amount of outstanding interest-bearing debt issued by LGFVs is currently double that four years ago, standing at Rmb48tn.

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Another hallmark of Beijing’s Covid stimulus policies, tax cuts, have offered little relief, according to many small business managers. In March, the State Tax Administration said SMEs would be exempt from paying value added tax until the end of the year. But, in practice, a business can only claim VAT relief on a transaction if the client waives its right to a VAT refund — something most are not willing to do.Tax officials argue that the government cannot afford to give relief to both parties. “We can’t allow small firms and their clients to both enjoy tax breaks,” says an official at Beijing’s municipal tax bureau. “That would translate into a big drop in overall tax revenue just as local governments badly need money to fight the virus and finance infrastructure projects.” Despite the intensifying economic pain, few expect Xi to relax his zero-Covid campaign before securing an unprecedented third term in power at a party congress later this year. The strategy “has become a political crusade — a political tool to test the loyalty of officials”, says Henry Gao, a China expert at Singapore Management University. “That’s far more important to Xi than a few more digits of GDP growth.” More

Things have gone from bad to worse on Oleg’s farm in Kherson in southern Ukraine since Russia’s invasion 10 weeks ago. Occupying forces took away some of his grain and stole all the machinery, including trucks, low-loaders and jeeps — which his staff have seen in local towns ferrying Russian army personnel and equipment. They commandeered his house and farm buildings.Oleg — not his real name given the risk of reprisals — doubts whether he will be able to harvest the reduced area of land he has sown this spring. The extra combine harvesters and lorries he normally rents from central Ukraine will be hard, if not impossible, to secure. Two-thirds of his staff have left. Some are afraid of working in the fields when the war is raging nearby. An exploding shell in a sunflower field during the dry summer months could trigger an unstoppable fire.“I did not count the amount of losses,” said Oleg, adding they were only going to get bigger. Ukraine’s government has accused Russia of trying to destroy its agriculture sector by stealing valuable grain stocks and machinery, deliberately bombing farms and warehouses and blockading its Black Sea ports to deprive it of exports earnings and farmers of liquidity. There are multiple examples around the country of grain elevators and warehouses being bombarded. Around Kyiv, Russian forces destroyed distribution centres and warehouses to try to disrupt the provision of food to the capital.But it is the confiscation of grain in territories controlled by Moscow that is the most emotive issue. It has drawn parallels with the Soviet policy of crop confiscations coupled with the confinement of peasants to their villages in the 1930s. Some 4mn people died in the ensuing famine in Ukraine, known as the Holodomor, or death by starvation.After Russia bombed a farm business in Luhansk in eastern Ukraine last month, destroying machinery, buildings and 17,000 tonnes of wheat — a year’s supply for 300,000 people — Serhiy Haidai, the local governor, said on social media that Moscow was seeking “to organise the Holodomor in the Luhansk region, that is without a doubt”.

Ukrainian farmers during the 1930s famine known as the Holodomor, in which about 4mn people died © CPA/Alamy

“The most straightforward conclusion from Russia’s exporting grain from Ukraine is [that] their aim [is] to exacerbate the risk of shortages and hunger in the Ukrainian territories under Russian control,” said Vladyslava Magaletska, former head of Kyiv’s state service for food security.“In addition, Russia may envisage using the stolen grain to blackmail the world, putting global food security at risk.”The confiscations appear to be on an industrial scale. Agriculture minister Mykola Solsky said Russian authorities had seized between 400,000 and 500,000 tonnes of grain from across the territory it has occupied, taking most of it to Crimea. “This is big business, organised at the highest levels. Clearly it is done by uniformed agents and the military of the aggressor country,” Solsky said.Alex Lissitsa, chief executive of IMC, one of Ukraine’s biggest agribusinesses, said grain seizure on this scale must be organised by the Russian authorities because it was not an easy endeavour.Ukrainian defence intelligence said in a recent statement that a “significant part of the grain stolen from Ukraine is on dry cargo ships under the Russian flag in the Mediterranean. The most likely destination is Syria [an ally of Moscow]. From there, grain can be smuggled to other countries in the Middle East.”Solsky said Kyiv was seeking western help to try to stop the shipments.Overall, Ukraine’s government expects 70-80 per cent of farmland to be sown this year despite the problems the war has caused for farmers — from rising prices for fuel and fertilisers to mines and unexploded munitions in their fields and their inability to export stocks of grain by ship. On Lissitsa’s land in northern Ukraine, the grain elevator was hit by Grad rockets at the beginning of Russia’s invasion but miraculously survived. After Moscow’s forces withdrew from the area his farmers were able to sow, despite the shortage of manpower. “I couldn’t believe a month ago we’d be farming here, but we are,” he said.

The picture in the occupied territories in eastern and southern Ukraine is bleaker. In some places, farmers have been banned from working in their fields. Inna Zelena, a Kherson local official who fled when Russia invaded, said some farmers were prevented from growing tall crops, such as corn and sunflowers, which could provide cover for Ukrainian insurgents. She also said local vegetables were being shipped en masse to Crimean stores and markets. Locals in Kherson were meanwhile increasingly reliant on groceries trucked in from the peninsula. “There will be a food crisis,” Zelena predicted.Kherson farmer Oleg said pro-Kremlin local officials appointed by occupying forces were expropriating entire farm holdings. Some 200 large farm businesses — including many owned by US companies — were being listed for “nationalisation” and would probably be transferred to pro-Russian businessmen from the area, he said.“Some powerful pro-government farmers have a very big bonus from Russia today,” he added. More

Your browser does not support playing this file but you can still download the MP3 file to play locally.Description: Turkish authorities have raised the pressure on the country’s banks to limit corporate clients’ purchases of foreign currency, US consumer prices rose at an annual pace of 8.3 per cent last month, and the EU will have to spend close to €200bn in the next five years to secure energy independence from Russia. Plus, the FT’s Tabby Kinder explains why HSBC’s biggest shareholder is pressuring the bank to split up. Mentioned in this podcast:Turkey dials up the pressure on banks as lira slidesUS inflation stays at 40-year high defying expectations of bigger dropEU warns of €195bn cost to free bloc from Russian energyPeter Ma: China’s shy insurance tycoon bursts into the limelightSaudi Aramco overtakes Apple as the world’s most valuable companyThe FT News Briefing is produced by Fiona Symon and Marc Filippino. The show’s editor is Jess Smith. Additional help by Peter Barber, Michael Lello, David da Silva, and Gavin Kallmann. The show’s theme song is by Metaphor Music. Topher Forhecz is the FT’s executive producer. The FT’s global head of audio is Cheryl Brumley. Read a transcript of this episode on FT.com See acast.com/privacy for privacy and opt-out information.Transcripts are not currently available for all podcasts, view our accessibility guide. More

Jefferson’s appointment was approved by a 91-7 vote with all of the no votes coming from Republicans. He is the fourth Black man to be a governor at the U.S. central bank. His term runs to 2036.Lawmakers on Thursday are expected to hand Jerome Powell a second term as Fed chair, though that confirmation vote is likely to be by a slimmer margin. However, that vote will amount not only to an endorsement of his handling of the pandemic crisis and the devastating 2020 recession that marked his first term, but also for the round of sharp interest rate hikes he began in March to fight the decades-high inflation that is marring his second.Jefferson was confirmed a day after Vice President Kamala Harris cast a tie-breaking vote on the Senate floor to confirm another of President Joe Biden’s nominees to the Fed, Michigan State University’s Lisa Cook. She is the first Black woman to become a Fed governor. Two Black governors have never before served simultaneously on the Fed Board. For Jefferson, the confirmation marks a bit of a return to his roots: his first job after graduating from Vassar College in New York State was as a research assistant at the Fed. Before taking his current job at Davidson College in North Carolina, he taught economics for more than two decades at Swarthmore College in Pennsylvania, and before that at Columbia University in New York. He has published research on monetary policy and written extensively on wages, poverty, and income distribution. The seven-member panel will still be one seat short of its full complement.Earlier this month Biden said he would nominate former Treasury official Michael Barr to be the Fed’s vice chair of supervision. His initial pick for the job, Sarah Bloom Raskin, withdrew her name after opposition from Republicans and one Democrat denied her a path to confirmation. More

TOKYO (Reuters) -A Bank of Japan policymaker said it was inappropriate to change monetary policy for the purpose of controlling exchange rates, a summary of opinions at the April meeting showed, brushing aside the idea of countering sharp yen falls with interest rate hikes.The yen’s slide to 20-year lows against the dollar has pushed up the cost of raw material imports, drawing concern among policymakers of the potential hit to Japan’s fragile economic recovery.Some market players believe the BOJ may tweak its ultra-loose policy to slow the yen’s decline, which is driven by rising interest rate differentials as the U.S. Federal Reserve embarks on aggressive rate hikes.”Among the factors behind the weak yen is the widening gap in economic conditions between Japan and Western countries. It’s inappropriate to change monetary policy for the purpose of controlling exchange rates,” one of the BOJ’s nine board members was quoted as saying in the summary, released on Thursday.”In guiding monetary policy, the BOJ must look at the impact of fluctuations in commodity prices and exchange rates on the economy and prices, rather than the price moves themselves,” another opinion showed.Several board members stressed the need to maintain the BOJ’s massive stimulus programme on the view any pick up in inflation will likely be temporary and driven mostly by rising raw material costs, the summary showed.”The BOJ must be mindful of the need to make its ultra-loose monetary policy sustainable if inflation remains short of its 2% target for a prolonged period,” one member was quoted as saying.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. More

NEW YORK (Reuters) – Investors have been reducing valuations of Latin American startups during the global stock market rout and in an environment of higher interest rates, said Sergio Furio, founder of unicorn fintech Creditas.”Startups that raised cash at peak valuation, for example last July last year, will have to accept a reduction if they need more money this year”, said Furio. Following the public markets, multiples attributed to private companies fell. Shares of Latam’s largest fintech, digital bank Nubank, sank 60.6% this year. So startups are trying to conserve cash, Furio added. Creditas’ latest funding was in January, a $260 million round in which the valuation reached $4.8 billion. The fintech will not raise capital this year, Furio said in an interview with Reuters before meeting with investors in New York.The startup expects to moderate credit growth, as its consumers deal with higher inflation and lower disposable income. It also intends to present progress in the operation of Voltz, an electric motorbike maker in which Creditas invested 100 million reais.The investment banking unit of Latin America’s largest bank, Itau BBA, is hosting its first conference in New York with Latin American CEOs since the start of the pandemic, with around 150 companies headquartered in Brazil, Mexico, Colombia and Argentina. Emerging market investors have been more interested in Latin America since the Ukraine war, as the region is relatively insulated from the higher geopolitical risks. They also have become more demanding.Alex Ibrahim, head of international markets at the New York Stock Exchange (NYSE), expects markets to reopen for new equity offerings from Latin America by September. “Investors are more selective, demanding a clear path to profitability from startups”, Ibrahim said. Investors are more cautious about companies that burn cash. While the market is closed, the NYSE has been working to prepare candidates, including tech and industrial companies, to come to markets when there is a window. More