Economy

Lloyd Austin, the US defence secretary, has spoken to China’s defence minister for the first time after Beijing rebuffed repeated requests for a call to be arranged with his proper counterpart, the top general in the Communist party politburo. Austin spoke to General Wei Fenghe on Tuesday, the first top-level exchange between the two militaries since President Joe Biden entered office 15 months ago. Austin wrote on Twitter that the call was a “follow-up” to the call Biden held with Chinese president Xi Jinping last month. Austin has made multiple requests to talk to General Xu Qiliang, vice-chair of the Central Military Commission, who the Pentagon says is his appropriate counterpart given that he is the most senior member of China’s defence establishment after Xi, who is also commander-in-chief.A US defence official said China had rejected requests for Austin to speak to Xu. He confirmed Chinese reports that the US had requested the call with Wei, who China describes as his peer. The official said the US hoped the talks would help pave the way for a later call with Xu.Thanks for reading FirstFT Asia Email me at [email protected]. Here’s the rest of today’s news — Emily.The latest from the war in UkraineMilitary supplies: A transfer of spare parts facilitated by the US and allied countries has given Ukraine access to an extra 20 warplanes.Business: Almost 200,000 workers in Russia are still on western multinationals’ payrolls despite pledges to suspend activity in the country.Sport: Wimbledon has banned players from Russia and Belarus from competing at this year’s tennis championships.IMF update: The head of the IMF has said Ukraine will need $5bn a month for the next three months to plug the hole left by the impact of Russia’s invasion.Russian economy: Russia built a domestic payment system after its banks were sanctioned following the invasion of Crimea in 2014. It is now reaping the rewards.Five more stories in the news1. Boris Johnson seeks to stop probe into his conduct The UK prime minister will seek to thwart an attempt by opposition MPs to open a House of Commons investigation into claims he misled parliament over the partygate scandal. Catch up on why the his comments about partygate matter.2. UK and India seek trade deal Johnson will tiptoe around the highly sensitive issue of Ukraine when he arrives in India for a two-day visit today. The prime minister hopes to secure a trade deal with his counterpart Narendra Modi by the end of the year.3. Shanghai allows millions to leave their homes Chinese health officials have allowed 4mn Shanghai residents in the financial hub to leave their homes after weeks of confinement, as the country’s rigorous lockdowns weigh on its growth prospects. Scientists are pushing China to find alternatives to its two homegrown Covid-19 vaccines.4. Google and Meta curb Hong Kong leadership candidate The two US tech groups have restricted the social media presence of former Hong Kong security chief John Lee, who is running uncontested with Beijing’s backing for city leader next month, based on sanctions by Washington.5. Netflix shares fall almost 40% Netflix lost close to 40 per cent of its market value, a decline of almost $60bn, after it revealed that its once-blistering subscriber growth had gone into reverse, raising questions about the future of the global streaming market.More US business news: Tesla’s earnings were boosted by a jump in sales of regulatory credits in the latest quarter.The day aheadRelaxation of Hong Kong Covid measures Today’s change will allow residents to dine in restaurants until 10pm and permit sports fields, beauty parlours, cinemas and religious premises to reopen.Boris Johnson in India The UK prime minister will kick off his official visit in Ahmedabad. Johnson is expected to announce a significant investment in key Indian industries. He’s also set to unveil a new collaboration on science, health and technology.Register here to attend the FT’s first Crypto and Digital Assets Summit on April 26-27. Be sure to check out the full line up of events, including remarks from Changpeng Zhao, founder and chief executive of Binance.What else we’re reading and listening toCan the ministry that shaped Japan’s economy rediscover its influence? Japan’s Ministry for Economy, Trade and Industry, or Meti, built Japan’s economic “miracle” through the early 1970s. But the bust that followed reduced its power. Now the future of Toshiba is putting its reputation back on the line.Investors wary of Australia’s green hydrogen hype A series of renewables ventures in Australia propose to use the country’s plentiful land and sunlight to transform it from one of the world’s top coal and gas exporters into a clean energy superpower. But the billions of dollars required to finance them have not materialised.Can policymakers boost dwindling fertility rates? The South Korean government issues one-off pregnancy gifts of $1,700 — as a reward for helping the country address its dire demographic crunch. Such tactics are not unusual. Developed economies are offering increasing amounts in subsidies to encourage citizens to have more children. But there is little evidence that they are having an effect.

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What French voters like about Le Pen this time Marine Le Pen is on her third attempt to reach the pinnacle of power in France after unsuccessful campaigns in 2012 and 2017. Opinion polls show she has her best chance yet of becoming the country’s first woman president and of delivering a nationalist body blow to western liberal democracy akin to the UK’s vote to leave the EU or the election of Donald Trump in 2016.Bumper bonuses are back — and particularly jarring The furore over the pay package of Stellantis chief executive Carlos Tavares, which was 300 times that of the average employee, shows that politicians are still working out how to handle corporate pay, writes Brooke Masters.Work & Careers: In this weeks Working It newsletter we feature tips on how to level up at work. Click here to subscribe to the newsletter. Thank you to readers who took yesterday’s poll — 60 per cent of respondents said they would invest their bonus money.Travel This summer, a French travel company plans to take tourists to the North Pole in a new type of icebreaking cruise ship. Jurriaan Teulings joined Le Commandant Charcot’s test run.

Le Commandant Charcot has 123 rooms and suites, including a spa, two restaurants and an onboard gym. © Jurriaan Teulings More

TOKYO (Reuters) -A senior Japanese government official said on Wednesday that there was no “good or bad” in exchange rates, in remarks that suggested Tokyo was not ready to take immediate action to shore up the weakening yen. In an interview with Reuters, Deputy Chief Cabinet Secretary Seiji Kihara reiterated authorities’ common refrain that sharp moves in currency rates were undesirable and that the government would closely watch the impact of a softer yen on the economy.However, asked about growing concerns that the falling yen was problematic for Japan — including from its own finance minister, Shunichi Suzuki — Kihara said: “There’s no such thing as good or bad” in exchange rates. “Stability is important.”A weak yen, once a blessing for the export-led economy, has now added to import costs, particularly for fuel amid the war in Ukraine. That is threatening to derail Japan’s frail economic recovery as rising prices hit consumers and companies.The dollar at one point scaled a fresh two-decade peak to the yen of 129.43 yen on Wednesday, compared with around 114 yen at the beginning of March.Some investors said a fall beyond 130 yen could be a trigger for authorities to intervene to prop up the currency. But others doubt such operations could halt its downtrend for long, with the U.S. Federal Reserve about to tighten policy and the Bank of Japan (BOJ) set to keep its policy super-loose for some time.BOJ Governor Haruhiko Kuroda, who has long argued that a weak yen was positive for the economy as a whole, tweaked his remarks this week to warn sharp yen weakening was negative. Asked whether the central bank should reverse its massive stimulus and raise interest rates to boost the yen, Kihara would not comment. Instead, he said it was up to the central bank to choose whatever tools were available to meet its 2013 joint statement with the government, including a 2% inflation goal.Kihara declined to speculate on the reasons behind the yen’s weakness, and whether current moves were rapid enough to warrant authorities’ action. He said he was not in a position to answer as it was up to currency authorities to act appropriately on a daily basis.Yen-buying intervention has been very rare. The last time Japan intervened to support its currency was in 1998 in the wake of the Asian currency crisis. Japan has stayed away from the market since 2011 when it intervened heavily to stem yen strength after the devastating earthquake triggered a nuclear crisis. More

TOKYO (Reuters) -The Bank of Japan on Wednesday boosted efforts to defend its yield target, making a fresh offer to buy an unlimited amount of the 10-year bonds for four consecutive sessions. The move comes as the yield on the 10-year JGB remained at 0.25%, the upper limit of its target of around zero percent, throughout Wednesday, despite the central bank’s offer to buy an unlimited amount of the 10-year bonds at that rate. “Given recent yield movements on longer-ended notes, we have announced a consecutive unlimited fixed-rate purchase of bonds to achieve our policy to guide the 10-year yield around 0%,” the BOJ said in a statement. The rise in yields comes as the yen weakens sharply to two-decade lows against the U.S. dollar amid a relentless widening of Japanese and U.S. yield spreads, prompting markets to test the central bank’s commitment to its super-easy yield-curve-control policy..The benchmark 10-year Treasury yield climbed to the highest since late 2018 at 2.981% in Tokyo trading on Wednesday.”The Bank of Japan has no other choice than to keep offering unlimited purchases of JGBs,” said Takafumi Yamawaki, head of Japan fixed income research at JPMorgan (NYSE:JPM) Securities. “If the central bank allows 10-year bond yields to keep going up, its message to the market would become unclear.” The BOJ’s guidance is that it will allow the 10-year yield to move flexibly around its 0% target as long as it stays below the 0.25% upper limit. The BOJ accepted all of the 225.1 billion yen ($1.75 billion) in bids it received in Wednesday’s operation.The bank had also offered to buy unlimited amounts of 10-year bonds at 0.25% in February and made four consecutive days of offers in March. With the Japanese economy still weak and inflation modest, the BOJ has stressed its resolve to keep policy ultra-loose even as the U.S. Federal Reserve looks set to raise rates aggressively to stem soaring prices. BOJ Governor Haruhiko Kuroda said on Monday the yen’s recent moves had been “quite sharp” and could hurt companies’ business plans, offering his strongest warning yet of the risks stemming from the currency’s depreciation.Minister of Finance Shunichi Suzuki was more categorical on Tuesday, warning that the damage to the economy from a weakening yen at present is greater than the benefits.The yen sank to near 130 per dollar on Wednesday – a level not seen for two decades – raising the risk of direct intervention, where the central bank would buy up large amounts of yen in the open market with its foreign-currency reserves.The last time Japan intervened to support its currency was in 1998, when the Asian financial crisis triggered a yen sell-off and a rapid capital outflows from the region.($1 = 128.6500 yen) More

Indonesia Finance Minister Sri Mulyani Indrawati, who chaired the meeting, said the walkout during the Group of 20 finance ministers and central bankers meeting was “not a total surprise” and was not disruptive to the group’s wider discussion.”I am confident this will not erode cooperation or the importance of the G20 forum,” Indrawati said at a press conference following the meeting. More

San Francisco Fed President Mary Daly acknowledged that a series of rate hikes over the coming months could tip the economy into a recession.
The central bank official noted she doesn’t expect that to happen, and said any period of negative growth likely would be mild.

Mary Daly, President of the Federal Reserve Bank of San Francisco, poses after giving a speech on the U.S. economic outlook, in Idaho Falls, Idaho, November 12 2018.
Ann Saphir | Reuters

San Francisco Federal Reserve President Mary Daly acknowledged Wednesday that a near-certain series of interest rate hikes over the coming months could tip the economy into a shallow recession, though she noted that isn’t her expectation.
Responding to the worst inflation the U.S. has seen in more than 40 years, the central bank official said she foresees “an expeditious march” through the year toward benchmark interest rates that would neither stimulate nor repress growth — the “neutral” rate, in Fed parlance.

“Accounting for the risks of being too fast or too slow, I see an expeditious march to neutral by the end of the year as a prudent path,” she said.
The moves, Daly said, would help slow down an overheated economy that now has consumer price inflation running at an 8.5% annual pace.
She cited research from Princeton economist and former Fed vice chair Alan Blinder, who asserted that in 11 previous Fed hiking cycles, seven “were followed by a mild recession or none at all — basically a smooth landing,” she said in remarks at the University of Nevada Las Vegas. “Now, since I’m in Las Vegas, I will offer that I think those are pretty good odds.”
Asked later whether she considered a mild recession to be the equivalent of a soft landing or acceptable outcome, Daly said her outlook is for the economy to slow to “something that looks like below-trend growth, but not tip into negative territory, but could potentially tick into negative territory.”
That likely would mean a shallow recession, unlike those associated with, for instance, the financial crisis of 2008 or the stagflation days of the late 1970s and early ’80s, when then-Chairman Paul Volcker jacked up rates so much that the economy fell into a double-dip recession.

Some Wall Street economists see recession risks rising. Deutsche Bank recently said it sees a near-certainty of negative growth, while Goldman Sachs indicated about a 35% chance over the next two years.
“Recession is one word, but it describes a whole range of outcomes,” Daly said in response to a CNBC question. “It can be a couple of quarters of a tiny bit below zero. That’s a very different beast than something like the financial crisis or the Volcker disinflation period.”
“That’s not something that I’m forecasting or something I think would derail the long-run expansion,” she added.
Markets currently expect the Fed to enact a series of aggressive interest rate hikes between now and the end of the year. Following a 25 basis point, or quarter percentage point, increase in March, the expectation is a series of 50 basis point moves then a slowdown that will take the benchmark fed funds rate to about 2.5% by the end of the year, according to CME Group data.
Earlier in the day, Chicago Fed President Charles Evans said “I’m open to doing 50 basis point increases in order to front-load this a little bit.” St. Louis Fed President James Bullard on Monday said he’d like to move even faster and thinks a 75 basis point move next month would be appropriate, though traders are pricing in no chance of that happening.
For her part, Daly said she doesn’t want the Fed to slam on the brakes too quickly as that could endanger the pandemic-era recovery, which has been strong outside of the historic inflation move.
“If we ease on the brakes by methodically removing accommodation and regularly assessing how much more is needed, we have a good chance of transitioning smoothly and gliding the economy to its long-run sustainable path,” she said.

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(Reuters) -The U.S. economy expanded at a moderate pace from mid February through early April and there was little respite for businesses from high inflation and worker shortages, a Federal Reserve report showed on Wednesday. The latest anecdotal evidence from U.S. firms paints a picture of an economy which received a boost from falling COVID-19 cases and remains resilient despite high inflation amid gummed up supply chains. But it also points to ongoing problems that show no signs of easing as the Fed gears up to more rapidly tighten borrowing costs to put the economy on a more even keel.Inflation continues to be a worry, with demand still far outstripping the supply of everything from labor to goods, not helped by recent lockdowns in China to restrict the spread of COVID-19 and a spike in food and energy costs due to Russia’s invasion of Ukraine.”Supply chain backlogs, labor market tightness, and elevated input costs continued to pose challenges on firms’ abilities to meet demand,” the Fed said in its survey, known as the “Beige Book,” which was conducted across its 12 districts through April 11. “Outlooks for future growth were clouded by the uncertainty created by recent geopolitical developments and rising prices.”The Fed raised interest rates in March for the first time in three years but they still remain low, currently in the target range of between 0.25% and 0.5%.It is expected to raise rates by a half percentage point at its next policy meeting on May 3-4 and continue with a series of hikes this year designed to make a hefty dent to high inflation. Consumer inflation rose last month to 8.5%, the highest level since 1981.The central bank will also in May likely decide to begin the process of reducing its balance sheet, which has ballooned to include roughly $8.5 trillion of U.S. Treasuries and mortgage-backed securities as the Fed sought to keep consumer borrowing costs low during the worst of the COVID-19 pandemic.For now, most firms appear to be able to swiftly pass on higher input costs and most districts expected price pressures to continue over the coming months, the Fed’s report said, although contacts in a few districts saw fewer sales as a result of higher prices.COFFEE AND ‘DECORATIVE IMPROVEMENTS’U.S. job openings remain near record highs, the unemployment rate is at a two-year low of 3.6% and wages have been boosted at a healthy clip, even if for most workers they have not kept up with inflation.”Many firms reported significant turnover as workers left for higher wages and more flexible job schedules,” the Fed’s report said, noting strong wage growth as “footloose” workers willing to change jobs drove up pay. A scattering of contacts, however, reported early signs the robust pace of wage gains had begun to slow.In St. Louis, the push and pull in the current labor market was on clear display as some firms offered “a new coffee shop, decorative improvements, more collaborative spaces and an arcade-style area” to try to entice workers back to the office, while others were so “at odds” over worker demands the local chamber of commerce set up special seminars to try to talk them through the conflict.INFLATION, INFLATION, INFLATIONStill the heat in everything from price pressures to jobs to consumer demand to the housing market was palpable, and helps explain why Fed policymakers have so quickly pivoted to support faster rate hikes. A residential real estate contact in South Dakota told the Minneapolis Fed that “anything ‘remotely close to good condition’ sells in less than 24 hours without having to list.”The St. Louis Fed reported a trailer manufacturing contact saying that they “could double their sales if they had the workers.” Yet there were also signs the Fed’s anticipated actions, which have already tightened financial conditions, may be beginning to bear fruit, at least in housing.Most homebuilders reported that demand for new homes held steady, but as costs rise many customers are shifting toward smaller, less pricey homes, the Philadelphia Fed reported. Contacts also noted that some potential buyers are searching for more affordable housing options in more remote locations and in mobile home parks, or by remaining in rental properties.But the report also flashed a warning sign for a Fed concerned about a potential wage-price spiral if inflation does not begin to abate soon. “Among those planning to hold the line on wage increases this year, it was noted that sustained higher inflation could push them to re-think their plans,” the Atlanta Fed reported. More

In a statement to the joint steering committee for the International Monetary Fund and World Bank, Yellen strongly condemned Russia’s war in Ukraine, and said it had highlighted the consequences of reliance on fossil fuels.”We must continue to develop and deploy renewable and zero emissions energy and reduce dependency on energy sources that are volatile,” Yellen said. More

“The global surge in inflation is hitting low incomes. From May 1 the basic wage will rise by 50 euros a month to 713 euros a month,” Mitsotakis said in a televised address.The conservative government raised the monthly gross minimum wage by about 2% to 663 euros in January, meaning that with the new increase the minimum wage will go up by 9.7%.Consumer inflation in Greece surged to 8.9% in March, hitting its highest level in 27 years with skyrocketing energy costs putting a squeeze on household incomes.Natural gas prices soared 68.3% on an annual basis, while electricity prices increased 79.3%.Thousands took to the streets of Athens earlier this month to protest against what they said was a “deepening crisis” of rising prices. The government’s term ends in 2023.”The shared agony I see on everyone’s face is the high cost due to the international energy crisis and the war in Ukraine, the prices for electricity, at the gasoline station, at the(supermarket) shelf,” Mitsotakis said.He acknowledged that pay levels are “indeed low in our country”.”The wounds of the 10-year financial crisis have not healed and now the surge of inflation globally hurts first and foremost the low incomes and the unemployed,” Mitsotakis said. “My decision today is centered towards them.”The government has spent about 4.0 billion euros in subsidising power bills for households, businesses and farmers faced with rising electricity and gas bills since last year.This week it said it is also preparing a national plan for a “decisive” intervention in the price of electricity to soften the impact on consumers, if the European Union does not take action on the issue soon. More