Economy

The European Central Bank may raise interest rates as soon as July amid “significant” inflation risks that will probably require further tightening later in the year, according to Governing Council member Martins Kazaks.He said he wouldn’t challenge trader bets that the ECB’s deposit rate — currently at a record-low -0.5% — will increase to zero this year. There’s also no need for the rate to linger at this “magical number” for longer than necessary. “A rate increase in July is possible, and I have no reason to disagree with what markets are pricing for the second half of the year,” Kazaks, who heads Latvia’s central bank, said in a Bloomberg interview. “We are on a solid path of policy normalization” where “we step-by-step gradually get to zero and then above.”With euro-area inflation at a record 7.5% and rising, policy makers are pressing ahead with unwinding monetary stimulus this year. Money markets are betting on more than a 50% chance of a quarter-point rate hike by July, with 25 basis points of tightening baked in for September and December.Still, the economic fallout from the war in Ukraine means policy makers are moving cautiously. Central banks in the U.S. and the U.K. are further ahead in removing crisis-era stimulus, which has exposed the ECB to criticism that it’s underestimating the inflation risks.“Gradual doesn’t mean slow,” said Kazaks, who tends to have hawkish policy views. “It doesn’t mean being consciously behind the curve. No, it just means checking if taken policy measures are appropriate.”Kazaks said that rate increases of 25 basis points “seem appropriate” for now, though policy makers can always discuss larger moves depending on the economic data. Current inflation readings mean the ECB shouldn’t wait for faster wage growth, and even a significant slowdown in price pressures or the economy would only delay, not derail, policy normalization, he said.Policy makers have been adamant that one precondition for raising rates for the first time in more than a decade is halting a 2015 bond-buying tool. That decision is on the agenda for their June 8-9 meeting.“We haven’t seen any major elements of stress in financial markets, which makes me think that ending QE early in the third quarter is possible and appropriate,” Kazaks said. “Whether it could already happen at the end of June, we’ll have to discuss when we get new forecasts.”Bloomberg reported earlier this month that ECB staff is working on a backstop to use against debt-market stress. But Kazaks argued that there’s currently no need for new tools to ensure monetary policy reaches all parts of the 19-nation region. “As far as I’m concerned, it’s sufficient to say ‘We will do what’s our task and we will deliver’,” he said. “We’ve done it before and we’ll do it again if needed.”On the risks to the economic outlook, he pointed to remaining pandemic disruptions, supply chains and the war in Ukraine. He also said the economy is probably closer to the “adverse scenario” the ECB published in March, which foresees weaker growth and faster inflation this year, and the risk of a technical recession is “non-trivial.”Like many of its European peers, the former Soviet republic is trying to speed up efforts to wean itself off Russian gas. Kazaks said the region would benefit from a joint fund — similar to the one created in response to the pandemic — to help energy independence and investment in renewables. “Sanctions on Russia are a necessary condition but for them to be efficient we ourselves need to change the ways we behave,” he said. “The challenge for Europe is to be able to switch away from Russian energy sources before Russia finds new ways to supply to other buyers.”©2022 Bloomberg L.P. More

SHANGHAI (Reuters) -China’s commercial capital of Shanghai reported no new COVID-19 infections outside quarantine areas in two districts on Wednesday, fanning hopes that the tide is turning in its pandemic battle, as some factories began to return to work.State media trumpeted the resumption of production by electric car company Tesla (NASDAQ:TSLA) Inc at its Shanghai plant on Tuesday, after a halt of more than three weeks. The U.S. carmaker was on a list of 666 firms the Chinese government said last week would get priority to reopen, or keep operations running, in Shanghai.”The city’s epidemic situation in recent days has shown a downward trend,” city health official Wu Qianyu told a daily news conference on Wednesday. “Community spread has been effectively curbed.”Stringent lockdown measures after the outbreak began in early March left the city’s 25 million people struggling with the loss of income, irregular food supplies, family separations and poor conditions in quarantine.While 16.3 million people are still barred from leaving flats or housing compounds, Wu added, 7.85 million can return to factories or walk outside, a rise of 2 million from last week.But some of those subject to looser curbs say they are still unable to secure the permission they need from neighbourhood officials to go out.Authorities ramped up daily testing of residents this week, as well as transfers of positive cases and their close contacts to quarantine centres outside Shanghai.Social media users have recounted stories of busloads of residents taken from home and sent into quarantine, even babies and the elderly.Shanghai reported 16,407 new local asymptomatic coronavirus cases for Tuesday, down from 17,332 the previous day. Symptomatic cases fell to 2,494, from 3,084.City authorities reported the deaths of seven people infected with COVID-19 on Tuesday. The toll stands at 17 since the latest outbreak began, all in the past three days.Many residents have said, however, that a family member had died after catching COVID-19 since early March, but cases had not been included in official statistics, raising doubts over their accuracy.The Shanghai government did not immediately respond to questions regarding the death toll.Sources told Reuters that Shanghai aims to stop the spread of COVID-19 outside quarantined areas by Wednesday.Tuesday’s 390 new cases outside quarantine areas were down from 550 on Monday. Two of Shanghai’s 16 districts, Jinshan and Chongming, reported no new cases outside quarantined areas, while seven had numbers in the single digits.Other cities under lockdown began easing curbs after having halted transmission outside quarantine areas.A key priority once people in Shanghai are able to resume going outdoors is to boost lagging vaccination rates among the elderly, health officials said. Just 62% of those older than 60 have been fully vaccinated, with 38% receiving a booster dose.STUTTERING RESTARTChina’s strict control measures have hurt the world’s second largest economy and global supply chains. While some firms resume factory operations, analysts do not expect production to see a straight-line recovery.Most workers will have to live on site and factories must tackle disruptions in supply lines and access to markets, with supply chains snarled by closures in other cities and problems at ports and trucking operations.A logistical “nightmare” faced many firms allowed to resume production, warned an official of the European Union Chamber of Commerce in China.In a statement, vice president Bettina Schoen-Behanzin said the numbers of available trucks were down between 40% and 50%, with fewer than 30% of employees able to return to work.”There’s a huge gap between policy and the reality of implementation,” she added.In the neighbouring city of Kunshan, home to many suppliers to the likes of Apple (NASDAQ:AAPL), Taiwan firms making chip and electronic components reported a mixed picture on resuming work.Chip substrate and printed circuit board maker Unimicron Technology Corp said it would resume gradually, while Asia Electronic Material Co Ltd, which makes parts for laptops, mobile phones and digital cameras, said its plant would stay closed. More

Good morning and welcome to Europe Express.Debate day is upon us. Marine Le Pen is facing off against Emmanuel Macron later, ahead of Sunday’s final round of presidential elections. We’ll analyse the significance of this event as the two candidates ramp up their electioneering in the final leg of the campaign. On the Ukraine front, Russia has said it has begun a new phase of hostilities in the Donbas region, with more grim details emerging, including the targeting of another hospital in the besieged city of Mariupol. In Brussels, officials are working on the bloc’s sanctions package number six (targeting oil and, as European Commission President Ursula von der Leyen recently suggested, Russia’s largest bank, Sberbank). A handful of European leaders, including von der Leyen, discussed further restrictive measures and weapons deliveries yesterday during a call with the US president and the prime ministers of Canada and Japan.The IMF yesterday slashed its global growth outlook to 3.6 per cent because of the war. With the IMF and the World Bank holding their spring meetings this week, we’ll explore what options are being considered to alleviate the impact of the conflict on food prices. One proposal is reorienting crops away from fuel production such as ethanol. We’ll also look at what the IMF had to say about the impact of a full Russian oil and gas embargo on the eurozone economy. Every Saturday from now on, you will receive Europe Express Weekend, written by Tony Barber, the FT’s European comment editor. It will appear in inboxes at 11am CET. Don’t worry, as a Europe Express subscriber, you will automatically receive the email. New subscribers can sign up here.French rematchWith only four days to go before French presidential election day, Emmanuel Macron and Marine Le Pen are preparing for their big face-to-face television debate tonight — a repeat of a live confrontation that proved disastrous for Le Pen five years ago and sealed Macron’s subsequent victory, writes Victor Mallet in Paris. In the 2017 debate, the far-right candidate came across as clumsy and ill-prepared, and Macron, who had been finance minister in the Socialist government, skilfully exposed her fragile grasp of business and economics and skewered her plan to leave the euro and go back to a French franc. This time, her advisers say, Le Pen is better prepared, more experienced and more relaxed, and will be taking a break from campaigning beforehand so that she is not as exhausted and stressed before the debate as they say she was last time. She has already ditched the unpopular policy of leaving the EU and the euro — even if her critics argue that her continued insistence on the primacy of French over European law will lead to Frexit anyway — and focused more on the rising cost of living than on her controversial plans to choke off immigration and send foreigners home if they have no jobs.In this second round of the 2022 presidential election, Le Pen and the French far right have never been so close to power — an achievement that Macron and other liberal internationalists say would undermine Nato, cripple the EU and ruin the French economy. Some recent opinion polls suggested that Macron’s lead over Le Pen was as little as 51 per cent to 49 of the vote on Sunday, within the margin of error of the surveys, although in the last few days there are signs that the incumbent president is increasing his advantage. An OpinionWay-Kéa Partners poll published yesterday gave Macron a 56:44 lead over Le Pen, and showed the main concerns for voters were the cost of living and social security, followed by crime and immigration. The war in Ukraine — a potential problem for Le Pen given her past associations with Russia’s Vladimir Putin — came 11th on the list of issues. Macron, meanwhile, has embarked on a flurry of tours and meetings in different parts of France after coming out ahead in the first round on April 10, with 28 per cent of the votes, against 23 per cent for Le Pen. They were the two that qualified for the second round, though the far-left candidate Jean-Luc Mélenchon was not far behind with 22 per cent. In an effort to persuade Mélenchon’s voters — including many environmentalists and Muslims — to support him, Macron has emphasised his green credentials and attacked Le Pen’s proposal to ban the wearing of the veil in public by Muslim women. Fuelling hunger One of the many damaging effects of the war in Ukraine has been rising food insecurity — a topic that will feature prominently at World Bank and IMF spring meetings this week, write Sam Fleming and Andy Bounds in Brussels. Beata Javorcik, the chief economist at the European Bank for Reconstruction and Development, said Egypt, Turkey, Jordan, and Tunisia were among countries that were facing economic strains because of the “huge increase” in agricultural commodity prices driven by Russia’s war on Ukraine.Policy responses include facilitating exports of grain from Ukraine by creating land transport corridors, or better yet by reopening transport routes via the Black Sea, Javorcik told Europe Express. But another area where policy could be adjusted is biofuels. “The US and EU could think of ways of temporarily diverting production of grain away from biofuels and toward consumption to help address food security concerns,” she said. There was a similar need to respond to interruptions to Ukraine’s sunflower seed production. “Soya and rapeseed are close substitutes but they are being used for biofuels in the US and EU, so again this production could be diverted to edible oils.”The US uses over a third of its corn production in ethanol production, while 3-4mn tonnes of EU-grown wheat are used to produce ethanol for fuel. The Greens-EFA group in the European Parliament has called for the European Commission to put a “temporary halt” to the use of edible crops for agrofuel production for at least two years given the food crisis. The World Food Program projects that the rise in prices caused by the war in Ukraine, especially in global wheat, corn and edible oil markets, could leave 323mn people in the grip of acute hunger in 2022, 47mn more than without the war. Finland this month became the first EU country to cut the amount of biofuel producers must blend with road fuel, while Sweden has proposed freezing its mandate for 2023 at 2022 levels, according to media reports. Greece has said it could divert sunflower oil from biofuel to food by reducing its mandate.Brussels is giving its blessing to such moves. “The European Commission is supporting potential efforts by members to reduce the rates at which fuel makers must blend crop-based biofuels into oil in order to free up more land for production of crops for food,” the commission said. The EU biofuels industry is far less impressed. “EU biofuels production creates food, feed and fuel, significantly strengthening Europe’s strategic autonomy by offsetting the need to import animal feed and displacing the use of crude oil in transport,” said the EU Biofuels Chain — a coalition representing Europe’s farmers and agri-co-operatives. Chart du jour: Missed opportunityRead more here about why Algeria, the third-biggest natural gas supplier to Europe, with direct pipelines to Italy, Spain and Portugal, is missing the opportunity to become a viable alternative to Russian gas imports.Energy drain The punishing effects of the war in Ukraine are set out in the IMF’s latest round of forecasts, unveiled ahead of the spring meetings taking place this week, writes Sam Fleming. There is no surprise as to where the pain is felt hardest: Ukraine is heading for a 35 per cent contraction this year as the invasion ravages its economy, the IMF predicts, while the sanctions-struck Russian economy will shrink by 8.5 per cent this year and another 2.3 per cent in 2023. The impact on the eurozone looks relatively slight by comparison, with GDP now forecast to rise by 2.8 per cent this year, 1.1 points lower than the previous IMF outlook. Growth is forecast at 2.3 per cent in 2023, a shade below the fund’s previous 2.5 per cent prediction. But the picture could yet get a lot worse, the IMF says. The fund’s forecasts assume the EU and its allies continue to exempt the Russian energy sector from sanctions. But the IMF outlook contains an alternative scenario under which embargoes on both oil and gas are imposed on Russia, alongside “the disconnection of Russia from much of the global financial and trade system.” This darker scenario would deliver a massive hit to EU growth, leaving the level of GDP nearly 3 per cent below the baseline by 2023. The scale of the dive in GDP helps explain the obvious hesitancy among EU member states when it comes to the details of the next round of sanctions. While the European Commission is pushing for an oil blockade as part of the next package, sanctions on Russian gas exports remain a less imminent prospect. What to watch today Emmanuel Macron faces Marine Le Pen in the only televised debate ahead of Sunday’s final round of presidential electionsGerman foreign minister Annalena Baerbock travels to the Baltic countries to meet her counterpartsNotable, Quotable

Sanctions, in court: Russia plans to take legal steps to recover $300bn of its foreign currency reserves frozen by western governments in a bid to overturn one of the most painful measures imposed on Moscow in response to its invasion of Ukraine. No official timeline has been made public, however. Restarting nuclear: In this explainer, the FT is unpacking the reasons why prolonging the life of Germany’s nuclear power plants wouldn’t solve the country’s dependency on Russian oil and gas. For a full picture of Europe’s gas imports and what it would take to replace them, click here. Moving (ware) house: While the UK government launches a search for Brexit opportunities, one group has already discovered them: Dutch warehouse owners. An influx of British-based companies to the Netherlands has swelled as they struggle with the disruption of a customs border across the North Sea. Nato courthouse: The Belgian side of a Paris terror trial kicked off yesterday at Brussels’ former Nato headquarters, VRT News reports. Over a dozen helpers of the suicide bombers who killed 130 people in November 2015 are being tried for taking part in a terrorist plot. Brussels’ own terror trial for the 2016 attack on the airport and the Maalbeek metro stop will take place later this year. More

Japan’s Ministry for Economy, Trade and Industry was on a high. It was June 2018 and Meti, as it is more commonly known, had just forced through the $18bn sale of Toshiba’s prized memory chip business to a private equity consortium. The deal appeared to justify the ministry’s billing as the creator of the nation’s industrial base. It was the largest private equity deal in the country’s history and relieved genuine concern that its most famous conglomerate could go bust. Critically, it appeared to unlock something bigger.The problem-solving reputation of Meti, an arm of government that became the principal architect of Japan’s postwar industrial economy by leveraging its power to channel investment and promoting consolidation in a range of sectors, seemed restored. The Toshiba deal highlighted the range of Meti’s modern prerogatives from managing the fortunes of tens of thousands of small businesses, to promoting the shift to automation, policing national security in industry and shaping energy policy in Asia’s largest advanced economy.Toshiba’s uncertain future risks the reputation of Japan’s Ministry for Economy, Trade and Industry (Meti) © Rolf Schulten/ullstein bild/Getty ImagesBut the deal, though successful, turned out to be a false dawn. Just four years later, Toshiba’s future is once again unclear, putting Meti’s reputation back on the line. Private equity groups in the US and Singapore are lining up a bid to take Toshiba private, taking one of the country’s most famous companies off the Tokyo Stock Exchange and into foreign ownership.Now, Meti must decide whether to support or block the buyout, a position made complicated by a scandal last year when its senior officials were accused of colluding with Toshiba to apply pressure on foreign investors to back management and shun activists in a pivotal vote on the company’s future. The pending decision is likely to expose a rift within Meti over the future direction of Japan’s economy, says Nicholas Benes, a corporate governance expert. Some at the ministry are pushing for more transparency and openness to foreign capital, he says, while others are under pressure from domestic industry groups not to be seen to be “selling-out Japan Inc”. The protectionists have until now wielded, and cultivated, the most influence. “Not only has Meti historically protected Japan Inc from foreign capital, it devotes so much time to deals that satisfy its pretension that Meti is running the industry,” says Shigeaki Koga, the former director of the ministry’s economic and industrial policy department. That “pretension”, critics say, sometimes colours the ministry’s judgment in the way that it chooses to intervene, or not, in companies.Meti supremo Takaya Imai became former prime minister Shinzo Abe’s chief of staff © Shoko Takayasu/BloombergThe Toshiba deal is just one issue facing a ministry that former officials say is beginning to look overstretched. The global trade turmoil caused by Covid-19 and exacerbated by the war in Ukraine has exposed some of the frailties of Japan’s economy, which is heavily dependent on imported energy, raw materials and food. The plummeting yen will only make matters worse. Yet the shifting tides of the global economy also give Meti an opportunity to position itself once again as the nation’s protector. At the behest of Prime Minister Fumio Kishida, the ministry is heavily involved in rethinking how best to develop or gain access to vital supply chains for products such as semiconductors, an industry once dominated by Japan. And it is also steering the Kishida administration’s shift towards energy security, which could eventually see Japan’s dormant nuclear industry reawaken. If this sprawling ministry of nearly 8,000 staff, overseen by the gaffe-prone minister Koichi Hagiuda, can find the right mixture of protectionist policies and targeted inward investment it might yet recapture a measure of its historic influence. But critics say it will need to tear itself out of its bureaucratic overcaution. “It has been only a year or two since Meti decided to do something on semiconductors, which should have been done five years ago,” says Masahiko Hosokawa, a former Meti official who was in charge of trade control. “It is [now] at the edge of being too late.” When an earthquake knocked out power stations in March Tokyo came close to a blackout, showing the country’s vulnerability to external shocks © Philip Fong/AFP/Getty ImagesFinding its place The ministry, formerly known as the Ministry of International Trade and Industry (Miti), built Japan’s economic “miracle” through the early 1970s until the burst of the bubble in the late 1980s, say its many advocates and former officials. But it was left bitter at its hugely diminished role and reduced influence during the “lost” decades that followed. By 2018 its powers had been partially restored after six years of “Abenomics” — the period under Shinzo Abe that put revitalisation at the centre of industrial policy. The government loaded Meti supremos such as the powerful strategist Takaya Imai — who became Abe’s chief of staff — at the very top rungs of national decision-making. Yet even at the height of this resurgence, the ministry’s powers never came close to where they had been during the postwar period when it shaped key industries to drive the nation’s rapid growth. Since then its role has fundamentally changed. With the exception of certain sectors such as nuclear power plants and utilities, it is no longer capable of wielding its influence over entire industries. Once a prestigious destination for aspiring civil servants, Meti has struggled to retain young talent in recent years, while the rotating appointment of officials has hindered the passage of knowhow to compile long-term industrial strategy.

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Instead, it has more recently refocused on the government’s efforts to encourage the private sector to be more involved in the economy by supporting start-ups and rebooting struggling companies via consolidation or cross-border acquisitions.“Since the 1990s, Meti’s mission has been to revive the lost dynamism of Japanese businesses,” says Keita Nishiyama, a recently retired official who played a key role in establishing the government-backed investment fund behind the bailouts of chipmaker Renesas in 2013 and display units of Sony, Hitachi and Toshiba in 2012. He now advises buyout group KKR. Critics say the injection of state money under Abe was unnecessary, sometimes wasteful and reminiscent of Meti’s postwar interventionist stance, pointing to the availability of ample liquidity provided by global private equity funds such as KKR and Bain, which is leading the potential buyout of Toshiba. Nishiyama argues that state-backed capital can at times be more effective than PE funds at removing company resistance to change: “We didn’t think it was intervention but it was a form of government activism,” he says. A move away from oil and gas power to provide energy security could lead to the reawakening of Japan’s shuttered nuclear sector © Toru Hanai/BloombergMore recently Meti has been cut out of some of this dealmaking. The recent tie-up between Sony and Honda in electric vehicles — the type of deal where the ministry would have traditionally pushed to be involved — happened without any guidance from government officials. Meti “co-ordinated industries so that everyone could survive,” says Koga, the former Meti director, and its senior bureaucrats benefited from amakudari or a “descent from heaven” into executive positions in the private sector. “But as industries grew, they no longer needed the protection of Meti, especially after the oil crisis of the 1970s and [more recently after] the US shifted its focus of trade conflict from Japan to China. Meti was ‘jobless’ in the 1990s and 2000s,” as they had no significant role to play. “For decades Meti was looking for things to do to protect its power base,” says Benes, “long after Japan ceased to be a manufacturing economy”. Japanese PM Fumio Kishida last week joined other G7 countries in banning coal imports from Russia © Rodrigo Reyes Marin/Pool/APKeeping the lights on The most urgent priority for Kishida, in power for just six months, is to strengthen the country’s energy and economic security against the backdrop of the war in Ukraine. He has leaned on Meti bureaucrats to do so. Their influence is seen by many in the decision of the Kishida administration to reject calls to pull out of two major energy projects developed with Russia on the island of Sakhalin north of Hokkaido and one in the Arctic.The decision by Shell and BP to abandon its Sakhalin oil and gas projects in the wake of the Ukraine invasion sent shockwaves across the industry in Japan. The projects, dating back to the 1970s, were developed in co-ordination with Meti. In total, Japan has more than $8bn worth of investments in energy facilities in Russia. Nobuo Tanaka, the former head of the International Energy Agency, says the country was reluctant to leave the Sakhalin projects because of the upfront investments. But Japan staying in business with Russia while piling additional sanctions on Moscow has created a dilemma for Meti. Kishida last week joined other G7 countries in banning coal imports from Russia and has pledged to reduce Japan’s dependence on it for energy. But it will not be easy for Japan to diversify away from the liquefied natural gas in the Sakhalin-2 project given that it is locked in on cheaper, long-term contracts. It accounts for about 10 per cent of the gas used in Tokyo and 50 per cent in Kishida’s native Hiroshima. The decision by the government to stick with the Russia projects is seen as a big political victory for the ministry. “The number one thing Meti cares about is making sure the energy supply is stable and that any blackouts or any potential issues with supply shortages are avoided” says Tom O’Sullivan of energy consultancy Mathyos. “They have very low tolerance for that kind of stuff.”And Japan is vulnerable to external shocks. When an earthquake knocked out several power stations in March Tokyo came close to a blackout. The incident rekindled the debate about reopening some of the country’s mothballed nuclear reactors, 54 of which supplied about a third of Japan’s energy before the Fukushima disaster in 2011. A recent opinion poll hinted at a shift in the public’s mood. For the first time since the triple meltdowns in Fukushima 53 per cent of people said nuclear reactors should restart if safety can be assured, with 38 per cent wanting them to remain closed. Although the Kishida administration is probably the most outspoken of recent cabinets on the need to restart nuclear power plants, convincing the public ahead of the upper house election in July that it can be done safely presents a significant political risk. “Meti’s wish is to see more polls like [that] so Japan can proceed with restarts and then use the gas it wouldn’t be consuming [if the nuclear plants are restarted] to sell at high prices to Europe,” Tanaka says. “That would make them a big player on the international stage and the money made like that could be, for example, used to subsidise gasoline prices.” Taiwan Semiconductor Manufacturing Co is building a $7bn chip manufacturing plant in south-west Japan with Sony © Kyodo/Reuters ‘Protectionist-in-chief’ The pressures created by the new energy crisis are just part of a deeper shift in the way that Meti’s responsibilities are being redrawn by geopolitics and Japan’s own view of industries essential to its long-term survival as a major economy. Meti’s reinvigorated role as “protectionist-in-chief” was evident even before the pandemic accelerated that shift. In 2019, the ministry assumed effective control of the newly revised Foreign Exchange and Foreign Trade Act (Fefta), giving it powers to scrutinise all inbound investment, similar to those of the US congressional committee on foreign investment, or Cfius.Shortly after coming to power, Kishida declared that “economic security” was to be a policy priority amid the Covid-related breakdown of supply chains. The focus, said the prime minister, would be on promoting research in emerging technologies, fortifying critical infrastructure and other programmes aimed at rebuilding Japan’s industrial resilience. For Meti, this translated into a mandate to become more involved in areas where it has traditionally had a large say, including the semiconductor industry.In the late 1980s, Japanese semiconductor companies spent lavishly to expand production, overtaking the US to reach just over a half of the global market share. But after a bruising trade conflict with the US government, Japan ceded its dominance in the chipmaking industry to companies in South Korea, Taiwan and eventually China. Only one Japanese company, Kioxia, is now in the top 10 chipmakers.That’s a frustrating state of affairs for Meti. In a widely distributed presentation by the ministry to journalists and others in June, a chart showing the decline in Japan’s share of the global chip market ended with a stark warning: “In the future, Japan’s share will come down to almost 0 per cent!?” In 2019 it stood at 10 per cent. However, the country still plays a pivotal role in the manufacturing of semiconductor equipment and materials. The US wants to keep those technologies out of Chinese hands, while Japan wants to retain what’s left of its chipmaking knowhow so it can secure supplies with the help of allies such as the US and Taiwan. In November, the Taiwanese group TSMC said it would build a $7bn chip manufacturing plant in Japan together with Sony — half of the investment is set to be subsidised by Meti.

“The semiconductor strategy is different from the familiar industrial policy of strengthening Japanese companies to earn foreign currency. The goal is closer to securing strategic goods such as oil and food,” says Kazumi Nishikawa, director of Meti’s IT industry division who heads the national chip strategy and compiled the Meti presentation. “The biggest challenge is building consensus among people, and letting people know that this is something that cannot be left entirely to the private sector.” The difficulty for Meti is that, over the next few weeks, Toshiba will almost certainly provide the Japanese public with evidence that certain problems can indeed only be solved by the private sector. In the seven years since Toshiba was first caught in an accounting scandal, the company has lurched from financial crisis to conflict with its shareholders. To solve its many problems, Toshiba’s largest investors and a growing contingent of the company’s own management increasingly believe that the group must be delisted and taken private. Meti has so far seemed to step back from the fray: the big question, say both Meti officials and Toshiba investors, is how long the interventionist ministry will be able to resist intervening. More

TAIPEI (Reuters) – Taiwanese chip firm TSMC has raised $3.5 billon in bonds for its new plant in the U.S. state of Arizona, according to a term sheet.Taiwan Semiconductor Manufacturing Co Ltd, a major Apple Inc (NASDAQ:AAPL) supplier and the world’s largest contract chip-maker, started construction last year at the Arizona site where it plans to spend $12 billion to build a computer chip factory. More

WASHINGTON (Reuters) -Russia’s war in Ukraine is to blame for exacerbating “already dire” world food insecurity, with price and supply shocks adding to global inflationary pressures, U.S. Treasury Secretary Janet Yellen said on Tuesday.Even before the war, over 800 million people – or 10% of the global population – were suffering from chronic food insecurity, Yellen said, and estimates showed higher food prices alone could push at least 10 million more people into poverty.Yellen told a high-level panel countries should avoid export bans that could further boost prices, while stepping up support for vulnerable populations and smallholder farmers, a message underscored by German Finance Minister Christian Lindner.”I want to be clear: Russia’s actions are responsible for this,” Yellen said, adding that the United States was working urgently with partners and allies to “help mitigate the effects of Russia’s reckless war on the world’s most vulnerable.”Russia calls its Feb. 24 invasion a “special military operation” to “denazify” Ukraine.Lindner, speaking on behalf of Group of Seven advanced economies, said targeted and coordinated action was needed, but called on all countries to “keep agricultural markets open, not stockpile and not withhold stocks, and not impose unjustified export restrictions on agricultural products or nutrients.”He said the G7, currently led by Germany, had committed to work with international financial institutions and like-minded government organizations to “act in an agile manner.” The Treasury said participants agreed to work on an “action plan” to frame the problem, outline joint principles for a coordinated response and map out short- and long-term actions.Yellen underscored Washington’s commitment to authorizing essential humanitarian aid and ensuring the availability of food and agricultural commodities to benefit people around the world, even as it continued escalating its sanctions and other economic measures against Russia.She said it was also critical to strengthen longer-term resilience, and called on international financial institutions to help mitigate the global fertilizer shortage and smooth supply chain disruptions for food and critical supplies.She said they could increase investments in agricultural capacity and resilience to boost domestic food production.It was also critical to bring in additional sources of financing, including from the private sector, the Treasury said.Indonesian Finance Minister Sri Mulyani Indrawati told participants that food security would be a key issue in the first session of a meeting of finance officials from the G20, currently headed by Indonesia, warning that food and energy price spikes could “create huge political and social unrest.”Several participants called on the global community to look at existing tools such as the Global Agriculture and Food Security Program, which was created by the G20 in response to the 2008 food price crisis.World Bank President David Malpass told a separate event later that advanced economies should boost food aid to developing countries, and work to increase production of food, energy and fertilizer.He said cash payments or vouchers would be a good way to help farmers in poor countries buy fertilizer to ensure continued food production.IMF chief Kristalina Georgieva said the food security crisis was piling further pressure on the 60% of low-income countries at or near debt distress, and urged China and private-sector creditors to “urgently step up their participation” in the G20 common framework for debt treatment.”We know hunger is the world’s greatest solvable problem,” she said. “And a looming crisis is the time to act decisively.” More

Ukraine plans to open a humanitarian corridor for civilians to leave Mariupol, the besieged south-eastern city where Russia this week began a bombing campaign targeting the city’s Azovstal steelworks.The government secured agreement on a corridor to bring civilians out of the city from 2pm, Iryna Vereshchuk, Ukraine’s deputy prime minister, said on Wednesday.Buildings in Mariupol damaged during the Russian siege of the south-eastern Ukrainian city: a humanitarian corridor is due to let civilians flee the city on Wednesday © REUTERS/Alexander Ermochenko“Given the catastrophic humanitarian situation in Mariupol, it is in this direction that we will focus our efforts today,” Vereshchuk wrote on the Telegram social media platform. “We managed to agree in advance on a humanitarian corridor for women, children and the elderly.”She said that changes might occur to the path of the corridor “due to the very difficult security situation”.Several attempts to evacuate civilians from the city have collapsed because of mistrust between the warring sides since Russian troops encircled and bombarded the city and cut off power, water, heat and other basic services in early March. It was not immediately clear whether the corridor announced by Vereshchuk had Russian support. According to Ukrainian officials, Russia has begun using bunker-busting bombs on and near the grounds of the Azovstal steelworks, the last area of the city under Ukrainian military control. They said civilians, including children, were hiding from the bombing alongside the fighters in shelters beneath the sprawling complex, one of Europe’s largest steelworks.Ukraine’s military said in an update on combat operations on Wednesday that the Russians’ main efforts were “focused on capturing the city of Mariupol, continuing the assault in the area of the Azovstal plant”. Serhiy Volyna, commander of Ukraine’s 36th marine brigade in Mariupol, among the last Ukrainian troops in the city, released a video on Tuesday in which he pleaded for international action to “save Mariupol”. He included the hashtags #PopeActNow and #KidsOfCatacombs.Ukrainian military claims have not been independently verified. More

WASHINGTON (Reuters) -The International Monetary Fund’s new chief economist said on Tuesday he is concerned about increasing signals that inflation expectations are on the rise and may become entrenched at elevated levels, prompting more aggressive monetary policy tightening in advanced economies.Pierre-Olivier Gourinchas, who started transitioning to the IMF’s economic counselor role in January, told Reuters in an interview that the war in Ukraine, which has caused sharp energy and food price increases, may damage expectations for decades-high inflation to start to subside this year.A “very, very tight labor market” in the United States is increasing demands for wage increases to “catch up” with higher prices that could help fuel expectations among consumers and businesses that prices will keep rising, the French-born former University of California-Berkeley economist said.”So there is definitely a risk that we could have a wage-price spiral,” Gourinchas said. “And there’s a risk also that as we live through a period of elevated inflation, and we hear that it goes from five to six to seven to eight (percent) – and we don’t see it turning around – people will start reassessing what they think inflation will be in the future and businesses will also do the same thing.”That would be bad news for the Federal Reserve and other developed-world central banks, which have argued that inflation expectations among consumers and businesses have remained reasonably anchored at levels well below the current high readings of measured inflation.Some Fed officials have begun to fret publicly that they may have a limited window now to ensure that that remains the case and an aggressive run of rate hikes this year is needed to pull that off.Market signals from elevated Treasury yields have been ahead of consensus private forecasts for inflation, but both are pointing higher than the 2% inflation targets of many central banks, and forecasts have been “sort of moving up,” Gourinchas said.”And that’s really, you know, the red alarm signal on the dashboard here,” he said. “If you see that and you’re a central banker, you don’t have a choice. You have to step in more forcefully to make sure people really anticipate that inflation will remain stable, even if it’s elevated right now.”WAGE PRESSURESThe duration of elevated inflation readings is a downside risk for the United States and some other advanced economies.”If inflation remains elevated for more than just a couple more months, if it keeps drifting upwards, we see these wage pressures building, we see these inflation expectations drifting more permanently and in particular the consensus forecast, then I think we would see a much more aggressive tightening of monetary policy going forward.”Earlier on Tuesday, the IMF revised down its global economic growth outlook by nearly a percentage point from January due to shocks from Russia’s war in Ukraine, with significant downside risks from tighter sanctions. It called inflation “a clear and present danger” for many countries.Gourinchas said the Fund’s baseline forecast anticipated that inflation will peak in the current quarter and start to decline as pandemic-driven supply chain bottlenecks ease and the withdrawal of pandemic fiscal support helps cool demand.But while a faster tightening of U.S. monetary policy would slow U.S. growth further, it would be unlikely to cause a recession, based on the current baseline of still-robust 3.7% U.S. growth for 2022, Gourinchas said.Steeper rate hikes, energy sanctions on Russia that spike prices further or a big drop in asset prices that stokes volatility could “bring us closer” to recession, he said.”How close we could be, that’s not something we can assess precisely at this point. Our baseline is basically the U.S. economy is still going to be growing in 2022 and 2023,” Gourinchas said.On China, he said recent data showed that its slowdown caused by renewed COVID-19 lockdowns may be a steeper than in the IMF’s baseline, but the Chinese government had room for more monetary and fiscal stimulus actions to counteract these trends. More