Economy

Separate data is expected to show Japan’s trade balance remained deep in the red, stoking worries about surging import costs of fuel and commodities, while the yen’s weakening to 20-year low past 126 versus the dollar this week adding to the pain.Next week’s data would underscore the challenge for Japan’s central bank. The weak yen has emerged as a political hot-button issue as lawmakers demand measures to cushion the blow from rising inflation.The nationwide core consumer price index (CPI) data, to be released by the internal ministry at 2330 GMT on April 21, likely rose 0.8% in March from a year earlier, faster than a 0.6% gain in February, the poll of 18 economists showed on Friday.”The pace of rises in the core CPI likely returned to pre-pandemic levels,” said Takeshi Minami, chief economist at Norinchukin Research Institute.”The natiowide core index probably picked up in March as import inflation has strengthened due to the weak yen, rising crude oil and commodity prices.” Still, rising headline inflation does not mean the BOJ would rush to unwind its monetary stimulus anytime soon. On the contrary, the central bank is expected to stick with its powerful stimulus for some time given the view that the current cost-push inflation is far from sustainable, analysts say.Its long elusive inflation target is 2%.The trade data, to be issued by the Ministry of Finance at 2350 GMT on April 19, will probably show Japan’s trade balance remained in a deficit of 100.8 billion yen in March, narrowing from 668.3 billion yen seen in the previous month.Imports likely jumped 28.9% in the year to March, outpacing a 17.5% gain in exports, the poll showed. More

The day after making the run-off of French presidential elections, far-right candidate Marine Le Pen took her campaign to rural Burgundy to press home a sore spot that has marred opponent Emmanuel Macron’s otherwise positive economic record. There, a cereal farmer told her of his struggles with the surging price of fuel and fertiliser, echoing what French voters tell pollsters is their biggest priority ahead of the April 24 run-off: the soaring cost of living.“Another black cloud is gathering above French people’s heads,” she said, predicting further food price inflation. The candidate, whose party has focused on immigration issues and is less known for its economic policies, has proposed fixing the problem by eliminating VAT on a basket of foods and essential household goods, while cutting the rate from 20 to 5 per cent on electricity and petrol. It is one of a series of measures in Le Pen’s plan that would set a France she led on a new economic course, driven by more protectionist, nationalist ideas than the business-friendly agenda espoused by Macron.In keeping with the campaign slogan “Give the French their money back”, she has proposed big tax cuts and new spending. Philippe Poitier, a Paris bar owner, said her focus on pocketbook issues had won him over. “Her ideas seem good, especially the tax cuts on petrol. We need someone to do something,” he said.There are risks from Le Pen’s economic strategy. Analysts said her programme would add €105bn a year to France’s already wide public deficit of €161bn for 2021, or 6.5 per cent of GDP. Aspects of her agenda, such as a proposed referendum on immigration that would assert the primacy of French over European law, could also set up a clash with the EU, which would have repercussions for financial markets. Another flashpoint is her stated wish for France to cut its annual contribution to the EU budget by €5bn.“When Hungary or Poland are in breach of EU law, there are some tensions on the currency and markets, but it’s manageable,” said Philippe Gudin, an economist at Barclays. “But if it were to happen with France, one of the founding members of the EU, it would be a lot more problematic.” Gudin estimates that Le Pen’s plans would funnel about €42bn, or 1.7 per cent of GDP, back to the French public. But if her presidency sparked a fight with the EU followed by a debt crisis such as in Greece a decade ago, ordinary voters would end up paying the price, he said.Under a Le Pen presidency, income tax would be scrapped for everyone under 30, and interest-free loans of up €100,000 would be offered to young families, with the debt forgiven if they had three children. A French sovereign wealth fund would be created to promote an economy focused on what she calls “localism” as opposed to Macron’s “globalism”.Unlike Macron who wants to raise the retirement age, she would keep it at 62, but lower it to 60 for those who started work young. While Le Pen and Macron claim their plans would not add to the public deficit, the Institut Montaigne think-tank found that both would worsen it because they overestimated savings and underestimated costs. For example, Le Pen has said excluding immigrants from benefits such as social housing and healthcare would save €18bn, but Institut Montaigne reckons it would be half that. Macron’s programme would add €44bn to the public deficit.The Medef employers’ federation, which has endorsed Macron, has warned that Le Pen’s economic plan would cause France to fall behind its EU neighbours.Others doubt Le Pen would be able to implement her pledges. Much depends on whether her Rassemblement National party wins a majority in June’s parliamentary elections. The prospect of a Le Pen victory has already rattled financial markets. After Macron’s poll lead narrowed ahead of last Sunday’s first round vote, the extra yield that France pays to borrow relative to Germany — the eurozone’s de facto haven — rose to the highest level since the pandemic began.

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The spread on 10-year bonds reached 0.56 percentage points, still short of the nearly 0.8 percentage points reached during Le Pen’s last presidential campaign in 2017, before falling back slightly once it was clear Macron had a solid first-round lead. The euro also rebounded. Latest polls predict Macron will win the run-off with 53 per cent of the vote.Vincent Mortier, chief investment officer at Amundi, the asset manager, said markets seemed “complacent about a Macron victory, even though the probability of a non-market friendly victory by Le Pen is not negligible.”One difference between Macron and Le Pen’s economic policies is that he puts more emphasis on fostering a dynamic labour market, arguing it is the best way to ensure purchasing power. His labour reforms have helped reduce unemployment to about 7 per cent, the lowest levels since 2008. Yet voters do not seem impressed, perhaps because inflation concerns have taken over, although France’s 5.1 per cent inflation rate year-on-year is the lowest in Europe, according to Eurostat. In a recent Ipsos poll, slightly more respondents, or 25 per cent, said they had confidence in Macron to handle the issue of living standards, compared with 21 per cent for Le Pen. Irdrielle Mounet, a student in Paris, said she was sceptical that the presidential election would make any difference but was prepared to cast a vote for change. “Le Pen says she is more focused on helping young people — so maybe it is worth a try.”Additional reporting by Sarah White in Paris More

After two decades of digital titans hogging the limelight, the physical economy has spent the past two years reasserting itself. From the supply of toilet paper to the price of wheat, shortages of personal protective equipment in early 2020 and columns of Russian tanks in early 2022, it’s become obvious that the economy doesn’t depend on tweets and dogecoin but on the kind of honest everyday stuff you can drop on your foot.That, at least, is the new conventional wisdom. Alongside that conventional wisdom go lamentations of decline: why don’t we in the UK make anything any more? Didn’t the Chinese show us all how it was done that time they built a Covid hospital in a week?There is some truth in this cry of despair, but also a great deal of confusion. Look more closely at the events of the past two years and the intangible economy seems more important than ever.Consider Covid. The successes and failures of the Chinese response had little to do with their ability to manufacture PPE or build a hospital in a few days. They were all about the capacity — or sometimes incapacity — to identify the virus, trace contacts and lock down population centres. The same was true elsewhere. Shortages of oxygen or equipment were sometimes a problem but not as great a problem as the shortage of effective contact-tracing systems, testing capacity or expert medical staff. High-quality statistics were another essential asset, acting as the pandemic equivalent of radar. Without reliable statistics, we were taking hugely consequential decisions by groping in the dark. As this data improved — from the infection survey conducted by the UK’s Office for National Statistics to the RECOVERY trial that has ruled out poor treatments and identified effective ones — our responses have been far better targeted.The most obvious success was the rapid development and production of vaccines. A vaccine programme is not purely intangible. Vaccines require vials, needles, deep freezers and complex supply chains. But the importance of intangible assets is central and absolute: no knowhow, no vaccine.There is more to these intangible assets than the information contained in an mRNA molecule. Developing vaccines required years of earlier research. Proving they worked required rapid, large-scale clinical trials. Ensuring doses were produced quickly required risk-sharing — in particular, government commitments to buy lots of doses before it was clear they would work.Perhaps the most underrated intangible asset in this rollout was trust. Hong Kong has suffered a catastrophic wave of Covid not because it lacks vaccines — it has plenty — but because the elderly residents who most needed the vaccine were the least likely to trust it. Two-thirds of the over-80s were unvaccinated when Hong Kong’s Omicron wave began in February. Taken as a whole, the experience of Covid is a reminder of how essential intangible factors can be, whether it’s the expertise in the heads of medical professionals, data in spreadsheets and databases, life-saving clinical trials, the policy environment surrounding the development of vaccines, or simply trust (or mistrust) of what is being offered.So let’s look at the war in Ukraine. Tangible physical factors are inescapable here, from boots on the ground to bullets in the bodies of unarmed civilians. Europe nervously contemplates its gas supply, while north Africa braces itself for the consequence of interruption to Ukraine’s wheat harvest: unaffordable bread.But if tangible assets were all that mattered, Vladimir Putin would already be consolidating a quick victory. “Quantity has a quality of its own,” as Stalin never actually said. But quality has a quality of its own, too. The early success of Ukrainian resistance has been built on intangible or partially tangible advantages: better tactics, vastly more motivated troops and anti-tank weapons that incorporate some of the latest western technology. President Zelensky’s rhetorical gifts have delivered him the sympathy of western public opinion and thus of western governments. That sympathy has manifested itself most obviously in vice-like financial sanctions. Ripping the Russian central bank out of the world economy is perhaps the ultimate example of intangible warfare.Clearly, there is much more to a flourishing society than mere stuff. In a new book, Restarting the Future: How to Fix the Intangible Economy, Jonathan Haskel and Stian Westlake argue that not only is the intangible economy more important than ever, but we have failed to reckon with that fact, and thus failed to develop the right institutions and policies. That failure goes a long way to explaining some of the disappointments of the modern world — low growth, inequality, corporate power, fragility in the face of shocks and growing concerns about inauthentic “bullshit jobs”.“Intangibles” is a word with an expansive meaning, covering everything from the software in a Javelin missile to the soft power of a charismatic president. But that does not make the idea vacuous; it explains why fixing the intangible economy is such a subtle challenge.So the pendulum has not swung back to the physical economy as much as the conventional wisdom might have you believe. The 21st century has been the century of the intangible economy, and little has happened in the last two years to suggest otherwise. Tim Harford’s new book is “How to Make the World Add Up”Follow @FTMag on Twitter to find out about our latest stories first More

TOKYO (Reuters) -Japanese Prime Minister Fumio Kishida said the central bank’s monetary policy is aimed at achieving its 2% inflation target, not at manipulating currency rates, brushing aside the view the country must end an ultra-low interest rate policy to stem sharp yen declines.Kishida also said the recent rise in domestic inflation was due mostly to a global spike in crude oil and raw material costs, rather than the weak yen.”The Bank of Japan (BOJ) is conducting monetary policy to achieve its 2% inflation target, not to manipulate currency rates,” Kishida told parliament, when asked by an opposition lawmaker about the relationship between the yen’s declines and the central bank’ prolonged ultra-loose policy.”The government hopes the BOJ continues to strive toward achieving its inflation target, with an eye on economic, price and financial developments,” he said on Friday.The yen slumped to a fresh 20-year low of 126.56 against the dollar on Friday, as investors focused on the gap between the U.S. Federal Reserve’s aggressive rate hike plans and the BOJ’s pledge to maintain its ultra-low policy for the time being.While a weak yen boosts Japanese exports, it inflates import costs for energy and food products that have already seen prices jump due to the war in Ukraine.Some lawmakers have blamed the BOJ’s ultra-easy policy for accelerating yen declines and adding pain to households and firms by pushing up living costs.Under a policy dubbed yield curve control, the BOJ pledges to guide short-term rates at -0.1% and cap long-term borrowing costs around 0% to fire up inflation to its 2% target. More

The People’s Bank of China (PBOC) said it was keeping the rate on 150 billion yuan ($23.52 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions unchanged at 2.85% from the previous operation, to “maintain banking system liquidity reasonably ample”, according to an online statement.Thirty-one out of the 45 traders and analysts, or nearly 70% of all participants in a Reuters poll, forecast no change to the MLF rate.Instead, markets increasingly expect an imminent reduction in the amount of cash banks must set aside as reserves, after the State Council, or cabinet, called on Wednesday for the timely use of such monetary tools.Global investment banks including Citi expect such a reserve requirement ratio (RRR) reduction could be delivered as early as Friday, with many expecting more easing measures still on the way.”We doubt the forthcoming RRR cut will be the last easing move either, given the severe headwinds facing China’s economy,” said Julian Evans-Pritchard, senior China economist at Capital Economics. “We continue to anticipate another 20 basis points of policy rate cuts this year and a further acceleration in credit growth.”The recent fast spread of COVID-19 cases has induced lockdowns in a dozen of cities across the country, including the financial hub of Shanghai, raising concern over wider disruptions to economic activity.That means policymakers will need to offer more stimulus to ensure the economy is on course to hit this year’s growth target of around 5.5%, analysts say.A latest Reuters poll showed China’s economic growth is likely to slow to 5.0% in 2022 amid renewed COVID-19 outbreaks and a weakening global recovery, piling pressure on the central bank to ease policy further.With 150 billion yuan worth of MLF loans maturing on Friday, the operation resulted in zero net cash injection into the banking system.The central bank also injected 10 billion yuan through seven-day reverse repos while keeping the borrowing cost unchanged at 2.1%, according to an online statement. ($1 = 6.3775 Chinese yuan) More

TOKYO (Reuters) -Japan is preparing to attend a gathering of financial leaders from the Group of 20 economic powers next week, its finance minister said on Friday, as Western nations sought the expulsion of Russia from the forum and said they would skip sessions where Moscow is represented.Shunichi Suzuki said Japan “is not in the position to respond to each country’s participation”, when asked about Russia’s plans to join the forum online, which G20 chair Indonesia announced on Thursday.Japanese officials are keen to have their minister go to Washington next week for the G20 meeting on April 20 on the sidelines of IMF/World Bank spring gatherings. Suzuki was not able to attend the previous meeting of the group in February.”The G20 meeting is a very important conference to discuss various issues of the global economy, including rising food and energy prices due to Russia’s invasion of Ukraine,” Suzuki told a news conference.Last week, U.S. Treasury Secretary Janet Yellen said the United States will boycott some G20 meetings if Russian officials show up. German Finance Minister Christian Lindner has called for rejection of any form of cooperation with Russia at the G20.Meanwhile, Japan “will take appropriate steps” in close cooperation with G7 allies and Indonesia, based on a March G7 leaders’ statement that said international platforms should not continue relations with Russia in a business as usual manner, Suzuki added.Suzuki and his American counterpart Yellen are likely to meet next week on the sidelines of the G20 gathering, Kyodo news agency reported on Friday.Currencies could be among possible topics, after the two sides affirmed last month close communication between their currency authorities. On Friday, the yen fell as far as 126.56 to the dollar, the lowest since May 2002, as the greenback strengthened on hawkish comments from U.S. Federal Reserve officials.A weak yen can be “bad” for Japan’s economy if rising costs of raw materials cannot be passed onto prices of goods sold, and if the price inflation outstrips wage growth, Suzuki said on Friday, clarifying his recent remark about the Japanese currency. More

BRASILIA (Reuters) – The Brazilian government projected on Thursday that the country’s debt will reach 79.6% of gross domestic product in 2023, rising to 80.3% in 2024 and remaining at that level in 2025.That compares with a 79.6% level currently, according to the central bank, signaling that the government expects a mild expansion in the coming years of its main fiscal sustainability indicator.The figures are contained in the 2023 budget bill sent to Congress, which sets a fiscal primary deficit target of 65.9 billion reais ($14.02 billion) for central government accounts next year, as Reuters previously reported.The central government accounts comprise the results of the Treasury, social security and the central bank. Brazil’s Economy Ministry recently projected a 66.9 billion reais primary deficit for this year.Figures have been negative since 2014, with fiscal deterioration taking gross debt far from the average for emerging countries, which stands at about 50% of GDP.The government foresees in the budget bill that in 2024 it will report a deficit of 27.9 billion reais. In 2025, after 11 years of straight shortfalls, the balance will move into the positive field, at 33.7 billion reais.Economy Minister Paulo Guedes has said that better fiscal numbers after the record deficit posted on the back of the COVID-19 blow in 2020 demonstrate the country’s commitment to fiscal responsibility. Many analysts, however, believe this year’s presidential elections will take candidates, including President Jair Bolsonaro, who is seeking a second term, to bet on more populist rhetoric, leaving fiscal discipline aside.($1 = 4.7013 reais) More

WASHINGTON (Reuters) -The board of governors of the Inter-American Development Bank has approved a resolution to hire an outside firm to investigate allegations that IDB President Mauricio Claver-Carone had an inappropriate relationship with a subordinate, sources familiar with the decision said on Thursday.Some countries were still voting on the issue, but sufficient support was reached to proceed with the investigation, two of the sources said.IDB directors met twice last week to discuss allegations that Claver-Carone had carried out an intimate relationship with a staff member, Reuters reported exclusively.A spokesperson for the Latin American regional development bank declined to comment about the vote.At an online event on Friday, Claver-Carone said he was the target of an “anonymous political media campaign” and hoped to have the opportunity to defend himself. He could not be immediately reached for comment about the board vote on Thursday.Claver-Carone did not directly address the specific allegations, which were made in an anonymous letter.It was not immediately clear which firm would be engaged to carry out the investigation.An anonymous email sent to the board of directors of the bank and the bank’s ethics officer at the end of March accused Claver-Carone of carrying out a relationship with a senior strategist who reported to him, according to the bank source with direct knowledge of the meeting. Reuters has not seen the email. The email also accused Claver-Carone and the staffer of misusing IDB funds, one source said, without giving more detail.The IDB’s ethics code on its website states: “You cannot participate in any employment-related decisions about someone with whom you have an intimate relationship.” More