Economy

SINGAPORE (Reuters) – The yen fought for a footing on Tuesday, following its worst session in 16 months, as the Bank of Japan pins down bond yields at a time when they are rising sharply in the rest of the world.The Japanese currency fell as much as 2.4% to 125.10 to the dollar overnight, its lowest since August 2015, before recovering to 124.24 in volatile morning trade in Tokyo.The U.S. dollar was broadly steady elsewhere, keeping the euro at $1.0988 and capping a recent rally in the Australian dollar to hold it at $0.7483. [AUD/]Japan’s central bank bought a little more than $500 million in bonds on Monday and has vowed three more days of unlimited purchases to defend its 10-year yield target of 0.25%.The move, a demonstration of resolve to keep Japan’s monetary policy ultra easy, underscores the stark contrast with an ever-more-hawkish sounding U.S. Federal Reserve and has tipped the already-sliding yen off a cliff.It is down nearly 7% this month and almost 10% on a resurgent Aussie. But with Japanese government bond yields (JGBs) barely retreating it is clear that some investors doubt the longevity of Japan’s policy. [JP/]”Anyone who watched the RBA ‘cap’ blow is probably excitedly (and logically) short JGBs right now hoping for a similar move in Japan rates,” said Brent Donnelly, president at analytics firm Spectra Markets, referring to the Reserve Bank of Australia’s abandonment of its yield target in November.Minutes from the Bank of Japan’s March meeting published on Tuesday showed policymakers stressing the need to keep monetary policy ultra-loose, even as some of them saw signs of growing inflationary pressure.Yet economists see building pressure for a shift if persistent yen weakness exacerbates inflation by raising import costs, particularly for energy, and reckon that 125, roughly where dollar/yen peaked in 2015, is a key level.”Japanese yen depreciation is a big problem for the Japanese economy, because the economy – especially households – is facing rising inflation and yen depreciation could accelerate that,” said Kentaro Koyama, chief economist at Deutsche Bank (DE:DBKGn) in Tokyo.”If the dollar/yen rate exceeded 125 I’d expect some more severe verbal intervention.”Japanese Finance Minister Shunichi Suzuki said on Tuesday that Japan will carefully watch foreign exchange market movement to avoid “bad yen weakening”.Among other majors the New Zealand dollar was a fraction weaker at $0.6889 and sterling was under pressure at $1.3081. [GBP/]European consumer confidence data and U.S. job openings figures are due later in the day.========================================================Currency bid prices at 0105 GMTDescription RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar $1.0975 $1.0988 -0.10% -3.45% +1.0998 +1.0969 Dollar/Yen 123.8750 123.8650 +0.20% +7.91% +124.3000 +123.4000 Euro/Yen 135.98 136.13 -0.11% +4.34% +136.5100 +135.5400 Dollar/Swiss 0.9342 0.9345 -0.02% +2.43% +0.9356 +0.9334 Sterling/Dollar 1.3083 1.3095 -0.10% -3.27% +1.3106 +1.3080 Dollar/Canadian 1.2522 1.2517 +0.04% -0.96% +1.2530 +1.2515 Aussie/Dollar 0.7479 0.7492 -0.16% +2.90% +0.7507 +0.7475 NZ Dollar/Dollar 0.6891 0.6897 -0.07% +0.69% +0.6908 +0.6889 All spotsTokyo spotsEurope spots Volatilities Tokyo Forex market info from BOJ More

TOKYO (Reuters) – Bank of Japan policymakers stressed the need to keep monetary policy ultra-loose, even as some of them saw signs of growing inflationary pressure from the Ukraine crisis, a summary of opinions at their March meeting showed on Tuesday.Japan’s consumer inflation will clearly accelerate from April and may hover around 2% for some time due mainly to the boost from energy price rises, one member was quoted as saying.”As wholesale prices rise at historical levels, upward pressure is gradually heightening for consumer inflation,” another member said.Other members, however, warned such cost-push inflation will prove short-lived due to weak domestic demand, the summary showed.”Consumer inflation may move around 2% in the first half of fiscal 2022 due to rising raw material costs. But it could undershoot expectations in the latter half of the year if commodity prices turn down,” one member said.Most of the opinions called on the need for the BOJ to stick to ultra-loose monetary policy as the war in Ukraine heightened uncertainty over the global outlook.”Unlike the United States or Britain, Japan isn’t in a situation where inflation continuously exceeds 2%…It’s therefore important to support the economy’s recovery from the coronavirus pandemic by maintaining monetary easing,” one member said.At the March meeting, the BOJ maintained its massive stimulus and warned of heightening risks to a fragile economic recovery from the Ukraine crisis.Japan’s core consumer inflation hit 0.6% in February, well below the BOJ’s 2% target, as weak consumer spending discourage firms from raising prices. But analysts expect inflation to approach 2% from April, due to soaring fuel costs and the dissipating effect of past cellphone fee cuts. More

WASHINGTON (Reuters) -The U.S. Senate on Monday again approved a bill to provide $52 billion in U.S. subsidies for semiconductor chips manufacturing in a bid to reach a compromise after months of discussions.The 68-28 procedural vote sends the legislation back to the House of Representatives in a cumbersome process to ultimately launch a formal process known as a “conference” where lawmakers from both chambers will seek agreement on a compromise version. A persistent industry-wide shortage of chips has disrupted production in the automotive and electronics industries, forcing some firms to scale back production, and there have been growing calls to decrease reliance on other countries for semiconductors.The Senate first passed chips legislation in June that also authorized $190 billion to strengthen U.S. technology and research to compete with China, while the House passed its version in early February.The bills take different approaches to addressing U.S. competitiveness with China on a wide range of issues, as well on trade and some climate provisions.Senate Commerce Committee chair Maria Cantwell said the vote was crucial to “get us to real negotiations”White House spokeswoman Jen Psaki said the Senate vote was another step “to strengthen our supply chains, make more in America, and outcompete China and the rest of the world for decades to come. We look forward to the House of Representatives moving quickly to start the formal conference process as well.”A senior House Democratic aide said the chamber is set to take up the measure and send it back to the Senate as soon as later this week. The Senate will need to vote again to launch the conference. A final agreement might not be reached until summer.Independent Senator Bernie Sanders criticized the $52 billion in subsidies, calling it “corporate greed” and said taxpayers should get warrants or equity from profitable chips firms in exchange for subsidies.”The financial gains made by these companies must be shared with the American people, not just wealthy shareholders,” Sanders said.U.S. Commerce Secretary Gina Raimondo noted that two decades ago, the United States produced nearly 40% of all chips while today it accounts for only 12% of global production. The Senate vote moved the United States “one step closer toward revitalizing American semiconductor manufacturing, securing our critical supply chains and bringing home good-quality manufacturing jobs.”On Friday, General Motors (NYSE:GM) said it would halt production at a pickup truck plant in Indiana for two weeks in April because of the chips shortage. More

TOKYO (Reuters) – Japanese Prime Minister Fumio Kishida ordered his cabinet to compile a fresh relief package to cushion the economic blow from rising fuel and raw material prices, economy minister Daishiro Yamagiwa said on Tuesday.Kishida has said the government will aim to compile the package by the end of April with funding mostly to come from special reserves set aside under the fiscal 2022 budget. More

NEW YORK (Reuters) – The U.S. Treasury yield curve has been flattening with parts of it inverting as investors price in an aggressive rate-hiking plan by the Federal Reserve as it attempts to bring inflation down from 40-year highs.That has investors trying to guess whether it is signaling a recession is nearing. The shape of the yield curve is a key metric investors watch as it impacts other asset prices, feeds through to banks’ returns and has been an indicator of how the economy will fare. Recent moves have reflected investor worries over whether the Fed can tighten monetary policy to tame inflation without hurting economic growth. Investors watch parts of the yield curve as recession indicators, primarily the spread between the yield on three-month Treasury bills and 10-year notes and the U.S. two-year to 10-year curve. However these two have veered in opposite directions, causing some confusion as to how accurate a recession signal they are giving.Other parts of the curve are less-watched, such as the spread between five- and 30-year Treasuries which inverted on Monday and has also inverted prior to some recessions. Here is a quick primer explaining what a steep, flat or inverted yield curve means and how it has in the past predicted recession, and what it might be signaling now.WHAT SHOULD THE CURVE LOOK LIKE? The U.S. Treasury finances federal government budget obligations by issuing various forms of debt. The $23 trillion https://fred.stlouisfed.org/series/MVMTD027MNFRBDAL Treasury market includes Treasury bills with maturities from one month out to one year, notes from two years to 10 years, as well as 20- and 30-year bonds.The yield curve plots the yield of all Treasury securities.Typically, the curve slopes upwards because investors expect more compensation for taking on the risk that rising inflation will lower the expected return from owning longer-dated bonds. That means a 10-year note typically yields more than a two-year note because it has a longer duration. Yields move inversely to prices. A steepening curve typically signals expectations of stronger economic activity, higher inflation, and higher interest rates. A flattening curve can mean the opposite: investors expect rate hikes in the near term and have lost confidence in the economy’s growth outlook.WHAT DOES AN INVERTED CURVE MEAN?The U.S. curve has inverted before each recession since 1955, with a recession following between six and 24 months, according to a 2018 report https://www.frbsf.org/economic-research/publications/economic-letter/2018/march/economic-forecasts-with-yield-curve by researchers at the Federal Reserve Bank of San Francisco. It offered a false signal just once in that time.The last time the 2/10 part of the yield curve inverted was in 2019. The following year, the United States entered a recession – albeit one caused by the global pandemic.WHY IS THE YIELD CURVE INVERTING NOW? Yields of short-term U.S. government debt have been rising quickly this year, reflecting expectations of a series of rate hikes by the U.S. Federal Reserve, while longer-dated government bond yields have moved at a slower pace amid concerns policy tightening may hurt the economy.As a result, the shape of the Treasury yield curve has been generally flattening and in some cases inverting. Flatter by the month – US yield curve https://fingfx.thomsonreuters.com/gfx/mkt/mypmnqkdnvr/Pasted%20image%201648502812707.pngParts of the yield curve, namely five to 10 and three to 10 years, inverted last week. The spread between five- and 30-year U.S. Treasury yields on Monday fell to as low as minus 7 basis points (bps), moving below zero for the first time since February 2006, according to Refinitiv data. The spread has collapsed from a positive 53 bps at the start of this month. The 5/30 year spread inverted prior to the 2008-09 recession and prior to the 2001 recession, but not prior to the pandemic-induced 2020 recession. Yield curve inversions and recessions, 5-yr/30-yr curve https://fingfx.thomsonreuters.com/gfx/mkt/zjpqkdwzxpx/Pasted%20image%201648486055821.pngIn the overnight index swaps (OIS) market, the yield curve between two- and 10-year swap rates inverted for the first time since late 2019 and last stood at minus 4 bps, according to Refinitiv data. Two parts of the curve are particularly closely watched: One is the gap between yields on two- and 10-year Treasury notes, widely seen to predict a recession when it inverts. That spread was at 12.1 basis points from 24 basis points 10 days ago. ARE WE GETTING MIXED SIGNALS? Still, another closely monitored part of the curve has been giving off a different signal: The spread between the yield on three-month Treasury bills and 10-year notes this month has been widening, causing some to doubt a recession is imminent.Yield curve inversions and recessions, 3-mo/10-yr curve https://fingfx.thomsonreuters.com/gfx/mkt/gkplgqdrwvb/Pasted%20image%201648503037022.pngMeanwhile, the two-year/10-year yield curve has technical issues, and not everyone is convinced the flattening curve is telling the true story. They say the Fed’s bond buying program of the last two years has resulted in an undervalued U.S. 10-year yield that will rise when the central bank starts shrinking its balance sheet, steepening the curve.U.S. benchmark 10-year yields pushed above the 2.5% marker to 2.55% Monday, hitting their highest since April 2019. In February they topped the 2% level for the first time since 2019. Yield curve inversions and recessions, 2-yr/10-yr curve https://fingfx.thomsonreuters.com/gfx/mkt/dwvkrqebxpm/Pasted%20image%201648485936956.pngResearchers at the Fed, meanwhile, put out a paper https://www.federalreserve.gov/econres/notes/feds-notes/dont-fear-the-yield-curve-reprise-20220325.htm on March 25 that suggested the predictive power of the spreads between 2 and 10-year Treasuries to signal a coming recession is “probably spurious,” and suggested a better herald of a coming economic slowdown is the spread of Treasuries with maturities of less than 2 years. WHAT DOES THIS MEAN FOR THE REAL WORLD? While rate increases can be a weapon against inflation, they can also slow economic growth by increasing the cost of borrowing for everything from mortgages to car loans.Aside from signals it may flash on the economy, the shape of the yield curve has ramifications for consumers and business. When short-term rates increase, U.S. banks tend to raise their benchmark rates for a wide range of consumer and commercial loans, including small business loans and credit cards, making borrowing more expensive for consumers. Mortgage rates also rise.When the yield curve steepens, banks are able to borrow money at lower interest rates and lend at higher interest rates. Conversely, when the curve is flatter they find their margins squeezed, which may deter lending. More

WASHINGTON (Reuters) -The U.S. Treasury on Monday proposed a new mechanism to comply with and enforce a 15% global corporate minimum tax agreed to last year by 136 countries, partly by denying deductions for taxes paid in jurisdictions with lower rates.The new Undertaxed Profits Rule proposed as part of President Joe Biden’s fiscal 2023 budget plan would replace the current U.S. Base Erosion Anti-Abuse Tax (BEAT) with a new system that would act as a “top-up tax” to ensure that multinational corporations pay an effective tax rate of at least 15%, the Treasury said in budget documents released on Monday.The global minimum tax deal negotiated through the Organization for Economic Cooperation and Development (OECD) is aimed at ending a downward competitive spiral of corporate rates and an erosion of government revenues while denying advantages to tax-haven countries.A key feature of Treasury’s proposed rule is that it would generate additional revenue by denying deductions to companies to the extent that they are paying a tax rate below 15%, a U.S. Treasury official told Reuters.In the event that U.S. subsidiaries of foreign companies use U.S. deductions and credits to lower their effective tax rates below 15%, the proposal includes a domestic tax to capture the difference in the United States, rather than cede it to foreign countries, matching mechanisms imposed by other countries. The official said Treasury was ready to work with Congress on enabling legislation to ensure that the benefits of U.S. tax credits and other incentives for American corporations are preserved.The new plan, which applies to companies with global revenues over $850 million conforms to so-called “model rules” for the global minimum tax agreed to last December.The proposal is the latest in a series of tax changes floated by the Treasury over the past year to negotiate and implement the sweeping global tax deal, which also includes a separate “pillar” that seeks to reallocate international taxing rights on large tech companies and other highly profitable multinationals.The Biden administration had sought to include tax changes to implement the global minimum tax into a sweeping social and climate investment bill, but that legislation stalled in Congress at the end of 2021.Biden’s budget seeks to raise the U.S. corporate tax rate to 28% from 21% and boost the current U.S. overseas minimum rate to 20% from 10.5%, along with higher taxes on wealthy individuals The legislative path forward to meet a 2023 deadline to implement the minimum tax is unclear.By including the new plan in the Treasury “green book” of budget revenue proposals, the Biden administration is showing that it is “still very, very committed to a global consensus on a global minimum tax,” said Manal Corwin, head of KPMG’s Washington national tax practice and a former U.S. Treasury tax official.”From a messaging perspective it’s important, because you see the Treasury at least building into their budget that they’re following the global architecture,” Corwin said. More

LONDON (Reuters) – More than 7,000 finance jobs have moved from London to the European Union as a result of Brexit, down 400 from the total anticipated in December, consultants EY said on Tuesday.While the total is well down on the 12,500 job moves forecast by firms in 2016, when Britain voted to leave the bloc, more could follow, EY said in its latest Brexit Tracker.EY said that new local hires linked to Brexit total 2,900 across Europe, and 2,500 in Britain, where just over a million people work in the financial services sector.Further relocations could result from European Central Bank checks on whether Brexit hubs in the EU opened by banks which used London as their European base have sufficient staff to justify their new licences, EY said.The Bank of England is scrutinising these to avoid banks in London being left with too few senior staff.”Staff and operational moves across European financial markets will continue as firms navigate ongoing geo-political uncertainty, post-pandemic dynamics and regulatory requirements,” Omar Ali, EMEIA financial services leader at EY, said in a statement.Dublin is the most popular destination for staff relocations and new hubs, followed by Luxembourg, Frankfurt and Paris.EY said Paris scored highest in terms of attracting jobs from London, totalling 2,800, followed by Frankfurt at around 1,800, and Dublin with 1,200.The transfer of assets from London to EU hubs remains around 1.3 trillion pounds ($1.7 trillion), EY said, adding that Brexit staff moves are by now part of a broader view of strategic business drivers and operating models.Bankers have said privately that in the longer term, it may not make commercial sense to have big hubs in London and the EU.($1 = 0.7637 pounds) More

Russia is no longer requesting Ukraine be “denazified” and is prepared to let Kyiv join the EU if it remains militarily non-aligned as part of continuing ceasefire negotiations, according to four people briefed on the discussions.Moscow and Kyiv are discussing a pause in hostilities as part of a possible deal that would involve Ukraine abandoning its drive for Nato membership in exchange for security guarantees and the prospect to join the EU, the people said under the condition of anonymity because the matter is not yet finalised. The draft ceasefire document does not contain any discussion of three of Russia’s initial core demands — “denazification”, “demilitarisation”, and legal protection for the Russian language in Ukraine — the people added. Envoys from both sides are to meet in Istanbul on Tuesday in a fourth round of peace talks designed to end president Vladimir Putin’s full-scale invasion of Ukraine. The concessions on Russia’s side come as its month-long ground offensive has largely stalled as a result of fiercer Ukrainian resistance than expected and Russian operational deficiencies. But Ukraine and its western backers remain sceptical of Putin’s intentions, worrying that the Russian president could be using the talks as a smokescreen to replenish his exhausted forces and plan a fresh offensive.In other developments:Banking: HSBC has repeatedly edited its analysts’ research publications to remove references to a “war” in Ukraine. Meanwhile other lenders are stuck in legal tangle over Russian corporate bond payments.Energy: Energy ministers of the G7 group of major economies rejected Vladimir Putin’s demand that Russian gas should be paid for in roubles.News: Roman Abramovich, the Russian owner of Chelsea Football Club, and two Ukrainian officials suffered poisoning symptoms in Kyiv in early March after peace talks with Russia, according to three people familiar with the matter.US: President Joe Biden said he was expressing “moral outrage” and not a call for regime change when he said Russian president Vladimir Putin must go. Biden has proposed increasing the country’s military funding by 9.8 per cent as part of a sweeping $5.8tn budget plan.Opinion: China is less likely to back Russia while it is facing troubles of its own, says Ruchir Sharma. Are you personally affected by the War in Ukraine? We want to hear from you. Tell us via a short survey. Thanks for reading FirstFT Asia. Here’s the rest of today’s news — Emily.Five more stories in the news1. US and Australia boost security co-operation to counter China The two nations are set to boost co-operation in space and the cyber domain as the Indo-Pacific allies strengthen efforts to counter China, which is investing heavily in space and weapons such as hypersonic missiles.2. Yen hits 7-year low after Bank of Japan sticks to stimulus The Japanese currency yesterday dropped more than 2 per cent against the dollar to reach ¥125, as the Bank of Japan bucked the global trend for tighter monetary policy. The decision stoked speculation that the central bank could intervene to prop up the currency for the first time since 1998.3. Trump ‘more likely than not’ committed crime on January 6, judge says Judge David Carter in California wrote that former president Donald Trump and attorney John Eastman “launched a campaign to overturn a democratic election, an action unprecedented in American history” as they “corruptly” attempted to obstruct Congress on January 6.4. Middle East ministers hold talks in Israel on ‘common enemies’ Foreign ministers from across the Middle East have met for a summit in the Negev desert, the first such meeting to take place on Israeli soil, as they try to co-ordinate their response to regional security threats including Iran.5. Will Smith under ‘formal review’ by Academy The Academy of Motion Picture Arts and Sciences has launched a “formal review” after actor Will Smith struck comedian Chris Rock on stage during the Oscars awards show. Rock had made a joke about Smith’s wife, Jada Pinkett Smith, who has a shaved head and has spoken publicly about her hair loss.

Will Smith slaps Chris Rock after the comedian made a joke about Jada Pinkett Smith © Chris Pizzello/Invision/AP

Coronavirus digest Shanghai authorities have divided China’s biggest city into two zones, as it locks one area down amid the struggles to contain an outbreak of Covid-19. Britons face a “historic shock” to their incomes this year sparked by surging energy prices, Bank of England governor Andrew Bailey warned.Sign up here for Disrupted Times (formerly known as Road to Recovery), your essential FT newsletter about the changes in business and the economy between Covid and conflict.The day aheadJoe Biden hosts Singapore PM The US president is set to welcome Prime Minister Lee Hsien Loong to the White House on Tuesday. The pair will discuss the war in Ukraine as well as plans to maintain a free and open Indo-Pacific. (Reuters) Japan unemployment figures February joblessness data will shed light on the country’s recovery from Covid-19. Results Earnings are expected from the Bank of China, Bellway, Boku and Ten Entertainment.What else we’re reading and listening toUS-China tech race In the first episode of a new series of our Tech Tonic podcast, the FT’s Global China Editor James Kynge tracks China’s dramatic transformation from the manufacturing workshop of the world to the next global superpower. Women at the Start Are you just at the beginning of your career or do you fancy a change of job? This special report is full of tips for new recruits. It also includes advice for women starting their own business and a guide to reverse mentoring schemes.More from work and careers: Read these tips to becoming an understanding manager, but not a therapist.War with Russia? Finland has a plan for that What the Nordic nation calls its strategy of “comprehensive security” offers an example of how countries can create rigorous, society-wide systems to protect themselves ahead of time — planning not just for a potential invasion, but also for natural disasters or cyber attacks or a pandemic.Secret schools keep Afghan girls learning Rule-breaking teachers are defying the Taliban to provide lessons to women and girls. Together, volunteers from a network of three schools, with 18 teachers and more than 200 students aged from 10 to 18, take part in the programme that serves many poor or disadvantaged neighbourhoods.Black Americans cheer as Jackson nears Supreme Court About 115 justices have served on the country’s highest court since its inception in 1789. Only five of those justices have been women, none of whom identified as black. Ketanji Brown Jackson’s confirmation would also bring the court the closest it has ever been to gender parity, with five men and four women.

Ketanji Brown Jackson would be the first black woman to serve on the US Supreme Court if confirmed © AP

BooksJournalist-turned-author Adam LeBor rounds up the best new thrillers. From spies, secrets and a Stasi “Romeo” in cold war Berlin to a dangerous haul of diamonds in Basel. More