Economy

OSAKA (Reuters) -The Bank of Japan can afford to spend time watching developments in financial markets and overseas economies as it sets monetary policy, Governor Kazuo Ueda said on Tuesday, suggesting that the central bank was in no rush to raise interest rates further.He also voiced hope of scrutinising service-price data for October, many of which are due out in November, in determining whether underlying inflation was accelerating toward the BOJ’s 2% inflation target – a prerequisite for hiking interest rates.”October is a month when service-price revisions are concentrated in Japan, so we must scrutinise data carefully,” Ueda told a news conference after meeting with business leaders in the western Japan city of Osaka.”While there are some elements we can estimate in advance, we need to look at actual data to confirm,” he said, suggesting the BOJ will wait at least until December to hike rates again.The BOJ next meets for a policy meeting on Oct. 30-31, when the board will also conduct a quarterly review of its growth and inflation forecasts.Ueda reiterated that the BOJ will raise rates if underlying inflation accelerates towards its 2% target as projected, a sign there was no change to its stance to gradually push up borrowing costs from still near-zero levels.But he warned of risks surrounding the outlook, such as volatile financial markets and uncertainty on whether the U.S. economy can achieve a soft landing.”We must conduct policy in a timely, appropriate fashion without having any pre-set schedule in mind, taking into account various uncertainties,” Ueda said in a speech to business leaders in Osaka.The yen’s “one-sided declines” have reversed since August and significantly lowered the risk of an inflation overshoot by moderating the pace of rise in import prices, Ueda said.”We need to scrutinise market moves and overseas economic developments behind them in setting monetary policy. We can afford to spend time doing this,” he said.The remarks highlight a shift in the BOJ’s focus away from inflationary risks, towards the chance of slowing global growth and yen rises weighing on Japan’s export-reliant economy.They were roughly in line with those Ueda made after the BOJ’s policy meeting on Friday, when the board unanimously voted to keep short-term rates steady at 0.25%.Ueda stressed that domestic economic conditions were moving in line with the BOJ’s projection with rising wages underpinning consumption and helping push up service-sector prices.But he highlighted the need to watch growing overseas risks, such as uncertainty on how past aggressive interest rate hikes by the Federal Reserve could affect the U.S. economy.Financial markets remained “somewhat unstable,” Ueda added, stressing the need to keep monitoring market developments with “utmost vigilance.”The BOJ ended negative interest rates in March and hiked short-term rates to 0.25% in July, in a landmark shift away from a decade-long stimulus programme aimed at firing up inflation and economic growth.The start of Japan’s rate-hike cycle comes as many other central banks cut interest rates after tightening monetary policy aggressively to combat high inflation.The Fed, for one, last week kicked off an anticipated series of rate cuts with a half-percentage-point reduction after soft labour market data.Japan’s core consumer inflation accelerated for the fourth straight month in August and tracked comfortably above the central bank’s 2% target, keeping alive expectations for further interest rate hikes. More

The U.S. company must provide documentation and evidence within 30 days detailing any “discriminatory measures” taken regarding Xinjiang products over the past three years, the ministry said in a statement. Additionally, the ministry noted in a separate statement that PVH is suspected of “unjustly boycotting” Xinjiang cotton and other products “without factual basis”. More

Antoine Armand, a 33-year-old ally of President Emmanuel Macron, was named France’s new finance minister over the weekend. On Monday, the country’s 10-year bond yield was just 1-1/2 basis points away from surpassing that of Spain’s traditionally more risky paper for the first time since late 2007. “I understand these questions,” Armand told France Inter radio, adding: “When you’ve had government experience, you have a certain number of habits. When you haven’t got that, yes it’s new, yes it’s quite a thing.” Teaming up with new Budget Minister Laurent Saint Martin, who is 39, Armand has the daunting task of plugging a huge hole in the budget. Previously little-known beyond Parisian political circles, the duo face pressure to figure out how to rein in France’s budget deficit as it spirals towards 6% of GDP. “We have one of the worst deficits in our history, so the situation is serious”, Armand said. “Our hard work will match the seriousness of this situation.” Asked whether the country will meet its budget deficit projection this year, Armand declined to give a clear answer, saying he was working with the budget minister on a “credible” updated estimate to be presented soon. France’s chief auditor last week told lawmakers the finance ministry’s current forecast of a deficit at 5.1% of GDP was out of reach due to reduced tax incomes amid an economic slowdown and lower public sector savings than needed. More

Bailey said he was “very encouraged” by the downward path of inflation since it peaked at 11.1% nearly two years ago.”I do think the path for interest rates will be downwards, gradually,” he told the Kent Messenger newspaper.”Inflation has come down a long way,” Bailey added. “We still have to get it sustainably at the target and we have quite an unbalanced mix of components of inflation at the moment.”British inflation was 2.2% in August but the central bank remains concerned about high rates of growth in services prices and regular wages, both of which are rising at an annual pace of more than 5%.Asked where interest rates would settle, Bailey said he did not expect them to return to the historic lows close to zero last seen four years ago, and his best guess was that it would settle at a neutral rate which he was unable to specify. Last week the BoE kept its main interest rate unchanged at 5% after cutting it from a 16-year high of 5.25% in August. Economists polled by Reuters expect the BoE to cut rates to 4.75% at its next meeting in November.Last week Bailey said he was optimistic rates would fall further, but also said cuts would need to be gradual and the BoE needed “to be careful not to cut too fast or by too much”.Bailey spoke to the Kent Messenger during a visit to southeast England, including the port of Dover (NYSE:DOV), the main route for freight and much passenger travel between Britain and continental Europe.Asked about the economic impact of Brexit, Bailey said: “What we have seen, there will be some short-term painful effect on trade. But over a longer period of time … that trade will be redirected.” More

1. Futures edge upUS stock futures pointed higher on Tuesday, after comments from Fed officials regarding the jumbo rate cut drove up equities on Wall Street in the prior session.By 03:22 ET (07:22 GMT), the Dow futures contract had added 37 points or 0.1%, S&P 500 futures had inched up by 8 points or 0.1%, and Nasdaq 100 futures had gained 47 points or 0.2%.The 30-stock Dow Jones Industrial Average, benchmark S&P 500 and tech-heavy Nasdaq Composite all gained on Monday, as investors assessed statements in support of the Fed’s outsized 50-basis point rate reduction last week. Fed officials including Neel Kashkari, Raphael Bostic, and Austan Goolsbee all backed the move and argued for further slashes to borrowing costs this year.Meanwhile, new data showed that US business activity held steady in September and average prices for goods and services climbed at the fastest pace in half a year. The figures, along with the release of the latest personal consumption expenditures (PCE) price index — one of the Fed’s preferred inflation gauges, could provide an updated glimpse into the state of price growth in the world’s biggest economy.Traders are now betting that there is a roughly 53% chance the Fed will bring rates down by a half-point again at its next meeting in November, according to the CME Group’s (NASDAQ:CME) closely-monitored FedWatch Tool.2. Fed’s Bowman to speakMarkets will likely be following comments on Tuesday from Fed Governor — and sole dissenter to the size of last week’s rate cut — Michelle Bowman.Bowman is due to speak at 09:00 ET at the Kentucky Bankers Association Annual Convention, according to the Fed.The statements will come after Bowman said last week that she had favored a quarter-point drawdown due to concerns that a bigger reduction would be misinterpreted by the public as a sign that the Fed’s long-standing fight against inflation had been won.In particular, she noted that so-called “core” PCE, which strips out volatile items like food and fuel, currently stands above the central bank’s preferred 2% target.”We have not yet achieved our inflation goal,” Bowman said on Friday, adding a more measured rate cut would “avoid unnecessarily stoking demand.”3. Boeing puts improved pay offer to striking workersBoeing has offered a sweetened labor deal to its more than 30,000 striking workers in the US Pacific Northwest, although their union has said it would not put the proposal to a vote.The aerospace giant’s latest offer includes a 30% general pay bump over four years as well as improvement in retirement benefits and an increased ratification bonus if the workers accept the proposal by Friday. Boeing said it was its “best and final” offer.However, the International Association of Machinists and Aerospace Workers District 751, which represents the workers, rebuffed the approach, saying it was “thrown at us” by Boeing without prior negotiations. The company, meanwhile, said it had presented the offer to the union and then to the employees.Finding a resolution to the strike, which began after workers rejected a prior compensation package earlier this month, has become critical for Boeing. Analysts have flagged that a prolonged work stoppage could place a further crimp on the firm’s finances during a time when it is already facing production delays and heightened scrutiny over its safety record.4. Chinese stocks surge on stimulusChina’s Shanghai Shenzhen CSI 300 and Shanghai Composite indices rose more than 4% on Tuesday, while Hong Kong’s Hang Seng index also rallied, following fresh stimulus measures from Beijing.Chinese officials unveiled a slew of planned measures to further spur economic growth, with the People’s Bank of China (PBOC) set to cut reserve requirements for banks by 50 basis points to unlock more liquidity.For the ailing property market, the government said it would reduce mortgage rates for existing loans. Bloomberg reported that the government was planning at least 500 billion yuan ($70.8 billion) of liquidity support for local stocks.The moves come after the PBOC cut a short-term repo rate on Monday in a bid to further boost liquidity. Officials in China are pushing to shore up growth as the world’s second-largest economy struggles with persistent disinflation and an extended property market downturn.5. Crude risesCrude prices advanced on Tuesday, boosted by the monetary stimulus from top importer China as well as escalating tensions in the Middle East.By 03:23 ET, the Brent contract climbed 1.2% to $74.08 per barrel, while U.S. crude futures (WTI) traded 1.4% higher at $71.34 a barrel.China’s broad stimulus measures boosted hopes of expanding demand for crude from the world’s largest importer.Elsewhere, Israel’s military said it launched airstrikes against Hezbollah sites in Lebanon on Monday, raising concerns of a disruption to supplies from this oil-rich region, tightening global markets. More

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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Spain is pushing other wealthy countries to allow developing nations hit by famines, droughts and hurricanes to suspend debt repayments, as climate change increases the threat from natural disasters.Paula Conthe, the head of Spain’s Treasury, told the Financial Times that official and private creditors should incorporate emergency so-called pause clauses for natural disasters into all loans to poor countries, after Grenada became the world’s first country to use such a clause last month.The Caribbean nation was able to suspend payments on a $112mn bond for a year after damage from Hurricane Beryl, which struck in July, triggered a clause in its debt terms agreed almost a decade ago. The interest will be added on to the bond’s principal. However, such clauses are rare in debt documents.The loan clauses that Spain is putting in its own debt documents will pause debt service for 12 months following a trigger event. Conthe said the Covid-19 pandemic showed how an exogenous shock can threaten a fiscally prudent country’s ability to repay debt in the short term.More severe and frequent droughts and floods are complicating debt crises, particularly in Africa. Zambia emerged from a bond default this year only to find its finances strained even further by the worst El Niño drought in southern Africa in four decades.Spain wants to use its clout as a member of the Paris Club of rich-country creditors to push for the wider uptake of similar clauses and across more types of disasters that can befall developing nations. “Otherwise, they might go into a negative debt spiral where their liquidity problems would turn into solvency problems,” she said.Madrid also wanted to make the pauses a standard feature of a G20 common framework for lending to poor nations, as well as some middle-income ones, Conthe added. It plans to make these agreements part of all concessional and commercial lending to low-income countries.Spain carries weight as a member of multilateral development banks active across emerging markets, including the Asian Infrastructure Investment Bank, the Central American Bank for Economic Integration, and the Development Bank of Latin America and the Caribbean.Spain has already inserted food crisis-related pause provisions into loans to Rwanda and Senegal this year. The clauses will only be able to offer “true relief” to borrowers if they are widely adopted, Conthe said.Some analysts say it is very difficult to design pause clauses that derive specific triggers from disasters such as drought, which can be harder to measure. Beyond Grenada, few countries have adopted the clauses even for risks such as hurricanes, which can be quantified relatively easily.However, Brad Setser, a senior fellow at the Council on Foreign Relations, said such clauses would be beneficial for both lenders and borrowers, and would not add much to a developing country’s borrowing costs. “The ability to stop payments for a year in the face of an act of God, so to speak, helps the debtor and helps the creditor. It helps avoid unnecessary default, and means the debtor doesn’t have to worry about coming up with funds during a disaster,” he said.“All insurance comes with a price,” Setser added, but the likely cost for loan payment suspension clauses done at issuance would be tens of basis points, not in the percentage points. More