More stories

  • in

    Japan PM hopeful Ishiba says complete exit from deflation is crucial

    TOKYO (Reuters) -Shigeru Ishiba, the former Japanese defence minister running in the ruling party’s leadership race, said on Tuesday that a complete exit from deflation is a crucially important task for the country.”I don’t think private consumption has recovered strongly yet despite some signs of improvement,” Ishiba said at a press conference where he laid out his policy pledges for the Liberal Democratic Party’s (LDP) leadership race.”I promise to achieve sustainable growth in real wages to realise a full exit from deflation, so that people can spend without worrying about the future,” he added.The LDP’s parliamentary control means its leader becomes the prime minister of Japan.Ishiba’s comments are meant to counter speculation that he is more focused on fiscal discipline than economic growth, a ruling party source close to Ishiba’s thinking said.Japan, saddled with the industrial world’s heaviest debt at more than twice the size of its economy, has pledged to deliver a primary budget surplus by the next fiscal year.But calls for more spending are expected to grow as the LDP leadership race is likely to be followed by a snap parliament election.Another candidate, former economic security minister Takayuki Kobayashi, reiterated in a separate press conference on Tuesday that economic growth should be prioritised over finance.”I believe we should aim to raise tax revenue by creating a strong economy, which would in turn result in a sustainable finance and social welfare system,” Kobayashi said.He said that he would compile a stimulus package by the end of this year to ease the pain of those affected by inflation, including small- and medium-sized companies, if he were to win the party leadership race. More

  • in

    China urged to spend up to $1.4tn to battle deflation

    Save over 65%$99 for your first yearFT newspaper delivered Monday-Saturday, plus FT Digital Edition delivered to your device Monday-Saturday.What’s included Weekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysis More

  • in

    ‘Spook the West’: Turkey’s bid for BRICS both a strategic and symbolic step, analysts say

    Turkey, an important geopolitical player and member of NATO, has made increasing strides in its influence and leverage on the global stage.
    BRICS is seen by some as a symbolic counterweight to Western-led organizations like the EU, the G7 and even NATO, although it lacks formal structure, enforcement mechanisms, and uniform rules and standards. 
    Despite its decades of being aligned with Europe and the U.S., Turkey has faced consistent rejection from joining the EU, which has long been a sore spot for Ankara.

    Turkish Foreign Minister Hakan Fidan attends the BRICS+ session on a two-day BRICS foreign ministers summit held in Nizhny Novgorod, Russia on June 11, 2024.
    Sefa Karacan | Anadolu | Getty Images

    Turkey’s request to join the BRICS alliance is a move seen as both strategic and symbolic as the Eurasian country of 85 million makes increasing strides in its influence and leverage on the global stage.
    “Our president has already expressed multiple times that we wish to become a member of BRICS,” a spokesperson for Turkey’s leading AK Party told journalists earlier in September. “Our request in this matter is clear, and the process is proceeding within this framework.”

    BRICS, which stands for Brazil, Russia, India, China and South Africa, is a group of emerging market countries that seek to deepen their economic ties. This year, it gained four new members: Iran, Egypt, Ethiopia, and the UAE. 
    It’s also seen as a counterweight to Western-led organizations like the EU, the G7 and even NATO, although it lacks formal structure, enforcement mechanisms, and uniform rules and standards. 

    For Turkey, a longtime Western ally and NATO member since 1952, the move to join BRICS is “in line with its broader geopolitical journey: positioning itself as an independent actor in a multi-polar world and even becoming a pole of power in its own right,” George Dyson, a senior analyst at Control Risks, told CNBC.
    “This is not to say that Turkey is turning away from the West entirely,” Dyson added, “but Turkey wants to foster as many trading ties as possible and pursue opportunities unilaterally without being constrained by Western alignment. It is definitely symbolic in that Turkey is demonstrating exactly this — that it is not constrained by its good ties with the West.”

    Diversifying alliances

    Despite decades of being aligned with Europe and the U.S., Turkey has faced consistent rejection from joining the EU, which has long been a sore spot for Ankara.

    Ambassador Matthew Bryza, a former White House and Senior State Department official currently based in Istanbul, said that Turkish President Recep Tayyip Erdogan and his government “seem to be motivated mostly by two factors: A strategic tradition of securing national interests… and a desire to spook the West a bit, both out of emotional spite and as a negotiating tactic to extract concessions.”
    CNBC has contacted the Turkish presidency’s office for comment.
    Turkey has in the last few years expanded its role in global diplomacy, brokering prisoner swap deals and leading other negotiations between Ukraine and Russia, for instance, while also mending previously strained relations with regional powers like Saudi Arabia, the United Arab Emirates and most recently, Egypt.

    Russian President Vladimir Putin shakes hands with Turkish President Recep Tayyip Erdogan during their joint press conference on September 4, 2023, in Sochi, Russia.
    Getty Images News | Getty Images

    Ankara also refuses to partake in sanctions against Russia — a stance that irks its Western allies but helps it maintain an independent position as a so-called “middle power,” which it sees as beneficial to its relationships with China and the Global South.
    To that end, “any new BRICS member is obviously eager to take advantage of stronger ‘togetherness’ of emerging economies in order to reduce dependency on developed economies, mainly the United States,” said Arda Tunca, an independent economist and consultant based in Turkey.

    Standing up to the West?

    Tunca noted, however, that Turkey’s unique position in the world is a “delicate discussion point” as the country has “serious political problems with the EU and the United States” despite its western alliances.
    Turkey’s governing party, which has run the country for 22 years, is “ideologically closer to the East than the West,” Tunca said. “Turkey wanted to hop on the BRICS train before it was late. It is too early to mention that the BRICS can become an alternative to the West, but the intention is clearly to stand up against the West under the leadership of China.”
    Importantly, being part of BRICS allows its members to trade in currencies other than dollars. This aims to reduce dependency on the U.S.-led system and usher in a more multi-polar world. The fact that it’s led by China makes some in the West wary, who see this as a potential win for Beijing. 

    Turkish President Recep Tayyip Erdogan (not seen) is welcomed by Chinese President Xi Jinping as part of the 11th G20 Leaders’ Summit in Hangzhou, China, on September 3, 2016.
    Mehmet Ali Ozcan | Anadolu Agency | Getty Images

    “I don’t think there is any enforcement of their [BRICS’] decisions, it’s more of a geopolitical thing, sort of a symbolic counter to the G7,” Dyson said. He also noted: “It’s interesting that Iran and UAE are both in it. It’s a bit like the anti-West team.” 
    Erdogan has spoken of his desire to join BRICS since at least 2018, but the issue was never formalized. In June, Turkish Foreign Minister Hakan Fidan visited both China and Russia, the latter for a BRICS+ summit, during which Russian President Vladimir Putin said he “welcomed” Turkey’s interest in joining the bloc.
    At the time, the then-U.S. ambassador to Turkey, Jeff Flake, said in an interview that he hoped Turkey wouldn’t join the group, but added that he did not think it would negatively impact Turkey’s alignment with the West. More

  • in

    Currencies tread with caution ahead of US inflation test

    SINGAPORE (Reuters) – The dollar was steady in early trading on Tuesday, with the yen inching away from one-month highs as investors brace for U.S. inflation data and reassess expectations of a large interest rate cut from the Federal Reserve starting next week. A mixed labour report on Friday failed to make a clear-cut case on whether the Fed would deliver a regular 25 basis point (bps) rate cut or an outsized 50 bps one at its Sept. 17-18 policy meeting.Traders are now waiting on Wednesday’s U.S. consumer price index report for further policy clues although the Fed has made it clear employment has taken on a greater focus than inflation. The headline CPI is expected to have risen 0.2% on a month-on-month basis in August, according to a Reuters poll, unchanged from the previous month.As the non-farm payrolls numbers failed to convince for a 50 bps cut, markets are now looking to the U.S. inflation data to understand the pace of the Fed’s rate cuts, ING economists said. “It is clear that economic growth is losing momentum, and the markets now seem to be focused on whether the economy will end up with a soft or hard landing.”Investor focus will also be on the highly anticipated televised U.S. Presidential debate later on Tuesday that could weigh heavily on the November election.The dollar was up 0.1% at 143.30 yen, creeping away from the one-month low of 141.75 touched on Friday. Sterling last fetched $1.3061, having touched a near three-week low of $1.3058 earlier in the session.The dollar index, which measures the U.S. currency against six rivals, was at 101.69 after rising 0.4% on Monday. The index fell 0.5% last week as traders’ expectations for rate cuts shifted. Markets are currently fully pricing in a 25 bps cut next week, with a 50 bps cut priced in at 30%, down from as high as 50% on Friday, CME FedWatch tool showed. A weaker-than-expected report could bolster market expectations of a 50 bps cut, but a steady reading may leave the 25 bps versus 50 bps debate unresolved, according to Charu Chanana, head of currency strategy at Saxo. “Overall, the USD is expected to trade sideways to higher, as current Fed easing expectations still appear excessive.”For 2024, traders expect 110 bps of easing, up from around 100 bps from the remaining three meetings.Fed policymakers last week signalled they are ready to kick off a series of rate cuts, noting a cooling in the labour market that could turn more dire in the absence of a policy shift.”This makes it likely that the Fed will opt for a 25bps cut to avoid signalling panic, though they may keep the door open for more aggressive cuts later in the year,” said Saxo’s Chanana.Meanwhile, the euro was little changed at $1.10305 after dropping nearly 0.5% on Monday ahead of the European Central Bank policy meeting on Thursday where the central bank looks all but certain to cut rates again. The spotlight though will be on the messaging from the central bankers. In other currencies, the Australian dollar was 0.13% lower at $0.6652, having touched a more than three-week low of $0.66445. The New Zealand dollar fell 0.19% to $0.6133, staying close to the three-week low it touched on Monday. [AUD/] More

  • in

    South Korea’s financial watchdog chief warns of household debt turning into systemic risk

    “There are concerns that it may turn into a systemic risk, as financial imbalances accumulate and soundness deteriorates should home prices undergo correction,” Lee Bok-hyun said at a meeting with local banks.South Korea has one of the world’s highest household debt-to-economy ratios, with more than 60% of loans tied to mortgages at local banks. More

  • in

    Australian consumers downbeat in Sept amid economic worries

    The Westpac-Melbourne Institute index of consumer sentiment dipped 0.4% in September from August, when it bounced 2.8%. The index reading of 84.6 showed pessimists still far outnumbered optimists.”The pessimism that has dominated for over two years now is still showing no real signs of lifting,” said Westpac Senior Economist Matthew Hassan.”While cost-of-living pressures are becoming a little less intense and fears of further interest rate rises have eased, consumers are becoming more concerned about where the economy may be headed and what this could mean for jobs.”The Reserve Bank of Australia (RBA) is considered unlikely to raise rates again, though neither is it in any rush to cut. It has repeatedly said an easing this year was not on the cards.Wide-scale income tax cuts also came into effect in July, delivering some relief to household budgets.The survey’s measure of family finances compared to a year ago rose 1.2% in September, while finances for the next 12 months ticked up 0.2%.However, that was offset by a 2.6% drop in the index measuring the economic outlook for the next 12 months, while the outlook for the next five years fell 1.0%. Respondents were also more concerned about losing their jobs.Data out last week showed the economy barely grew in the June quarter, while annual growth was the slowest since the pandemic. In a sign tax cuts were not feeding through into spending, the survey’s “time to buy a major household item” index held at 82.6 in September, well below its long-run average of 124.2. More