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Chinese pilots deplane from a JH-7 fighter-bomber in preparation for the 9th China International Aviation and Aerospace Exhibition, known as Airshow China 2012, in Zhuhai city, south Chinas Guangdong province, 10 November 2012.
Hard Numbers: China rattles the saber, Egypt’s inflation falls, Japan props up yen, Spain wins Euros
30: Taiwan’s defense ministry recorded 30 Chinese combat jets and seven warships in the skies and waters around the islandon Saturday and said it was monitoring “waves” of missile tests in Inner Mongolia province. These are the third large-scale maneuvers around Taiwan this week.
27.5: Inflation rates in Egypt have dropped for the fourth straight month to 27.5%, down from an agonizing 38% peak in September. However, economists warn that fuel, medicine, fertilizer, and naturalgas markets remain volatile, and Egypt’s most needy families are smarting from a 300% increase in the price of subsidized bread.
22 billion: A Bloomberg analysis of the Bank of Japan’s accounts found it had likely spent approximately $22 billion propping up the anemic yen, which has lost 11% of its value this year, on Thursday. This would mark the third time the central bank has directly intervened in the currency market — an expensive practice, but Tokyo has few other options while the difference between US and Japanese interest rates remains so vast.
2-1: Spain beat England 2-1 in a thrilling final of the Euro 2024 championship on Sunday, marking their fourth time bringing home the cup. England, the country that invented modern football, has never won. In Miami, Argentina won the Copa America 1-0 against Colombia, but the event was marred by botched security that saw scenes of panic as unticketed fans rushed and overwhelmed barriers.A view of the skyline and buildings at Shinjuku district during sunset in Tokyo, Japan June 20, 2021.
Will Japan raise interest rates … to zero?
Japan’s central bank will debate a landmark interest rate rise next week that could bring interest rates to a staggering 0% after nearly a decade of negative rates.
As the saying goes, there are four types of economies: developed, underdeveloped, Argentina, and Japan. While most countries have been working hard to cool inflation, Japan has struggled with the opposite problem, deflation, since the 1990s. Lower prices at the grocery store are nice, but consumers pay for it on the other end: Businesses see revenues fall, struggle to pay their debts, and lower wages or downsize to break even (mostly the former in Japan). The economy stagnates and ordinary families suffer.
Tokyo started running 0% interest rates in 1999 and negative interest rates in 2016 – in other words, encouraging companies to borrow money and keep cash flowing through the economy. It’s helped drive recent inflation, currently around 2.2%, above the target of 2%.
But is it the right kind of inflation? The Bank of Japan wants to make sure price increases are being driven by consumers spending more, and not costs on the producers’ side, before they hike rates. There are some promising signs, including Japanese trade unions securing the largest pay increase in 30 years from Japan’s largest corporations.
“All eyes are on the annual wage negotiations that will wrap up this week,” says Eurasia Group’s Japan analyst David Boling. “The Bank of Japan wants to see strong wage growth before it scotches the negative interest rate policy.”
We’re watching how cautiously central bankers choose to tack — if the climb to zero looks too steep next week, they can always wait until their April meeting.