BOJ's Tamura Hints at 'Decisive' Rate Hikes Amid Rising Inflation Expectations

Economic

Summary:

Bank of Japan board member Naoki Tamura signaled the potential for aggressive interest rate hikes, even as uncertainties over U.S. tariffs persist....

Inflation Target May Be Met Sooner Than Anticipated

In a speech delivered in Fukushima, BOJ board member Naoki Tamura—considered one of the more hawkish voices within the central bank—stated that Japan's inflation trajectory continues to strengthen, suggesting the BOJ’s 2% price stability target could be met earlier than initially forecast. He emphasized that wage increases and persistent price-setting behaviors by companies are anchoring inflation around the 2% level through fiscal 2027, even in the face of external pressures such as U.S. tariffs.

Tamura warned that inflation expectations, particularly among households and businesses, are approaching or have already reached 2%, which justifies heightened policy vigilance. In his view, these expectations are more relevant than market-based indicators because they directly influence economic behavior and consumption patterns.

Decisive Policy Action on the Table Despite Tariff Headwinds

Although U.S. President Donald Trump's April announcement of sweeping reciprocal tariffs introduced downside risks to Japan’s short-term economic outlook, Tamura argued this should not distract from the BOJ’s primary mandate. He underscored that the central bank must be ready to act “decisively” if upside risks to prices persist or intensify.

This marks a notable shift in tone, as the BOJ has historically maintained a cautious approach to tightening, given Japan's fragile recovery from decades of deflation. Tamura’s comments suggest a willingness to raise rates even amid global uncertainty—so long as domestic inflation appears entrenched.

Balancing Growth and Stability

The BOJ lifted interest rates to 0.5% in January 2025 after ending its ultra-loose monetary stance in 2024. Since then, it has adopted a data-driven approach to further tightening. However, the economic drag from new U.S. tariffs has forced the central bank to revise down growth forecasts, complicating the timing of its next moves.

Tamura’s remarks indicate that monetary tightening may resume if inflation momentum continues, potentially outpacing concerns over short-term growth softness. This could pressure the yen to strengthen and raise borrowing costs across Japanese markets, particularly if other central banks like the Fed remain dovish or on hold.

Inflation Anchors vs. External Headwinds

While Japan remains exposed to global geopolitical and trade risks, the internal dynamics of rising wages, tight labor markets, and anchored inflation expectations are giving the BOJ room to normalize policy faster than previously expected. If Tamura’s stance gains traction within the board, markets may begin pricing in further rate hikes in the second half of 2025.

The key focus will now shift to BOJ’s July meeting and updated projections. If inflation expectations continue rising and tariffs do not severely damage growth, Tamura’s call for decisive action may set the tone for Japan’s next monetary tightening phase.

Source: Reuters

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Gerik

Economic

Germany’s Generosity Under Scrutiny

Germany has long prided itself on being a global leader in development aid, spending nearly €30 billion ($34.45 billion) annually. In 2024, the country allocated 0.67% of its gross national income to official development assistance (ODA), nearly reaching the United Nations target of 0.7%. Yet, critics argue that this generous outlay has not translated into sustainable progress.

Economist and advisor Daniel Stelter, founder of the think tank Beyond the Obvious, argues that the quantity of aid is not the issue—it’s the effectiveness. For decades, Germany has poured money into projects around the world, from gender training in China to governance support in Uganda and large-scale investment in the Palestinian territories. Yet many of these efforts have been undermined by corruption, misallocation, and a lack of measurable success.

Misuse, Inefficiency, and Political Motives

Reports estimate that between 2% and 15% of development aid is lost to corruption, with some sectors such as public construction facing even higher losses. In some cases, as with Palestine, aid was allegedly funneled into building tunnels and weaponry rather than improving civil infrastructure. Even when funds are used transparently, the impact remains unclear, as the German Federal Court of Auditors acknowledged in a recent report.

One systemic problem is that many aid projects align more closely with Germany’s domestic political themes—such as women’s empowerment or gender equality—than with the recipient country’s actual needs. This “donor-driven” approach risks creating solutions in search of problems, rather than targeting structural economic development.

The Rise of the Aid Industry

Germany’s development sector has grown into a self-sustaining industry. Former Development Minister Dirk Niebel referred to it as a “global development industry,” noting that it often benefits itself more than the recipients. With excessive bureaucracy, scattered project management, and little strategic oversight, the system has become more about the process than the outcome.

In contrast to other donor nations that tie aid to clear governance reforms or anti-corruption standards, Germany often avoids attaching conditions to its aid. This lack of accountability has allowed misuse and delayed reforms in many partner countries.

Public Backlash and a Call for Reform

As German taxpayers grow increasingly skeptical—especially amid record-high spending and strained public finances—there is growing political momentum to rethink aid policy. Stelter recommends reducing Germany’s aid commitment to 0.5% of GDP, aligning with the EU average, and reallocating funds with stricter performance benchmarks.

Germany, he argues, should stop cooperating with regimes where corruption and mismanagement are endemic unless rigorous oversight is guaranteed. Development aid should aim to empower recipient countries to stand on their own economically, not foster dependency or political posturing.

The German experience underscores a broader truth in development economics: spending does not guarantee impact. Unless development aid is rooted in strategic goals, measurable success, and local needs—rather than donor interests—it risks becoming an expensive illusion of progress. For Germany, reforming the structure, oversight, and intent of aid delivery may be the only way to ensure that development efforts yield lasting change.

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Gerik

Middle East Situation

Iran Insists on Peaceful Nuclear Intentions

In the wake of a fragile ceasefire with Israel, Iranian President Masoud Pezeshkian declared that the Islamic Republic has no ambition to develop nuclear weapons. During calls with leaders from the UAE and Saudi Arabia, he emphasized Iran’s commitment to its “legitimate rights” and rejected any suggestion of militarized nuclear goals. Pezeshkian stressed that Iran’s nuclear program is solely for civilian energy purposes and rooted in national sovereignty and self-sufficiency.

He added that Iran is eager to cooperate with neighbors and the broader international community, stating that the country's vision is to build a better future for its citizens and regional peace through mutual cooperation.

Israel Warns of Retaliation, Thanks U.S. for Ceasefire Mediation

Israel’s Ambassador to the United Nations, Danny Danon, stated that while it is too early to launch direct diplomatic talks with Iran, such discussions are likely to happen soon. Speaking at the UN headquarters in New York, Danon said Israel is still assessing the impact of recent airstrikes on Iranian nuclear facilities.

He reaffirmed that Israel would respond forcefully to any violations of the ceasefire and expressed appreciation to U.S. President Donald Trump for brokering the truce. Danon also indicated Israel’s readiness to deepen ties with Arab nations, referencing existing normalization deals under the Abraham Accords, although he did not specify new countries currently in dialogue.

Ceasefire Prompts Return to Normalcy

Following the ceasefire, both Iran and Israel began restoring domestic order. According to FlightRadar24, Iran reopened parts of its airspace to international flights in and out of Tehran with prior approval. Israel, meanwhile, lifted nationwide restrictions on public gatherings, religious services, schools, and workplaces. Airports in Ben Gurion and Haifa resumed full operations without capacity limits.

The U.S. State Department confirmed that over 400 American citizens have been evacuated from Israel since June 21 via U.S.-arranged flights. Thousands more have departed through Jordan, Egypt, or maritime evacuations to Cyprus. However, logistical challenges left some flights underbooked due to travelers being unable to reach departure points in time.

In parallel, the U.S. is conducting high-level diplomatic efforts to open Turkmenistan's border to allow American citizens to exit Iran. Secretary of State Marco Rubio secured cooperation from his Turkmen counterpart, with 198 Americans having expressed interest in using the route. Some have already opted for alternative exit paths, primarily through Azerbaijan.

U.S. Domestic Fallout and Debate Over Military Action

Back in Washington, the House of Representatives voted overwhelmingly to shelve a resolution introduced by Democrat Al Green that sought to impeach President Trump for ordering strikes on Iran without congressional approval. Lawmakers from both parties criticized the administration for canceling classified briefings intended to inform Congress about the operations.

At the UN, U.S. Ambassador Dorothy Shea defended the strikes, calling them consistent with the right to collective self-defense. A preliminary U.S. intelligence assessment suggested the strikes only temporarily delayed Iran’s nuclear program, without destroying core infrastructure.

While the ceasefire has restored a degree of calm and opened the door to dialogue, fundamental disagreements remain unresolved. Iran continues to maintain its peaceful nuclear stance, while Israel remains alert to any potential breach. The U.S. is actively managing the diplomatic and humanitarian dimensions of the conflict, but faces political scrutiny at home. Whether this truce can evolve into lasting peace will depend on sustained engagement, mutual restraint, and transparent negotiations.

Risk Warnings and Disclaimers

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Alice Winters

Key Points:

● US-UK negotiations tie tariff exemptions to tax bill approval.

● Involves key government leaders in the UK and US.

● Potential impact on steel and aluminum industries.

Trade Talks Progress Linked to US Tax Bill Approval

Main Content

President Donald Trump's administration conditions trade deals, including potential UK exemptions on steel tariffs, on the approval of upcoming US tax legislation.

The potential trade deal's significance lies in reducing tariffs for UK industries, amidst broader US-EU tariff tensions impacting global trade strategies and market confidence.

The US Government, led by President Donald Trump, is linking future trade deals, including a potential UK exemption from increased steel tariffs, to the passage of a US tax bill. Prime Minister Keir Starmer is engaged in these negotiations, emphasizing the connection of tariff exemptions to the tax bill's approval. Keir Starmer, UK Prime Minister, said,

"We are the only country in the world that isn’t paying the 50% tax on steel and that will be coming down. We are working on it to bring it down to zero, that is going to happen.”

Immediate effects on the UK's steel industry could be significant, as reduced tariffs may enhance export competitiveness. Gareth Stace from U.K. Steel commented,

"Trump’s decision to pause higher tariffs was a 'welcome pause,' but ‘uncertainty was making American customers ‘dubious over whether they should even risk making U.K. orders.’"

Politically, these interconnected negotiations are a strategic move by the US to push congressional tax agendas. Socially, aligning trade agreements with legislative actions reflects a transnational strategy impacting national economies.

Historically, such linkages between trade deals and tax legislation have shaped international economic policies. Potential outcomes may include reshaped trade dynamics, affecting numerous sectors. Global markets may see shifts in risk sentiment based on the tax bill's passage, influencing broader economic stability.

Source: CryptoSlate

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Oliver Scott

Key Takeaways

● Federal Reserve Chair Jerome Powell defended the central bank's high interest rate policy Tuesday in Congress.

● Powell has resisted President Donald Trump's demands to cut interest rates and has said Trump's tariffs risk pushing up inflation.

● Powell said the Fed needs to know what Trump's final tariff policy will be and how it will impact the economy before committing to cutting borrowing costs.

If you're waiting for lower borrowing costs on all kinds of debt, they may not be coming any time soon.Federal Reserve Chair Jerome Powell told Congress Tuesday that the central bank can continue its waiting game when it comes to lowering the key fed funds rate, which influences interest rates on credit cards, car loans, and other debt. The Fed has been holding the rate at a higher-than-usual level all year to snuff out the last of the post-pandemic inflation flare-up.

The Fed will continue to hold rates flat until Fed officials have a better idea of what President Donald Trump's tariff policy will be, and how the tariffs will affect consumer prices, Powell said in prepared remarks, reiterating the stance he outlined last week when the Fed's policy committee voted for the fourth time this year to keep the fed funds rate unchanged.Powell's testimony to the House Finance Committee on the Fed's semi-annual monetary report to Congress was the latest action in an increasingly heated conflict between Powell and Trump over interest rates.

Trump has repeatedly demanded the Fed cut rates sharply, pointing to recent economic data showing that inflation has been relatively tame in recent months.

However, the Federal Reserve is not under presidential control, and Fed officials have been reluctant to cut interest rates despite Trump's insult-filled threats on social media and in interviews.

Lower rates could boost the economy by encouraging more borrowing and help the federal budget by cutting the amount of interest the government pays on its national debt. However, Powell and many professional forecasters expect Trump's tariffs to push up consumer prices later in the year, in a potential setback in the Fed's battle against inflation.

Tariffs Loom Over Outlook

Powell's testimony highlighted the fact that Trump's trade policy hasn't settled on long-term tariff levels, clouding the economic outlook. Several tariff-related deadlines are approaching, including Trump's July 9 deadline for trading partners to negotiate lower trade barriers to avoid the double-digit "reciprocal" tariffs he announced on Liberation Day."The effects of tariffs will depend, among other things, on their ultimate level," Powell said in prepared testimony. "Expectations of that level, and thus of the related economic effects, reached a peak in April and have since declined. Even so, increases in tariffs this year are likely to push up prices and weigh on economic activity."

Source: Yahoo Finance

Risk Warnings and Disclaimers

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Henry Thompson

The European Central Bank (ECB) is well-placed to tackle “exceptionally high” economic and political uncertainty, president Christine Lagarde said.

Addressing European lawmakers in Brussels, Lagarde said inflation is set to stabilise around the 2% goal and risks to economic growth remain tilted to the downside.

“At the current interest-rate levels, we believe that we are in a good position to navigate the uncertain circumstances,” she said on Monday. “Especially in the current conditions of exceptional uncertainty, we will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance.”The comments reaffirm Lagarde’s position after a weekend in which the US launched strikes on Iran’s nuclear infrastructure — sending oil prices higher and throwing the global economic outlook into question.

After eight rate cuts in a year, ECB officials are weighing whether to lower borrowing costs further. While Lagarde said in early June that the easing campaign is nearing an end, some policymakers reckon more may be needed to support the 20-nation economy.

Surprisingly strong expansion of 0.6% at the start of 2025 was partly down to exporters front-running US tariffs. Data earlier on Monday showed the eurozone’s private sector barely grew this month as trade and geopolitical uncertainty keeps companies from from investing and households from spending.

Investors and analysts reckon the key deposit rate will be left at 2% next month, but they’re leaning toward one more quarter-point cut before year-end.

“We are not pre-committing to a particular rate path,” Lagarde said.

Source: Theedgemarkets

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Nathaniel Wright

The U.S. Federal Reserve has time to study the effect of rising import tariffs on prices and economic growth before deciding on further interest rate cuts, Kansas City Fed President Jeff Schmid said on Tuesday.

"The current posture of monetary policy, which has been characterized as 'wait-and-see,' is appropriate," Schmid said in remarks prepared for delivery to an agricultural summit in Nebraska.

"The resilience of the economy gives us the time to observe how prices and the economy develop," before changing the benchmark policy rate, said Schmid, a voter this year on the Fed's rate-setting Federal Open Market Committee, which next meets on July 29-30.

The Fed has held its benchmark rate steady in a range from 4.25% to 4.5% since December, despite calls from President Donald Trump for rate cuts.

Fed officials in recent projections anticipate two rate cuts by the end of the year, but have highlighted uncertainty around trade policy and in general expect to see slower growth, higher unemployment and higher inflation in coming months.

Inflation remains above the Fed's 2% target, and "contacts almost uniformly expect increased tariffs to push up prices and to weigh on activity," Schmid said, adding it seemed "likely" the Fed's inflation and job goals "will come into conflict."

But "there is far less clarity on when and by how much," said Schmid, an argument for leaving interest rates unchanged until the economy's direction is clearer.