Japan's Core Inflation Slows In June But Stays Above Central Bank Target

Economic

Summary:

Japan's core inflation slowed in June due to temporary cuts in utility bills but stayed above the central bank's 2% target.

Japan's core inflation slowed in June due to temporary cuts in utility bills but stayed above the central bank's 2% target, highlighting lingering price pressures that will keep alive market expectations for further interest rate rises.

The data will be among factors the Bank of Japan (BOJ) will scrutinise at its next policy meeting on July 30-31, when the board is expected to revise up its inflation forecast in a quarterly review of its projections.

The nationwide core consumer price index (CPI), which excludes volatile fresh food costs, rose 3.3% in June from a year earlier, government data showed on Friday, matching a median market forecast.

The rise was smaller than the 3.7% increase in May due largely to the resumption of fuel subsidies aimed at helping households weather the pain from higher living costs.

A separate index that strips away both fresh food and fuel costs - closely watched by the BOJ as a measure of domestic demand-driven prices - rose 3.4% in June from a year earlier after increasing 3.3% in May.

The BOJ exited a decade-long, radical stimulus programme last year and raised short-term interest rates to 0.5% in January on the view that Japan was on the cusp of sustainably hitting its 2% inflation target.

While the central bank has signalled its readiness to raise rates further, the economic impact of higher U.S. tariffs forced it to cut its growth forecasts in May and complicated decisions around the timing of the next rate increase.

Japan's economy shrank in the first quarter as rising living costs hurt consumption. Exports fell in May for the first time in eight months, stoking recession fears.

A slight majority of economists in a June Reuters poll expected the BOJ to forgo another rate hike this year.

Source: Theedgemarkets

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Energy

Middle East Situation

France, Britain and Germany told Iran on Thursday that they wanted Tehran to resume diplomacy immediately over its nuclear programme and warned if there were no concrete steps by the end of the summer they would restore U.N. sanctions.

The foreign ministers of the so-called E3, along with the European Union's foreign policy chief, held their first call with Iran's Foreign Minister Abbas Araqchi since Israel and the United States carried out air strikes in mid-June on Iran's nuclear programme.

Speaking after the call, a French diplomatic source said the ministers had called on Iran to resume diplomatic efforts immediately to reach a "verifiable and lasting" nuclear deal.

The three countries, along with China and Russia, are the remaining parties to a 2015 deal with Iran that lifted sanctions on the country in return for restrictions on its nuclear programme.

A U.N. Security Council resolution which enshrines the deal expires on October 18 and under its terms U.N. sanctions can be re-imposed beforehand. The process would take about 30 days.

The Europeans have repeatedly warned that unless there is a new nuclear accord they will launch the "snapback mechanism", which would restore all previous U.N. sanctions on Iran if it is found to be in violation of the agreement's terms.

"The ministers also reiterated their determination to use the so-called 'snapback' mechanism in the absence of concrete progress toward such an agreement by the end of the summer," the diplomatic source said.

The source did not elaborate what concrete progress would entail.

Since the air strikes, inspectors from the U.N. atomic watchdog have left Iran. While Iran has suggested it is open to diplomacy, there are no indications a sixth round of nuclear talks between Washington and Tehran will resume imminently.

Diplomats say that even if they were to resume talks, reaching a comprehensive accord before the end of August - the final deadline the Europeans have given - seems unrealistic, especially without inspectors on the ground to assess Iran's remaining nuclear programme.

Two European diplomats said they hoped to coordinate strategy with the United States in the coming days with a view to possibly holding talks with Iran soon.

Source: Reuters

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Daniel Carter

Central Bank

Economic

“With inflation near target and the upside risks to inflation limited, we should not wait until the labor market deteriorates before we cut the policy rate,” he said Thursday in the text of a speech prepared for an event hosted by the Money Marketeers in New York. “I believe it makes sense to cut the FOMC's policy rate by 25 basis points two weeks from now.”

Fed officials will gather July 29-30 in Washington.

Waller's remarks set him apart from most of his fellow policymakers, who have characterized the employment landscape as still solid.

“Looking across the soft and hard data, I get a picture of a labor market on the edge,” he said.

Waller is one of two Fed officials, alongside Vice Chair for Supervision Michelle Bowman, who had already signaled their openness to cutting rates as early as this month.

He had previously differentiated himself from other officials by saying he believed the impact of tariffs on inflation would be temporary, and he repeated that view Thursday.

“Policy should look through tariff effects and focus on underlying inflation, which seems to be close to the FOMC's 2% goal,” he said, referring to the Fed's rate-setting panel, the Federal Open Market Committee.

Underlying inflation in the US rose by less than expected in June for a fifth straight month, though the latest data also showed an aggressive set of tariffs announced by President Donald Trump in April were beginning to lift prices for some goods.

Waller said inflation expectations remain anchored and wage growth isn't accelerating, easing concerns of a persistent inflation effect.

He said the risk of a weaker jobs market is “greater and sufficient” to cut interest rates.

“The economy is still growing, but its momentum has slowed significantly, and the risks to the FOMC's employment mandate have increased,” he added.

He said he expects the economy to “remain soft” for the rest of 2025 after growing at about a 1% pace in the first half of the year.

Several other policymakers, including Governor Adriana Kugler and New York Fed President John Williams, have expressed more concern about the potential impact of tariffs on inflation and have said they'd prefer to wait longer before lowering rates.

Investors expect the central bank to hold interest rates steady when they gather later this month, and see slightly better than even odds of a rate cut in September, according to futures contracts.

Waller has been among the names touted to succeed Jerome Powell at the head of the central bank when his term as chair expires in May. Trump, who will nominate Powell's successor, has been demanding lower rates from the Fed.

Source: Bloomberg Europe

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Central Bank

Economic

Federal Reserve Governor Christopher Waller said on Thursday he continues to believe that the U.S. central bank should cut its interest rate target at the end of the month amid mounting risks to the economy and the strong likelihood that tariff-induced inflation will not drive a persistent rise in price pressures.

“It makes sense to cut the FOMC’s policy rate by 25 basis points two weeks from now,” Waller said in the text of a speech prepared for delivery before a gathering of the Money Marketeers of New York University.

“I see the hard and soft data on economic activity and the labor market as consistent: The economy is still growing, but its momentum has slowed significantly, and the risks to the (Federal Open Market Committee’s) employment mandate have increased,” Waller said, and that justifies cutting rates.

He added that all the evidence suggests the Fed can look through the impact of tariffs and focus on other issues affecting the economy.

A July easing could also be followed by more rate cuts, as the Fed no longer needs a monetary policy stance designed to slow the economy, Waller said, noting the Fed’s interest rate target is well above the 3% officials consider its long-run level.

If underlying inflation remains in check and expectations of future price increases stay contained amid slow growth, “I would support further 25 basis point cuts to move monetary policy toward neutral,” he said.

Waller warned that not easing this month could create issues down the road.

“If we cut our target range in July and subsequent employment and inflation data point toward fewer cuts, we would have the option of holding policy steady for one or more meetings,” Waller said.

But if economic weakness accelerated, “waiting until September or even later in the year would risk us falling behind the curve of appropriate policy,” the official said.

Waller is one of the last central bank officials to weigh in on the economy as policy makers go into their customary quiet period for the rate-setting FOMC meeting scheduled for July 29-30.

Most central bank officials who have spoken have signaled no interest in changing the Fed’s 4.25% to 4.5% interest rate target now as inflation remains above target, the economy is generally faring well and it’s unclear how much upward price pressure President Donald Trump’s trade tariffs will create.

Financial markets are currently pricing in a September starting date for rate cuts and Fed officials penciled in two easings at their June meeting. Waller is one of two Fed officials who have expressed interest in cutting rates this month, reckoning the import tax surge will be a one-time event that policy makers can look through.

Waller stressed in recent remarks his interest in cutting rates soon was “not political.” Waller is widely viewed as in the running to succeed Fed Chairman Jerome Powell. The Fed leader has been under regular attack from Trump, who believes the central bank should cut rates aggressively.

On Wednesday reports indicated the president was close to firing Powell amid a lack of clarity over whether the action would be legal, with Trump later denying those reports.

In his remarks, Waller noted data points to a job market that is “on the edge” of trouble. At the same time, he said that if 10% tariffs were sustained, that would add only 0.75% to 1% to inflation.

Source: Reuters

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Manuel

Economic

China–U.S. Trade War

The US Commerce Department imposed preliminary anti-dumping duties of 93.5% on Chinese imports of graphite, a key battery component, after concluding the materials had been unfairly subsidized.

A trade association representing US graphite producers in December filed petitions with two federal agencies, asking for investigations into whether Chinese companies were violating anti-dumping laws. The new duties will add to existing rates making the effective tariff 160%, according to American Active Anode Material Producers, the trade group that filed the complaint.

The anti-dumping duty on graphite is set to increase tensions along the global electric-vehicle supply chain that’s already facing Beijing’s export controls of some critical minerals and battery technology. Battery supplier shares slipped while North American graphite producers soared.

“Commerce’s determination proves that China is selling AAM at less than fair value into the domestic market,” Erik Olson, a spokesperson for the the anode producers trade group, said in a statement.

The tariff would be a blow to battery manufacturers, said Sam Adham, head of battery materials at consultancy CRU Group. A 160% tariff equates to $7 per kilowatt-hour added cost to an average EV battery cell, or one fifth of the battery manufacturing tax credits that originated in the Inflation Reduction Act and survived President Trump’s budget bill, he said.

“That basically wipes out profits for one or two entire quarters for the Korean battery makers,” Adham said.

Tesla Inc. and its key battery supplier, Japan’s Panasonic Inc., were among companies pushing to block the new tariffs, arguing that they rely on Chinese graphite imports because the domestic industry hasn’t developed enough to meet the quality standards and volume that the carmaker requires. Tesla shares fell as much as 0.7% Thursday.

Graphite is a key raw material used to make anodes of the batteries, and nearly 180,000 metric tons of graphite products were imported into the US last year, with about two-thirds of these deliveries coming from China, according to BloombergNEF.

China dominates the processing capacity of graphite, with the International Energy Agency calling the material one of the most exposed to potential supply risks and “requiring urgent efforts for diversification,” according to a report in May.

Graphite is expected to remain the most common anode material for all types of lithium-ion batteries in the medium term, according to the IEA, with silicon only expected to begin eating into its market share from 2030.

The Commerce Department issued the preliminary determination affirming the anti-dumping duties in a document Thursday, and said the final determination should be announced by Dec. 5.

The tariff ruling “provides the policy clarity and market signals needed to accelerate domestic graphite production,” said Jon Jacobs, chief commercial officer at Westwater Resources Inc., which is building a graphite plant in Alabama. Westwater, which has agreements with Jeep-owner Stellantis NV and South Korea’s SK On Co., currently has a pilot line producing 12,500 metric tons of graphite a year. It plans to expand capacity to 50,000 tons annually by 2028, Jacobs said.

Westwater rose 15% on Thursday. Canadian graphite firms Nouveau Monde Graphite Inc. and Northern Graphite Corp. also surged on the tariff news.

The anti-dumping rate determination “could impact the cost structure for battery suppliers” like Fluence Energy Inc. and Enphase Energy Inc., analysts at Roth Capital Partners said in a note Wednesday. Fluence shares closed lower by 0.4% while Enphase dropped 0.7%.

Additional duties on batteries will add to pressures facing the renewable industry. While energy storage retained key tax incentives in President Donald Trump’s budget bill, Treasury Department rules restricting the use of Chinese cells complicates compliance for many developers. Supply chain risks and costs will slow the pace of storage growth on the US grid, according to Wood Mackenzie.

Source: Bloomberg

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Cryptocurrency

Political

The U.S. House of Representatives on Thursday passed a bill to create a regulatory framework for U.S.-dollar-pegged cryptocurrency tokens known as stablecoins, sending the bill to President Donald Trump, who is expected to sign it into law.

The vote marks a watershed moment for the digital asset industry, which has been pushing for federal legislation for years and poured money into last year's elections in order to promote pro-crypto candidates.

Shares of crypto-related companies were mostly higher after passage of the bill, dubbed the Genius Act, that would expand the Commodity Futures Trading Commission's oversight of the industry.

Bitcoin, the largest crypto currency, was down 0.54% at $119,298.87, trading near a record high reached earlier this week. Rival ethereum rose 1.42% to $3,429.47.

COMMENTS

ANDREW FORSON, PRESIDENT, DEFI TECHNOLOGIES (by email):

“It signals the start of a new era for digital assets and public companies. We’re seeing an unprecedented wave of corporations embracing digital assets, diversifying beyond Bitcoin into Ethereum, Solana, and more. But for many institutions, education gaps and regulatory uncertainty have been real barriers.”

“By establishing clear, actionable rules for stablecoins and digital assets, the Genius Act unlocks broader adoption by traditional institutions and brings much-needed trust and transparency to the sector. This paves the way for compliant, bank-backed digital money and new solutions for corporate treasuries, helping to bridge the gap between innovation and investor protection.”

DANTE DISPARTE, CHIEF STRATEGY OFFICER, CIRCLE, NEW YORK:

“The House vote to clear the GENIUS Act for the President’s signature is a defining moment for the future of money and the internet financial system. It signals strong bipartisan support for responsible innovation and sends a clear message that the U.S. will lead in the regulation of dollar-backed payment stablecoins. We commend Congressional leaders for delivering a regulatory foundation that puts consumer protection, financial integrity, and U.S. competitiveness at the forefront.”

SUMMER MERSINGER, CEO, BLOCKCHAIN ASSOCIATION (press release):

“The bipartisan passage of the GENIUS Act is a watershed moment for digital assets in the United States. For the first time, Congress has moved comprehensive legislation that provides enforceable, tailored rules for stablecoins — a foundational technology for the future of finance. This marks real momentum toward regulatory clarity that protects consumers, supports innovation, and reinforces the strength of the U.S. dollar in the digital economy. We now call on President Trump to swiftly sign the bill into law, ensuring that the United States continues to lead in shaping the global standards for digital assets.”

MICHAEL JAMES, EQUITY SALES TRADER, ROSENBLATT SECURITIES, LOS ANGELES:

"Crypto stocks have been strong the past two days in expectation that the bill, which didn't pass on Tuesday, would eventually get the necessary votes to pass, which it has done this afternoon. That is part of the reason that crypto stocks have been outperformers in the last two days."

Source: Reuters

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Commodity

Oil rose amid signs of tighter supplies in the near term and on stronger demand signals in the US.

West Texas Intermediate crude rose 1.7% to settle above $67 a barrel, snapping a three-day losing streak. Equity markets advanced — typically a bullish indicator for commodities — after better-than-expected US economic data allayed some fears of oil demand deterioration. Oil Rises on Signs of Tight Supply, Robust Demand in Near Term_1

Oil Rises on Signs of Tight Supply, Robust Demand in Near Term_1

Prices also found support from indications of a tighter near-term physical crude market on Thursday. US crude inventories slid last week and Iraq has lost about 200,000 barrels a day of oil production due to drone attacks on several fields in Kurdistan. Chevron Corp. said it was on the cusp of reaching a production plateau in the largest US oil field.

“While inventories globally have built very significantly, stocks in the pricing centres – especially in the US – are still quite low,” Daan Struyven, head of oil research at Goldman Sachs, said on Bloomberg Television. Market focus has shifted to “downside risks to supply,” he said.

Limiting the rally, Iraq approved a plan for its semi-autonomous Kurdish region to resume oil exports that have been halted since March 2023. The Kurdistan Regional Government will supply Iraq’s state oil marketer SOMO at least 230,000 barrels a day for export, the federal government said.

Supply concerns were also reflected in the forward curve for crude. It is currently trading in backwardation, where a premium is paid for sooner delivery over longer-dated contracts.