Japan's New Enemy in Fight to Lure Immigrant Workers: The Tumbling Yen

Economic

Summary:

Visa rules eased, but currency weakness tarnishes Japan's appeal for overseas hires.

At a nearly 40-year low versus the dollar, the yen and its sharp weakening are exercising the minds of Japanese government officials and central bankers racing to come up with an urgent, cogent policy response.

Households in Japan face a 90,000 yen ($570) jump in annual expenses from higher prices for food and energy imports, one estimate shows, as the currency's skid drains purchasing power.

In the real-world economy, from the shop floor to the C-suite, Japan Inc. is wrestling with one of the starkest manifestations of enyasu, or a weak yen: how to hire and retain the overseas workers and executive talent it needs amid a national labor shortage. Even as Japan has moved to ease work visa restrictions, the currency's slide means immigrant workers can make much more money in other countries to send home in the form of remittances.

For some companies, the response is as obvious as it is painful -- hike wages to attract overseas workers and pass the cost on to consumers, fueling inflation pressures.

In one case last year, Japanese housekeeping service provider Bears, which relies partly on young, qualified workers from the Philippines, raised its service fees for the first time in 18 years, by up to 20%. In the previous fiscal year, Bears' revenue topped 6 billion yen.

In low-margin, competitive businesses, however, as well as at smaller outfits, big wage increases are not a viable long-term option, even as newly introduced restrictions on working time -- Japan's so-called '2024 problem' -- make labor harder to source, both domestically and internationally. Japan's New Enemy in Fight to Lure Immigrant Workers: The Tumbling Yen_1

Japan's New Enemy in Fight to Lure Immigrant Workers: The Tumbling Yen_1

"My salary has remained the same," said Spandan Sunar, a 27-year-old Nepalese citizen. Sunar works at a transportation company in Chiba, east of Tokyo, as a contractor, and used to send about 50,000 yen per month back to his family in Nepal when he first arrived in 2018.

To send the equivalent amount now would cost Sunar 80,000 yen a month, extra money he can't afford. That means sending less back to Nepal. And while he used to save 30,000 yen per month, he has had to reduce that amount amid rising cost of living pressures.

"Foreigners working in Japan are struggling with low-income problems," he said.

Sunar wistfully compared his situation to Nepalese friends earning higher salaries in the U.S. and Australia, noting that some considered moving to Japan before opting to go elsewhere. But for Sunar, abandoning his current location would mean also jettisoning considerable effort spent learning Japanese and navigating the country's bureaucracy.

According to a 2024 survey by human resource company Mynavi Global, 91% of foreign students and workers living in Japan said they wanted to remain in the country. But that represented a 5.8 percentage point drop from 2022. The top reason cited for not wanting to work in the country? The weak yen.

Even minus the currency factor, Japanese wage levels have long been modest, depressed by decades of deflation and low growth after the bursting of Japan's asset bubble in the early 1990s.

Japan's average monthly earnings were $2,800, way lower than $4,600 in the U.S. or $3,483 in Singapore, according to International Labor Organization numbers for 2021, the most recent year for which data was available.

The yen's dramatically rapid slump has made matters worse. The currency has skidded from about 130 yen to the dollar at the beginning of 2023 to beyond 160 yen this month.

Some companies have touted more flexible working conditions as a strategy to recruit overseas hires. Japanese payment service PayPay has been offering remote working options to attract talented engineers.

"You can work from anywhere in Japan, including resorts, with our fully remote working style," a spokesperson told Nikkei Asia. The company said it now has engineers working remotely from tourist destinations all over Japan, and "we have not seen any negative impact on hiring due to the weakening yen."

Still, that potential solution might not be suitable for less skilled jobs.

"Relatively low-wage workers, such as technical intern trainees, workers in service and manufacturing industries are the most affected by the weak yen," said Hiroo Yamanouchi, a partner and the head of career consulting at Mercer Japan.

Yamanouchi said that one implication of the yen's weakening has been that the range of countries where lower-skilled workers are coming from is becoming limited to low-wage countries such as Indonesia, Myanmar, Cambodia and Bangladesh.

In Vietnam, for example, there has been a decline in the number of people willing to come to Japan to earn money as its economy has developed, according to Yamanouchi.

At household services provider Bears, some staff from the Philippines have been cutting back on their living and leisure expenses, a company representative told Nikkei Asia.

While no existing employees have left for other countries because of the exchange rate, the representative said, the weaker yen "cannot be a positive thing for hiring. ... It is scary what kind of ripple effect there would be if the yen continues to depreciate further."

To be sure, as Shinji Yamazaki at human resource company Career-tasu explained, non-Japanese students who come to Japan because they like the country tend to want to work and stay, regardless of the opportunities for higher-paid jobs abroad.

Japanese is unique compared to other languages, and "has an effect of making people less likely to leave Japan once they have mastered it."

But without wage hikes, "if the weak yen trend continues, it could lead to declines in the number of people who want to come to Japan in the future," said Yamazaki, who is deputy director of Career-tatsu's global business development department. Japan's New Enemy in Fight to Lure Immigrant Workers: The Tumbling Yen_2

Japan's New Enemy in Fight to Lure Immigrant Workers: The Tumbling Yen_2

One sector where Japanese companies are particularly exposed to global competition in luring talent is information technology, as businesses confront skills gaps in their digital transformation efforts.

According to human resources company Human Resocia, Japan's IT engineer remuneration in 2023 declined by 5.9% in U.S. dollar terms compared to the previous year, while it increased by 0.4% in yen. The average annual pay level was $36,061, a little more than a third of the $92,378 it was in the U.S. according to calculations based on average exchange rates between January and September 2023.

For white-collar jobs, Kevin Naylor, chief executive of Future Manager World USA and former director at talent search agency en world Japan, said companies in Japan have tended to prefer to hire native citizens or foreigners already in Japan.

Still, "the areas where there have been more opportunities to hire non-Japanese have been in technology," Naylor said.

Luke Furnival, who covers the technology market as associate director of recruitment company Robert Walters Japan, said, "There is usually a significant gap between what [candidates] expect and what they can make" in Japan. "Over the last couple of years, we've had to really focus on managing that expectation more than previous years."

According to Furnival, some companies have adjusted their strategies on securing the necessary workforce. "A lot of clients opt for more outsourcing models," he said, in which they contract with global vendors who offer digital skills either offshore or locally.

As the yen weakens, it is becoming more costly to hire from overseas. On June 27, it took almost 161 yen to buy a dollar.

Costs are also rising for companies looking to fill their top management positions.

The cost of hiring executives "usually becomes twice or three times higher than just hiring the local leaders or promoting [employees from] within," according to Junichi Takinami, country managing director of Korn Ferry Japan.

Speaking on condition of anonymity, citing the sensitivity of the matter, one recruitment firm representative told Nikkei Asia that one client, a major manufacturer, in the last six months stopped looking to fill executive positions with candidates outside Japan. "They just cannot compete," he said.

When companies do try to bring in international C-suite executives, they generally have to offer the same or higher compensation than the candidate already gets in dollar terms. "Cost surely is higher due to the weak yen for companies," said Kenichi Iwata, Tokyo Office Leader of headhunting outfit Egon Zehnder.

In some cases, companies have no alternative but to look abroad to fill talent gaps in Japan.

"If [companies] are sourcing [talent from abroad] to solve an issue, a skill set or a product capability that the company doesn't have that they must have, then compensation is secondary," suggested Peter Rackowe, Korn Ferry Japan's head of executive and professional search. Japan's New Enemy in Fight to Lure Immigrant Workers: The Tumbling Yen_3

Japan's New Enemy in Fight to Lure Immigrant Workers: The Tumbling Yen_3

Rackowe referred to offshore wind as an area where Japanese companies have been searching abroad for executives and specialists.

"There is an awareness by [Japanese] companies that there is a certain skill set that they need to have, that Japan may not have as much of" compared to other places such as Europe, he said.

Meanwhile, the weak yen's impact isn't restricted to hiring overseas.

While there isn't yet a widespread "brain drain" of Japanese talent away from its home country, according to most of the human resource companies contacted by Nikkei Asia, there are some early indications of movement.

"We are seeing more Japanese senior executives wanting to relocate to Singapore, Malaysia and Vietnam," said Christopher Delcourt, Japan country manager of recruitment company Hyre.

Relocating overseas for Japanese high-earning nationals has always been attractive in terms of countries applying lower income tax.

"Now with the weak yen, it is an extra element that they are taking into consideration," since they can earn more in U.S. dollar terms, Delcourt said.

While weak yen pressures mount, Nepalese contractor Sunar is in Japan for the long haul, he said, aiming to work and save money for another 10 years before returning to Nepal to build his own store.

But a Nepalese friend of his has already quit Japan to try his luck making more money in the United States.

"I believe that more foreign workers, especially from developing countries, will move out of Japan to countries with higher incomes such as ones in Europe and the U.S.," Sunar said.

Source: NikkeiAsia

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SAXO

Economic

Forex

USDJPY could be poised for another run higher. Below are some of the key reasons that support the case for further yen weakness:

Market Intervention Impact Fading:While recent intervention by Japanese authorities provided temporary support for the yen, its effects are waning. Without coordinated efforts and fundamental shifts, interventions are unlikely to sustain a stronger yen.

Fed Policy Outlook:Fed Chair Powell has so far avoided signalling a September rate cut and remains in a data-dependent mode. Other Fed speakers this week may follow his lead given they still have a lot more data to chew on before a potential rate cut in September. This outlook means that another slide in US yields like the one that was seen last week may be avoided for now, contributing to the upward momentum in USDJPY.

US Dollar Strength from Trump Trade:The increasing probability of a Trump 2.0 presidency has been supporting the US dollar. Market participants anticipate that a second term for Trump could lead to aggressive fiscal policies and trade measures, driving demand for the greenback.

Political Uncertainty and Safe Haven Demand:The geopolitical and political landscape, including uncertainties surrounding US politics, often leads to safe-haven demand for the US dollar, further boosting USDJPY.

Higher US Yields: US yields remain elevated, especially at the long end of the curve, due to market expectations of sustained economic strength and potential inflationary pressures from tariff measures if Trump is elected as the president again in November. This means US yields continue to stay higher, limiting room for yen strength.

BOJ's Underwhelming Rate Hikes:There is recent chatter that the Bank of Japan may delay its tightening because of the intervention-driven yen strength seen last week. The BOJ has a tendency to surprise dovish and could continue to postpone its rate hikes or quantitative tightening measures. Even if some normalization comes through at the July meeting, any adjustments to rates is expected to be minimal and accompanied with a dovish narrative. This slow pace of BOJ’s tightening will do little to narrow the yield gap with the US, keeping the yen under pressure.

In summary, a combination of strong US economic fundamentals, a cautious BOJ, and geopolitical dynamics is likely to drive the USDJPY pair higher in the near term. Traders should closely monitor upcoming economic data and policy statements from both the Fed and BOJ for further insights into the direction of USDJPY.

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Warren Takunda

Economic

Central Bank

Sentiment among companies in Canada remains more pessimistic than average in April-June after improving slightly in the previous two quarters as continued weak demand and high borrowing costs have discouraged capacity expansion and also led to easing labor conditions and lower near-term inflation expectations among firms and consumers, the Bank of Canada’s quarterly Business Outlook Survey (BOS) released Monday showed.

Looking at near-term inflation expectations among firms, the bank said they are now in its inflation-control range of between 1% to 3%.

Ahead of their next policy rate announcement on July 24, the bank’s policymakers will monitor more indicators, particularly the June CPI data on Tuesday, to discuss whether economic conditions will allow the bank to lower interest rates further soon, after conducting its first rate since March 2020 in June. Economists expect the bank will have to make a tough decision, either to trim its policy rate next week or wait until September.

The business outlook indicator fell to minus 2.90 in the second quarter after rising to minus 2.39 in the first quarter of 2024 from minus 3.06 in the fourth quarter and followed minus 3.44 in the third quarter, minus 2.25 in the second quarter of 2023. Excluding the pandemic period, the third-quarter 2023 reading of minus 3.44 is the worst since minus 4.97 in the second quarter of 2009.

The BOS indicator has declined from its record high of 5.63 hit in the fourth quarter of 2021. The indicator plunged to minus 5.99 in April-June 2020 from minus 0.57 in the previous quarter during the first wave of the pandemic. The entire time series of the indicator is revised after every release.

“Firms’ sales outlooks are mostly unchanged from last quarter and remain more pessimistic than average,” the bank said. “Businesses tied to discretionary spending reported particularly weak sales expectations, while those tied to essential spending see population growth continuing to benefit their sales.”

Investment spending plans also “remain below average” in the face of weak demand, elevated interest rates, uncertainty about the business environment and the high cost of machinery and equipment.

As seen in jobs data, employment creation is not catching up with rapid population growth under Canada’s strong immigration policy. The share of firms reporting labour shortages is “near survey lows” but the bank said “few firms plan to reduce headcounts.”

Businesses expect the growth of their input prices and selling prices to slow, suggesting that inflation will continue to decline over the coming year, the survey showed. Most firms that made abnormally large price increases in the past 12 months do not plan to do so again in the coming year.

“Firms’ expectations for inflation fell in June and are now in the Bank of Canada’s inflation-control range (between 1% to 3%),” the bank said. In the Business Outlook Survey, firms’ expectations for inflation over the next two years are roughly unchanged in the second quarter, at 3.0%, but recent Business Leaders’ Pulse results show monthly expectations for inflation one year ahead fell sharply in June to 2.9% after rising to 3.3% in April from March’s 3.1% and stayed at 3.3% in May.

“In contrast, fiscal policy and housing continue to be seen as fuelling inflation and driving some firms’ uncertainty about when inflation will return to the bank’s 2% target,” the bank said, adding that most respondents expect inflation to return close to the target within two to three years.

In the latest survey, firms’ inflation expectations over the next two years are unchanged at 3.0% in the April-June quarter after easing slightly to 3.0% in January-March form 3.2% in October-December, 3.3% in July-September and 3.5% in April-June 2023. It remains above the bank’s 2% target.

The share of firms expecting inflation to be above 3% over the next two years was also little changed at 41% in the second quarter after falling to 40% in the first quarter survey and edging up to 54% in the fourth quarter from 53% in the third quarter while that of firms foreseeing inflation to be between 2% and 3% fell to 48% after rising sharply to 54% in the first quarter and being unchanged at 39% in the fourth quarter survey.

Consumer inflation is forecast to ease only slightly to 2.8% in June after ticking up to 2.9% in May from a three-year low of 2.7% in April. Until the May report, the bank’s efforts to tame inflation were making a steady progress, bringing it down from last summer’s peak of 4% and the recent high of 8.1% hit in June 2022.

Jobs data released this month showed employment fell 1,400 in June, coming in much weaker than the consensus call of a 21,300 gain and following a 26,7000 rise in May while the unemployment rate rose to 6.4% from 6.2%.

The latest GDP data showed the economy rose 0.3% on the month in April after being flat in March, making a solid start to the April-June quarter. Statistics Canada’s early estimate for May is a 0.1% gain. In the first quarter, the real gross domestic product grew 0.4% on quarter, or an annualized 1.7%, below the consensus forecast of a 2.3% rise and the BoC’s April projection of 2.8%. The annualized growth rate in the previous quarter was revised down to a slight 0.1% from 1.0%.

The survey was conducted in-person, video and phone interviews from May 9 to May 29 before the bank’s June 5 meeting at which it decided to lower its policy interest rate — the target for overnight lending rates — by 25 basis points to 4.75%, as widely expected, to help reduce high mortgage rates and other borrowing costs in light of easing inflation and slower economic growth that is allowing the key rate to be “not as restrictive” as it has been.

Consumers’ Near-Term Inflation Expectations Also Ease in Q2 Survey

In its quarterly survey of consumer expectations for April-June, the Bank of Canada said the inflation outlook remains well above the bank’s 2% target but also pointed to a lower outlook in the near term.

“Consumers’ perceptions of inflation are unchanged from a quarter ago, but their expectations for inflation over the next 12 months have declined significantly,” the bank said. Both measures have improved substantially in recent quarters, although they remain higher than they were before the pandemic.

Consumers’ inflation expectations over the next two years rose to 3.91% in the April-June quarter after falling to 3.76% in the March quarter from 3.94% in the December quarter and 4.04% in the September quarter. By contrast, their outlook for the coming year fell to 4.09% from 4.92% in the first quarter, when it was little changed from 4.91% in the fourth quarter but down from 5.03% in the third quarter.

“Most consumers continue to think that domestic factors—in particular, high government spending and elevated housing costs—are contributing to high inflation,” the bank said.

Perceived financial stress “remains high,” most consumers continue to report spending cuts, and pessimism about future economic conditions persists, it said but added that homebuying intentions are “close to the historical average,” supported by strong plans among newcomers to purchase a home.

Consumers’ perceptions of the labour market have weakened this quarter, especially among private sector employees. However, overall wage growth expectations reached a new survey high, driven by public sector employees who anticipate their salaries will catch up with the higher cost of living.

Source: MaceNews

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Swissquote

Economic

The Trump trade consists of going long Bitcoin and equities (especially gunmakers, oil producers) and short the long term treasuries on expectation of exploding US debt with tax cuts, higher spending and growth supportive Trump policies. The yield on 30-year Treasuries yesterday surpassed the rate on two-year notes for the first time since January – the 30-year notes reflecting the exploding spending, while 2-year notes benefit from the rising Federal Reserve (Fed) rate cut bets as Powell reiterated on Monday that recent data boosted confidence that inflation is heading toward the Fed’s 2% goal. Other than that, Trump’s Media company jumped more than 30% yesterday following the murder attempt..

Nothing to do with Trump, but Apple’s 1.67% surge to a fresh high following news that its annual sales in India hit a record of $8bn – on path to potentially offsetting the Chinese weakness – and after being named a top pick at Morgan Stanley, also helped major US indices do well yesterday. While Goldman Sachs jumped more than 2.5% after announcing results. GS announced a much meagre investment banking revenue growth compared to JPM and Citi, but the trading unit and capital markets business did better than expected. And Trump trade is also positive for bank business. As a result, US kicked off the week on a positive note after the murder attempt on Trump, all major US indices – the S&P500, Nasdaq 100 and the Dow Jones eked out gains as the Russell 2000 jumped 1.80%.

Here in Europe, the Trump trade is not necessarily positive for the European stocks as who says Trump says higher tariffs and increased trade tensions. That’s one thing. Then there is the China trade where China’s inability to print sufficiently strong growth weighs on energy and commodities that are heavily represented in FTSE 100 and on the European luxury stocks. As such, Shell and Total Energies for example fell on the announcement of a weak growth number from China yesterday while their US peers gained on expectation that Trump will go slow on the climate-friendly policies and give support to the traditional energy businesses. In the luxury space, Burberry tanked 16% – yes 16% – yesterday after issuing a profit warnings and replacing its CEO. The Swiss Swatch Group lost almost 10% after slower spending in China in the first half led to a 70% decline in operating profit!

Happily for European stocks, the reflation trade is providing a boost, as rate cuts from major central banks are fostering better sentiment for European equities and supporting commodities weakened by China’s economic slowdown. But alone, hope of lower rates may not suffice to keep the European Stoxx 600 near record, as Europe’s 12-month forward earnings revisions ratio, which is a gauge of analyst upgrades versus downgrades moved further into negative territory before companies started reporting their Q2 earnings. You could argue that softer earnings are easier to beat, of course, but do they really justify a rally to ATH levels, is another question.

Then there is the AI trade – which has been pushing the major US indices to record after record, but where, the high valuations start giving a foolish smell suggesting that a correction is certainly near. The expectations – here – are robust: the big tech earnings should slow but remain strong whereas the non-tech are expected to print positive earnings after quarters of struggle. That, combined with the rising odds of a September rate cut and heightened odds of a Trump victory keeps buyers in charge. But if the Big Tech starts falling, the other sectors will hardly make up for the drop because they have neither the potential nor a justification to do so.

All in all, uncertainties loom as equity markets on both sides of the Atlantic Ocean continue to flirt with record high levels. Due today, investors will focus on Canadian inflation print and the US retail sales. Retail sales in the US are expected to have fallen 0.2% in June. Such weakness would back the Fed’s easing inflation story and further reinforce the expectation of a September Fed cut. We could then see the US dollar index make a decisive move below a major Fibonacci support – the major 38.2% retracement that stands near 104.20 – and step into the medium-term bearish consolidation zone for the first time since the beginning of the year. If that happens, the price action would perfectly reflect the Fed rhetoric and give a further confidence regarding the weakening dollar outlook. The latter would inevitably boost the currency valuations elsewhere, and ease the dollar-led inflationary pressures elsewhere, as well. The EURUSD tested the 1.09 offers yesterday while Cable is flirting with the 1.30 psychological resistance amid a broad-based USD weakness, and ahead of the latest CPI update due tomorrow. UK’s headline inflation is expected to have eased below the 1.9% in some analyst surveys, but services inflation and jobs data will also play an important role in shaping the Bank of England (BoE) expectations for the August meeting. A sufficiently weak set of data will make the sterling bulls’ job harder near the 1.30 mark, while any strength in this week’s data could get the BoE doves to further scale back their rate cut expectations and pave the way for a further rally in Cable to above the 1.30 mark for the first time in a year.

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Alex

Economic

Political

Speakers argued that Trump would fix inflation and bring back prosperity simply by returning to the White House as president. Virginia Gov. Glenn Youngkin lamented, “Tonight, America, the land of opportunity, just doesn’t feel like that anymore.”

But Trump has released few hard numbers and no real policy language or legislative blueprints, and most of the speakers Monday didn’t get into details either. Instead, his campaign is betting that voters care more about attitude than policy specifics.

Trump says he wants tariffs on trade partners and no taxes on tips. He would like to knock the corporate tax rate down a tick. The Republican platform also promises to “defeat” inflation and “quickly bring down all prices,” in addition to pumping out more oil, natural gas and coal.

The platform would address illegal immigration in part with the “largest deportation program in American history.” And Trump would also scrap President Joe Biden’s policies to develop the market for electric vehicles and renewable energy.

Democrats and several leading economists say the math shows that Trump’s ideas would cause an explosive bout of inflation, wallop the middle class and — by his extending his soon-to-expire tax cuts — heap another $5 trillion-plus onto the national debt.

The Associated Press sent the Trump campaign 20 basic questions in June to clarify his economic views and the campaign declined to answer any of them. Spokeswoman Karoline Leavitt insisted that Trump best speaks for himself and directed the AP to video clips of him.

By contrast, Biden has an exhaustive 188-page budget proposal that lays out his economic vision, even as his campaign had increasingly devolved before Saturday’s rally shooting into questions about his age and whether he should remain the nominee after a self-defeating June 27 debate.

A recent analysis by the Peterson Institute of International Economics showed that deporting 1.3 million workers would cause the size of the U.S. economy to shrink by 2.1%, essentially creating a recession.

Stephen Moore, an informal Trump adviser and economist at the Heritage Foundation, a conservative think tank, said Trump is unique in that he’s already been president and voters can judge him off his record in office.

“You want to know what he’s going to do in his second term, look at what he did in his first term,” Moore said.

Democrats have argued that Trump would be more extreme in his second term, using his own remarks to say he would put independent federal agencies under his direct control and use the federal government to settle scores with his perceived enemies. The Heritage Foundation’s Project 2025 blueprint is a template for what a second term would look like, they argue, a claim that Trump has disputed.

But Moore said he believes that Trump would be pragmatic in office and focus on the needs of business to drive economic growth.

“There is an idea that it’s going to be like slash and burn — I don’t think it’s going to be a radical agenda,” Moore said.

Some of Trump’s plans have gotten bipartisan backing. Both of Nevada’s senators, Jacky Rosen and Catherine Cortez Masto, are Democrats who would like to ban taxes on tips paid to workers, even as the Biden White House favors a higher minimum wage for tipped workers.

Companies do like Trump’s ideas to cut regulations and further lower the corporate tax rate from 21% to 20%. The tax rate had been 35% when he became president in 2017. Democrats, by comparison, want a 28% corporate tax rate in order to fund programs for the middle class and deficit reduction.

But Trump has also floated huge tariffs that he says would protect U.S. manufacturing jobs. Biden preserved the tariffs on China that Trump introduced and went a step further by banning exports of advanced computer chips to China.

Companies generally dislike tariffs — which are taxes on imports — because they can raise costs, which are then likely borne by consumers. An analysis by the economists Kimberly Clausing and Mary Lovely found that Trump’s tariffs would cost a typical U.S. household $1,700 a year in what would effectively be a tax hike.

Trump’s tariff plans could worsen inflation as a result, even though the Republican says in videos that he would reduce inflation. It’s unclear how Trump would lower inflation, which peaked in 2022 at 9.1% and has since eased to 3% annually.

“The tariff issue is extremely important — and people are not paying enough attention to the magnitude of the Trump tariff policy, what the consequences would be,” said Clausing, a former Biden Treasury Department official and professor at the University of California, Los Angeles.

But tariffs might be more of a political winner than an economic strategy, according to a research paper earlier this year by the economists David Autor, Anne Beck, David Dorn and Gordon Hanson. The research found that the tariffs during Trump’s first term did not increase employment, but the tariffs did help Trump politically in the 2020 election in the industrial areas that lost jobs to China and other countries.

Clausing noted that Trump is proposing tariffs on more than $3 trillion of imports, a 10-fold increase over what he did in his first term. She noted that the tariffs could make it more expensive to bring in the raw materials that U.S. factories need while also raising prices for consumers already struggling with high inflation. She said she wants people to understand the risks Trump’s economic policies could pose before it’s too late.

“I think people will notice when everything gets wildly expensive,” she said. “This is going to be a huge disaster.”

Source:AP News

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Samantha Luan

Economic

Commodity

Gold edged higher to just below a record as traders added to bets the US Federal Reserve will cut interest rates three times this year.

Spot bullion was up 0.2% to trade just below $2,430 an ounce after rising on Monday to within $11 of the peak set in May. Traders see two quarter-point rate reductions on the cards for 2024 as US inflation cools, and market-implied odds of a third reached about 60% on Monday after Goldman Sachs Group Inc. said it saw a “a solid rationale” for lower rates as soon as July.

After trading in a relatively narrow band throughout June, gold has rallied this month with markets preparing for the Fed’s pivot to easier policy, a shift that should aid the appeal of non-interest-bearing assets. On Monday, Fed Chair Jerome Powell reiterated that recent data offered greater confidence that inflation was heading down to target. Prices have also benefited this year from concerted central-bank buying.

Gold Inches Closer to Record as Bets on Fed Pivot Gain Traction_1

Bullion is likely consolidating near its previous record-high, but a break above that would require a “significant” shift in Fed rate cut expectations, according to Standard Chartered Plc analyst Zhong Liang Han.

“Policy rate expectations are in the driving seat for now. But political uncertainty could take over if we see material developments,” he added.

The weekend assassination attempt on Republican nominee Donald Trump has remained in focus as investors weighing up the financial and political implications of the attack and the US presidential contest gathers pace. Markets now see rising odds of a victory for Trump, who on Monday picked Ohio Senator JD Vance as his running mate in the race.

Bullion for immediate delivery was 0.2% higher at $2,427.93 at 10:37 a.m. in Singapore after climbing to as much as $2,439.75 on Monday. The Bloomberg Dollar Spot Index was up 0.1%, while 10-year Treasury yields fell. Silver rose to just below $31 an ounce, as platinum slipped and palladium edged higher.

Source:Bloomberg

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FastBull Featured

Data Interpretation

The Monthly Survey of Manufacturing by Statistics Canada for May 2024 showed that following a 1.4% increase in April, Canadian manufacturing sales rose 0.4% to $71.4 billion in May.

The aerospace products and parts sector saw the largest increase. Following a 6.1% decrease in April, production of aerospace products and parts rose 11.2% in May, the highest level on record. The post-COVID-19 pandemic surge in commercial and business aircraft markets mainly drove demand for aviation industry products in 2023 and remained strong in 2024. Year over year, production in this industry group rose 23.9% in May.

This was followed by sales growth in the food and paper product subsectors. Sales of food products increased 1.4% to $13.0 billion in May, the third-highest level on record. The gain was widespread across all food industry groups, led by seafood, meat, and bakeries and tortilla manufacturing. Seasonal demand contributed to the increase.

Meanwhile, sales of motor vehicles decreased the most, falling by 4.2% in May. A new retooling in an auto assembly plant in Ontario was mainly responsible for the decline. Despite lower sales of motor vehicles and parts in May, their exports rose 3.8%, mainly on higher exports of light trucks to the United States.

Total inventory levels edged up 0.2% in May, while total unfilled orders were up 0.8%, the second consecutive monthly increase. The capacity utilization rate (not seasonally adjusted) for the total manufacturing sector rose from 78.4% in April to 80.4% in May due to higher production.