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Bank of Japan makes first rate hike in 17 years

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Japan ended negative interest rates and raised interest rates for the first time in 17 years. The Japanese yen fell sharply against the dollar on Tuesday after the Bank of Japan announced that it had ended the world’s last negative interest rate policy.

The Bank of Japan (BoJ), which decided to end the negative interest rate policy it started in 2016 following significant wage increases at large companies, raised short-term interest rates from minus 0.1 percent to a range of 0 to 0.1 percent.

The BoJ’s statement after the two-day policy meeting said it had decided to raise short-term interest rates from minus 0.1 percent to a range of 0 to 0.1 percent. With its first rate hike in 17 years, the BoJ became the last of the world’s leading central banks to abandon its negative interest rate policy.

The BoJ first started its negative interest rate policy (paying minus 0.1% interest on certain excess reserves deposited by financial institutions with the central bank) in 2016, as part of its fight against deflation.

In addition to ending the negative interest rate policy, the Bank also ended its yield curve control for 10-year Japanese government bonds. The BoJ will continue to buy bonds, while purchases of corporate bonds and similar assets will end within a year.

While the US Federal Reserve (Fed), the European Central Bank (ECB) and the Bank of England (BoE), among the world’s leading central banks, have raised interest rates to curb inflation, which rose to record levels after the pandemic, the BoJ has continued its ultra-loose monetary policy to stimulate economic growth.

The BoJ had made strong wage growth a condition for an orderly exit from the ultra-loose monetary policy it had maintained for years. Wage increases in the country this year, the highest in 33 years, had fueled expectations that the BoJ would give itself room to end negative interest rates.

Japan’s largest labour organisation, the Japanese Trade Union Confederation (Rengo), announced that this year’s wage negotiations with employers resulted in an average increase of 5.28%. This was the highest level in 33 years.

Analysts said the possibility of a rate hike was positive for the Japanese economy, as inflation has been above the BoJ’s 2% target for more than a year.

The last interest rate hike in Japan was in 2007. Unlike other leading developed economies, Japan has long struggled with disinflation, or a slowdown in the rate of inflation.

The BoJ’s aggressive monetary easing has contributed to the rapid depreciation of the yen, which has had a negative impact on households in the country.

The bank’s exit from negative interest rates is expected to affect not only companies and households, but also global money flows.

The Japanese yen fell sharply against the dollar on Tuesday after the Bank of Japan announced the end of its negative interest rate policy.

The yen fell to 150.46, its lowest level against the US currency in two weeks, after falling as low as 149.90 in the immediate aftermath of the BOJ’s announcement.

The benchmark Nikkei Stock Average reversed early losses following the announcement, closing Tuesday up 263.16 points, or 0.66 per cent, at 40,003.60. The broader Topix index gained even more, rising 28.98 points, or 1.06 per cent, to 2,750.97. “Along with the momentary rise in stock prices, the dollar-yen [exchange rate] also rose temporarily to 149.90 yen, which is thought to be in response to movements such as algorithmic trading,” said Hirofumi Suzuki, chief currency strategist at Sumitomo Mitsui Banking Corp.

Suzuki said the BOJ’s decision was largely in line with market expectations and gave a green light to commodity trading advisers – money managers who make various investments in the futures market and follow trends – to buy Japanese stocks.

Goldman Sachs senior economist Tomohiro Ota predicts another rate hike this year.

Ota expects the BOJ to raise rates to 0.25 per cent in October, followed by another 0.25 per cent hike in October next year.

“We expect a one-year delay between the second and third rate hike because we expect a lower CPI inflation rate next year,” he said in a note published on Monday.

But some, such as HSBC’s chief Asia economist Frederic Neumann, predict that the BOJ is unlikely to raise rates this year as it monitors the impact of policy normalisation.

“It’s a big risk for the BOJ,” Neumann said, adding: “The weak yen has been a big benefit for the Japanese economy, the reflation story and the stock market, and you don’t want to erase those gains with premature tightening.”

ASIA

Syria will not follow Afghanistan’s Taliban model of governance

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In an astonishing statement, Ahmed Shará, also known as Abu Mohamad Jolani, the leader of the Hayat Tahrir al-Sham (HTS) said that he will allow the girls to go to schools and will not turn Syria like Afghanistan under the rule of the Taliban.

Jolani, the de facto ruler of Syria, said that he will distance himself from the Taliban’s strict policies on women’s rights, and said that Syria will not follow the Taliban’s mode of governance.  

Jolani, who brought down the government of Bashar al-Assad and also widely welcomed by the Taliban, said that he believes in the education of women and girls and will not make Syria like Afghanistan.

“Syria is a diverse society with various ideas, unlike Afghanistan, which is more tribal. The Afghan model cannot be applied here,” Jolani told a BBC reporter.

Jolani says that Syria is a diverse society with various ideas, unlike Afghanistan, which is more tribal.

Jolani’s comment came when the Taliban congratulated the HTS-led victory by Jolani over Assad’s regime after years of fighting. The Afghan Foreign Ministry celebrated Jolani’s victory through a statement and hoped Jolani can bring peace and stability in the country.

“It is hoped that the power transition process is advanced in a manner that lays the foundation of a sovereign and serve-oriented Islamic government in the line with the aspiration of the Syrian people; that unifies the entire population without discrimination and retribution through adoption of a general assembly; and a positive foreign policy with world countries the safeguard Syria from a threat of negative rivalries of foreign actors and creates conditions for the return of millions of refugees,” the statement by Taliban Foreign Ministry.

However, Jolan’s position on the rights of women and girls is in great contrast with the current view of the Taliban leadership. Women and girls have been banned from education and work since the return of the Taliban in August 2021, following the collapse of the Republic System and withdrawal of the US troops from Afghanistan. Girls and women are even banned from medical institutions and visiting public spaces.

Jolani says he has a plan to create a government based institution and a council chosen by the people. 

The situation got worse when the Taliban’s Ministry for the Promotion of Virtue and Prevention of Vice called women’s voices “immodest” compounding their exclusion from public life. This year, it has been marked as three years since girls were banned from pursuing education over sixth grade. Besides that, on December 20, 2022, the Taliban’s Ministry of Higher Education announced that women would be barred from attending public and private universities.    

In an interview with CNN, Jolani said that he has a plan to create a government based on institutions and a “council chosen by the people.”

“When we talk about objectives, the goal of the revolution remains the overthrow of this regime. It is our right to use all available means to achieve that goal,” said Jolani.

“The seeds of the regime’s defeat have always been within it… the Iranians attempted to revive the regime, buying it time, and later the Russians also tried to prop it up. But the truth remains: this regime is dead.”

Moreover, he also said the Syrian people are the “rightful owners” of the country after the ouster of Assad, and declared a “new history” has been written for the entire Middle East.

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ASIA

Yoon summoned again for questioning on treason charges

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A joint law enforcement team investigating South Korea’s martial law case announced on Friday that it has issued a second summons to ousted President Yoon Suk Yeol, requesting his presence for questioning next week. The inquiry concerns his alleged involvement in the failed implementation of martial law.

The team has scheduled the questioning for 10:00 a.m. next Wednesday at the Corruption Investigation Office for Senior Officials (CIO) headquarters in Gwacheon, located just south of Seoul. This marks the second summons after Yoon refused to cooperate with the initial notice earlier this week.

The decision to hold the questioning on a public holiday appears to be a strategic move by the CIO, likely aimed at addressing security concerns. The office confirmed that the summonses were delivered via express mail and electronically to both Yoon’s residence and the presidential office in Yongsan. Notably, after Yoon’s team refused to accept the first subpoena, the CIO opted against delivering the documents in person for this round.

The investigation focuses on Yoon’s role in the December 3 martial law declaration, which he revoked following a vote in the National Assembly. If Yoon continues to disregard the summons without valid justification, the CIO may seek a court order to detain him for up to 48 hours.

Yoon faces allegations of sedition and abuse of office, charges that have gained traction since his dismissal by parliament last Saturday. His suspension from office remains in effect pending a decision by the Constitutional Court, which will determine whether he is permanently removed or reinstated.

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ASIA

Xi Jinping champions economic diversification during Macau visit

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During a three-day visit to Macau commemorating the 25th anniversary of its return to Chinese sovereignty from Portugal, President Xi Jinping emphasized the importance of economic diversification and maintaining the “one country, two systems” framework.

Speaking at the swearing-in ceremony for Macau’s new Chief Executive Officer, Sam Hou-fai, Xi urged the administration to make economic diversification the city’s primary focus. Sam, the fourth leader since the 1999 handover and the first mainland-born Chinese official to hold the position, is expected to align closely with Beijing’s objectives to reduce Macau’s reliance on gambling. The gambling industry, which accounts for approximately 80% of Macau’s tax revenue, has been the cornerstone of its rapid economic growth in recent years.

“Macau should prioritize proper economic diversification,” Xi stated, calling for enhanced policy support and investment in emerging sectors. He also reiterated the significance of the “one country, two systems” principle, stressing its role in ensuring the city’s “prosperity and stability” for the long term.

Xi’s visit included stops at the Macau University of Science and Technology, where he explored laboratories focusing on traditional Chinese medicine and planetary science. He also attended a cultural performance at the Macau Dome and met with local stakeholders, according to Chinese state media. His trip marked a shift in tone, with Anthony Lawrence, founder of Intelligence Macau, noting that it was the first time Xi publicly praised Macau for its progress rather than delivering critiques or instructions.

Since the liberalization of Macau’s gaming monopoly in 2002, the city has attracted significant foreign investment, including from prominent US casino operators such as Las Vegas Sands, MGM, and Wynn Resorts. However, the economy struggled during the COVID-19 pandemic due to travel restrictions, and recovery has only recently begun.

On Friday, Macau’s casinos were bustling with visitors, while non-gaming initiatives like a stamp exhibition co-organized by MGM China and Beijing’s Palace Museum showcased the city’s efforts to diversify its offerings.

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