Latest news with #SquawkBoxAsia
CNBC
5 days ago
- Business
- CNBC
Japan's inflation has been above target for over 3 years, but where is the BOJ?
Major central banks have hiked their policy rates in the face of surging inflation since the Covid-19 pandemic — but the Bank of Japan has been an outlier. It has stayed put despite headline and core inflation running above its target of 2% since April 2022, and despite headline inflation's two-year high of 4% in January. So-called "core-core" inflation has run above the target since October 2022. The BOJ has raised rates by just 60 basis points in the 14 months since March 2024, when it abandoned its negative interest rate policy. It held its policy rate at 0.5% in its most recent policy meeting in June, saying that "underlying CPI inflation is likely to be sluggish, mainly due to the deceleration in the economy." The U.S. Federal Reserve raised rates for the first time since 2018 in March 2022, and every major central bank except the BOJ raised rates that year. In Japan, the main driver of inflation is food prices, specifically rice prices. Rice prices in the country rose sharply in the second half of 2024 and accelerated further in the first half of 2025, mainly due to poor harvests in 2023 and 2024. In May, rice prices more than doubled, skyrocketing 101.7%. That marked the largest increase in more than half a century. Marcella Chow, global market strategist at JP Morgan Asset Management, noted that rice accounts for approximately half of Japan's core inflation, and future inflation trends are heavily reliant on food prices, especially rice. But despite such a sharp rise in prices, experts said the BOJ will not move on its policy rate as the central bank views the spike in inflation as temporary. BOJ Governor Kazuo Ueda said in a press conference after the BOJ's June meeting that "When we look at recent data, consumer inflation is moving around 3%. But this is mostly due to rising import costs and rice prices ... we expect such pressures to dissipate," according to comments translated by Reuters. JPM's Chow noted Ueda also pointed out that underlying inflation, a greater focus for the BOJ, remains below 2%. The BOJ does not publicly reveal the components that define "underlying inflation." "This indicates that the central bank considers the recent spike in rice prices to be temporary," she said, adding "Mr. Ueda does not believe the BOJ is lagging behind, given that the upward trend in underlying inflation is not accelerating." Yujiro Goto, head of foreign exchange strategy for Japan at Nomura, told CNBC that the current inflation spike, especially in food inflation, is mostly due to supply issues, not strong demand. "Thus, the BOJ judges that the Bank does not need to react to the surge in inflation, which is just cost-push inflation. Against cost-push inflation, rate hikes may not be very effective to slow inflation," Goto said. That view is supported by Kei Okamura, a portfolio manager at Neuberger Berman, who said on "Squawk Box Asia" that price pressures from foodstuffs are likely to wane over the next few months. Growth concerns are another big reason the BOJ is likely to hold back on raising rates. On Wednesday, a BOJ summary of opinions from its June meeting revealed that some board members expressed that rates should be kept at current levels. Higher rates generally help to curb inflation, but they can also constrain economic growth. Chow pointed out that there would be geopolitical uncertainty ahead for the country, including the upcoming Upper House election, as well as tariff and trade uncertainties. The election may present political challenges for the Ishiba administration, she said. Those could pose risks to growth, which means a policy rate hike could come later rather than sooner. Nomura's Goto is, likewise, of the view that growth concerns will hold the BOJ back from rate hikes, considering that Japan has not reached agreement with the U.S. on trade. "Due to higher tariffs on Japan (10% universal tariffs plus sectoral tariffs such as auto and steel), we expect Japanese economy to record [a] small negative growth in July-September quarter, which warrants the pause for the time being, at least until September this year," he told CNBC. Japan is currently locked in trade negotiations with the U.S. with no clear sign of an agreement. On June 20, the country's top trade negotiator Ryosei Akazawa reportedly said that trade negotiations with the U.S. "remained in a fog." If the two sides don't reach a deal, a 25% "reciprocal" tariff will be slapped on Japanese imports into the U.S. Raising rates could strengthen the yen, which would make Japanese exports less competitive and restrict growth at a time when the export-oriented economy is facing headwinds. The country's most recent trade data revealed that Japan's exports in May declined 1.7% year over year, marking the sharpest decline since September 2024. Japan's gross domestic product also declined for the first time in a year, falling 0.2% quarter on quarter in the three months ended March as exports fell sharply. The BOJ could also be taking lessons from history. Frederic Neumann, chief Asia economist at HSBC, told CNBC that the BOJ has experienced decades of persistent deflationary pressures and "several episodes of false dawns that prompted premature tightening." Consequently, the bank is now taking its time to normalize policy. Neumann noted that the BOJ is taking a slow approach to raising rates because the rise in inflation was mainly driven by the sharp depreciation of the Japanese yen, with only a "tentative sign of a sustained wage-price cycle." BOJ board member Naoki Tamura, however, said in a speech on Wednesday that the bank may need to raise interest rates "decisively" if upside risks to prices grow. Since April 2022, the Japanese yen has weakened from about 120 yen against the dollar to its current levels of around 150. In 2024, the currency weakened to 161.99 on July 3, marking its weakest level against the dollar in about 38 years. Separately, Neumann said, "A period of inflation overshoot may arguably be necessary to shake Japanese households and businesses out of their expectations of limited price gains over time." He said although the BOJ's "go-it-slow" approach is justified, Japanese monetary officials need to be wary of normalizing policy too late. "The BOJ faces a tough, narrow path ahead, needing to raise fast enough to prevent inflation expectations from shooting up, but not too fast as to see the economy fall back into its earlier deflationary morass."
Ya Libnan
7 days ago
- Business
- Ya Libnan
Iran's parliament votes to block Strait of Hormuz, in a move that will anger its neighbors and trade partners
Iran may be threatening to close the Strait of Hormuz but experts told CNBC that it's also the one with the most to lose. In major move after U.S. struck Iranian nuclear sites, the country's parliament on Sunday reportedly approved the closure of the Strait of Hormuz, risking alienating its neighbors and trade partners. The decision to close the waterway now rests with the the country's national security council, and its possibility has raised the specter of higher energy prices and aggravated geopolitical tensions, with Washington calling upon Beijing to prevent the strait's closure. Vandana Hari, founder of energy intelligence firm Vanda Insights, told CNBC's ' Squawk Box Asia ' that the possibility of closure remains 'absolutely minimalistic.' If Iran blocks the strait, the country risks turning its neighboring oil producing countries into enemies and risks hostilities with them, she said. Table: CNBCSource: U.S. Energy Information Administration Get the data Created with Datawrapper Data from the U.S. Energy Information Administration revealed that Iran had shipped 1.5 million barrels per day via the Strait of Hormuz in the first quarter of 2025. Furthermore, a closure would also provoke Iran's market in Asia, particularly China, which accounts for a majority of Iranian oil exports. 'So very, very little to be achieved, and a lot of self inflicted harm that Iran could do' Hari said. Her view is supported by Andrew Bishop, senior partner and global head of policy research at advisory firm Signum Global Advisors. Iran will not want to antagonize China, he said, adding that disrupting supplies will also 'put a target' on the country's own oil production, export infrastructure, and regime 'at a time when there is little reason to doubt U.S. and Israeli resolve in being 'trigger-happy.'' Clayton Seigle, senior fellow for Energy Security and Climate Change at the Center for Strategic and International Studies said that as China is 'very dependent' on oil flows from the Gulf, not just Iran, 'its national security interest really would value stabilization of the situation and a de-escalation enabling safe flows of oil and gas through the strait.' There are currently there are no indications of threats to commercial shipping passing the waterway, according to the Joint Maritime Information Center . 'U.S. associated vessels have successfully transited the Strait of Hormuz without interruption, which is a positive sign for the immediate future.' The Strait of Hormuz is the only sea route from the Persian Gulf to the open ocean, and about 20% of the world's oil transits the waterway. The U.S. Energy Information Administration has described it as the 'world's most important oil transit chokepoint.' 'Iran's operations in and around Hormuz are unlikely to be 'all or nothing' – but instead move along a sliding scale from total disruption to none at all,' said Signum's Bishop. 'The best strategy [for Iran] would be to rattle Hormuz oil flows just enough to hurt the U.S. via moderate upward price movement, but not enough to provoke a major U.S. response against Iran's oil production and export capacity,' he added. On Sunday, Patrick De Haan, head of petroleum analysis at GasBuddy, said in a post on X that pump prices in the U.S. could climb to $3.35-$3.50 per gallon in the days ahead, compared to the national average of $3.139 for the week of June 16. Should Iran decide to close the strait, it would likely use small boats for a partial blockade, or for a more complete solution, mine the waterway, according to David Roche, strategist at Quantum Strategy. In a Sunday note, S&P Global Commodity Insights wrote that any Iranian closure of the strait would mean that not only Iran's own exports will be affected, but also those of nearby Gulf nations, such as Saudi Arabia, the United Arab Emirates, Kuwait and Qatar. That would potentially remove over 17 billion barrels of oil from global markets, and affect regional refineries by causing feedstock shortages, the research firm said. The disruption to supply will impact Asia, Europe as well as North America. Besides oil, natural gas flows could also be 'severely impacted,' S&P said, with Qatar's gas exports of about 77 million metric tons per year potentially unable to reach key markets in Asia and Europe. Qatar's LNG exports represent about 20% of global LNG supply. 'Alternative supply routes for Middle Eastern oil and gas are limited, with pipeline capacity insufficient to offset potential maritime disruptions through the Persian Gulf and Red Sea,' S&P added. The Commonwealth Bank of Australia pointed out that 'there is limited scope to bypass the Strait of Hormuz.' Pipelines in Saudi Arabia and the UAE have only a spare capacity of 2.6 million barrels a day between them, while the strait oversees the transport of an estimated 20 million barrels of oil and oil products per day, the bank said in a note. CNBC
NBC News
23-06-2025
- Business
- NBC News
Iran's parliament backs blocking Strait of Hormuz. Its closure will alienate Tehran further
Iran may be threatening to close the Strait of Hormuz, but experts told CNBC that it's also the one with the most to lose. In a major move after U.S. struck Iranian nuclear sites, the country's parliament on Sunday reportedly approved the closure of the Strait of Hormuz, risking alienating its neighbors and trade partners. The decision to close the waterway now rests with the the country's national security council, and its possibility has raised the specter of higher energy prices and aggravated geopolitical tensions, with Washington calling upon Beijing to prevent the strait's closure. Vandana Hari, founder of energy intelligence firm Vanda Insights, told CNBC's ' Squawk Box Asia ' that the possibility of closure remains 'absolutely minimalistic.' If Iran blocks the strait, the country risks turning its neighboring oil-producing countries into enemies and risks hostilities with them, she said. Data from the U.S. Energy Information Administration revealed that Iran had shipped 1.5 million barrels per day via the Strait of Hormuz in the first quarter of 2025. Furthermore, a closure would also provoke Iran's market in Asia, particularly China, which accounts for a majority of Iranian oil exports. 'So very, very little to be achieved, and a lot of self-inflicted harm that Iran could do,' Hari said. Her view is supported by Andrew Bishop, senior partner and global head of policy research at advisory firm Signum Global Advisors. Iran will not want to antagonize China, he said, adding that disrupting supplies will also 'put a target' on the country's own oil production, export infrastructure, and regime 'at a time when there is little reason to doubt U.S. and Israeli resolve in being 'trigger-happy.'' Clayton Seigle, senior fellow for Energy Security and Climate Change at the Center for Strategic and International Studies, said that as China is 'very dependent' on oil flows from the Gulf, not just Iran, 'its national security interest really would value stabilization of the situation and a de-escalation enabling safe flows of oil and gas through the strait.' There are currently no indications of threats to commercial shipping passing through the waterway, according to the Joint Maritime Information Center. 'U.S. associated vessels have successfully transited the Strait of Hormuz without interruption, which is a positive sign for the immediate future.' Impact of potential disruptions The Strait of Hormuz is the only sea route from the Persian Gulf to the open ocean, and about 20% of the world's oil transits the waterway. The U.S. Energy Information Administration has described it as the 'world's most important oil transit chokepoint.' 'Iran's operations in and around Hormuz are unlikely to be 'all or nothing' — but instead move along a sliding scale from total disruption to none at all,' said Signum's Bishop. 'The best strategy [for Iran] would be to rattle Hormuz oil flows just enough to hurt the U.S. via moderate upward price movement, but not enough to provoke a major U.S. response against Iran's oil production and export capacity,' he added. On Sunday, Patrick De Haan, head of petroleum analysis at GasBuddy, said in a post on X that pump prices in the U.S. could climb to $3.35-$3.50 per gallon in the days ahead, compared with the national average of $3.139 for the week of June 16. Should Iran decide to close the strait, it would most likely use small boats for a partial blockade, or for a more complete solution, mine the waterway, according to David Roche, strategist at Quantum Strategy. In a Sunday note, S&P Global Commodity Insights wrote that any Iranian closure of the strait would affect not only Iran's own exports, but also those of nearby Gulf nations such as Saudi Arabia, the United Arab Emirates, Kuwait and Qatar. That would potentially remove over 17 billion barrels of oil from global markets, and affect regional refineries by causing feedstock shortages, the research firm said. The disruption to supply would impact Asia and Europe as well as North America. Besides oil, natural gas flows could also be 'severely impacted,' S&P said, with Qatar's gas exports of about 77 million metric tons per year potentially unable to reach key markets in Asia and Europe. Qatar's LNG exports represent about 20% of global LNG supply. 'Alternative supply routes for Middle Eastern oil and gas are limited, with pipeline capacity insufficient to offset potential maritime disruptions through the Persian Gulf and Red Sea,' S&P added. The Commonwealth Bank of Australia pointed out that 'there is limited scope to bypass the Strait of Hormuz.' Pipelines in Saudi Arabia and the UAE have only a spare capacity of 2.6 million barrels a day between them, while the strait oversees the transport of an estimated 20 million barrels of oil and oil products per day, the bank said in a note. All these present upside risk to energy prices, with Goldman Sachs estimating that the market is pricing in a geopolitical risk premium of $12. If oil flows through the strait were to drop by 50% for one month and then were to remain down by 10% for another 11 months, Brent is forecast to 'briefly jump' to a peak of around $110, Goldman said.
CNBC
23-06-2025
- Business
- CNBC
Iran's parliament approves blocking Strait of Hormuz. Its closure will alienate Tehran further
In major move after U.S. struck Iranian nuclear sites, the country's parliament on Sunday reportedly approved the closure of the Strait of Hormuz, risking alienating its neighbors and trade partners. The decision to close the waterway now rests with the the country's national security council, and it's possibility has raised the specter of higher energy prices and aggravated geopolitical tensions, with Washington calling upon Beijing to prevent the strait's closure. But in all of this, it is Iran that stands to loose the most, which is why the possibility of a closure of the strait is low, experts said, discounting Tehran's rhetoric. Vanda Hari, founder of energy intelligence firm Vanda Insights, told CNBC's "Squawk Box Asia" that the possibility of closure remains "absolutely minimalistic." If Iran blocks the strait, the country risks turning its neighboring oil producing countries into enemies and risks hostilities with them, she said. Furthermore, a closure would also provoke Iran's market in Asia, particularly China, which accounts for a majority of Iranian oil exports. "So very, very little to be achieved, and a lot of self inflicted harm that Iran could do" Hari said. Her view is supported by Andrew Bishop, senior partner and global head of policy research at advisory firm Signum Global Advisors. Iran will not want to antagonize China, he said, adding that disrupting supplies will also "put a target" on the country's own oil production, export infrastructure, and regime "at a time when there is little reason to doubt U.S. and Israeli resolve in being 'trigger-happy'." Clayton Seigle, senior fellow for Energy Security and Climate Change at the Center for Strategic and International Studies said that as China is "very dependent" on oil flows from the Gulf, not just Iran, "its national security interest really would value stabilization of the situation and a de-escalation enabling safe flows of oil and gas through the strait." There are currently there are no indications of threats to commercial shipping passing the waterway, according to the Joint Maritime Information Center. "U.S. associated vessels have successfully transited the Strait of Hormuz without interruption, which is a positive sign for the immediate future." The Strait of Hormuz is the only sea route from the Persian Gulf to the open ocean, and about 20% of the world's oil transits the waterway. The U.S. Energy Information Administration has described it as the "world's most important oil transit chokepoint." "Iran's operations in and around Hormuz are unlikely to be 'all or nothing' – but instead move along a sliding scale from total disruption to none at all," said Signum's Bishop. "The best strategy [for Iran] would be to rattle Hormuz oil flows just enough to hurt the U.S. via moderate upward price movement, but not enough to provoke a major U.S. response against Iran's oil production and export capacity," he added. On Sunday, Patrick De Haan, head of petroleum analysis at GasBuddy, said in a post on X that pump prices in the U.S. could climb to $3.35-$3.50 per gallon in the days ahead, compared to the national average of $3.139 for the week of June 16. Should Iran decide to close the strait, it would likely use small boats for a partial blockade, or for a more complete solution, mine the waterway, according to David Roche, strategist at Quantum Strategy. In a Sunday note, S&P Global Commodity Insights wrote that any Iranian closure of the strait would mean that not only Iran's own exports will be affected, but also those of nearby Gulf nations, such as Saudi Arabia, the United Arab Emirates, Kuwait and Qatar. That would potentially remove over 17 billion barrels of oil from global markets, and affect regional refineries by causing feedstock shortages, the research firm said. The disruption to supply will impact Asia, Europe as well as North America. Besides oil, natural gas flows could also be "severely impacted," S&P said, with Qatar's gas exports of about 77 million metric tons per year potentially unable to reach key markets in Asia and Europe. Qatar's LNG exports represent about 20% of global LNG supply. "Alternative supply routes for Middle Eastern oil and gas are limited, with pipeline capacity insufficient to offset potential maritime disruptions through the Persian Gulf and Red Sea," S&P added. The Commonwealth Bank of Australia pointed out that "there is limited scope to bypass the Strait of Hormuz." Pipelines in Saudi Arabia and the UAE have only a spare capacity of 2.6 million barrels a day between them, while the strait oversees the transport of an estimated 20 million barrels of oil and oil products per day, the bank said in a note. All these present upside risk to energy prices, with Goldman Sachs estimating that the market is pricing in a geopolitical risk premium of $12. If oil flows through the strait were to drop by 50% for one month and then were to remain down by 10% for another 11 months, Brent is forecast to "briefly jump" to a peak of around $110, Goldman said. Brent oil futures currently stand at $78.95 per barrel, while West Texas Intermediate futures were trading at $75.75.
CNBC
18-06-2025
- Business
- CNBC
$50 the "sweet spot" to keep energy investments flowing, says Petronas CEO
Muhammad Taufik, President & Group CEO of Petronas, shares the company's long-term goals and outlook for oil markets amid the conflict in the Middle East. He joins 'Squawk Box Asia' on the sidelines of the 2025 Energy Asia in Kuala Lumpur.
