Latest news with #fiscalstimulus
Reuters
a day ago
- Business
- Reuters
Japan election angst has bond investors girding for jump in super-long yields
TOKYO, July 15 (Reuters) - Japanese government bond investors are bracing for a potential power shift in upper house elections this weekend that could end up worsening the country's already frail finances. Prime Minister Shigeru Ishiba's sliding popularity has analysts and investors questioning whether even his modest goal of retaining a majority is achievable. Defeat could bring anything from a shift in the composition of the coalition to Ishiba's resignation, though even the least disruptive scenario is still expected to see more stimulus-minded political viewpoints gain sway. "As the noise towards yet more fiscal spending picks up, we have increased our underweight in Japan as a whole," said Ales Koutny, head of international rates at Vanguard. "Japan is going down a similar path as the UK did a couple of years ago," Koutny said. "If no fiscal restraint, then the bond market will start to put pressure on the economy." Japan's debt burden is the highest in the developed world at about 250% of GDP. Concerns about promises of fiscal largesse from opposition parties backing tax cuts were instrumental in sending yields on Japan's longest-dated government bonds (JGBs) surging to record peaks in late May. The Ministry of Finance was able to restore some calm to the market with plans to reduce issuance of 20-, 30- and 40-year bonds to address a supply-demand imbalance for those tenors, with traditional demand from life insurers dropping sharply this year. The Bank of Japan's reticence to raise interest rates further against an uncertain global economic backdrop is also keeping investors sidelined. "If such a demand-less market continues and investors foresee no rate hikes within this fiscal year, JGB volatility will go up, especially in the long end," said Kentaro Hatono, a fund manager at Asset Management One, who says he's adopting a "wait-and-see" stance due to the risks of the yield curve steepening after the election outcome. The persistent fragility of the so-called super-long sector has been on display for the past week, as opinion polls showed a sharp drop in Ishiba's approval ratings. Benchmark 30-year JGB yields vaulted 13 basis points to 3.17% on Monday, bringing them just shy of the all-time high of 3.185% from May 21. A week earlier, those same yields had surged as much as 22.5 basis points over two days to 3.09% on July 8. Barclays calculates that the rise in 30-year yields currently factors in about a three percentage-point cut to Japan's 10% consumption tax rate. "Even if the ruling parties retain their majority in the upper house, they would still be unable to pass budget bills, including the upcoming supplementary budget, without the cooperation of the opposition parties," the bank's Japan-based analysts wrote in a research note. "In this context, we believe there will likely be a convergence toward an expansionary budget proposal." All three of the leading opposition parties espouse some form of consumption tax cuts, with the populist, right-wing Sanseito party proposing a phasing out of VAT altogether. The policy has gained sway with the public as well: a recent poll by the Asahi newspaper showed 68% of voters thought a sales tax cut was the best way to cushion the blow from rising living costs. Fiscally hawkish Ishiba has eschewed that option in favour of cash handouts. A poor election result for the ruling coalition will trigger a sell-off in super-long JGBs by so-called real money investors, including life insurers and institutional investors, predicts Toshinobu Chiba, a fund manager at Simplex Asset Management. "If the opposition parties win, the government deficit will see a huge expansion," Chiba said. "The JGB yield curve will steepen by a lot."
Times of Oman
30-06-2025
- Business
- Times of Oman
India's trade deficit may surge to $300bn in FY26 despite lower oil prices: ICICI Bank Report
New Delhi: India's trade deficit is likely to widen to $300 billion in the financial year 2025-26, even though oil prices are expected to remain moderate, according to a recent report by ICICI Bank. The projected deficit would be 7.0 per cent of the country's GDP, higher than the USD 287 billion recorded in FY25 and USD 245 billion in FY24. The report stated, "We see goods deficit widening to USD 300bn (7.0 per cent of GDP) in FY26. But steady inflows in case of services exports and remittances should ensure a CAD of USD 30bn (0.7 per cent of GDP)". The report highlighted that while oil prices may not surge sharply, the widening trade deficit will be driven mainly by weak performance in non-oil exports. On the other hand, imports are expected to stay strong due to the strength in domestic growth. A trade deficit occurs when a country's imports are more than its exports, while a current account deficit is a broader measure that includes the trade deficit plus other international transactions like investment income and remittances from other countries. As per the bank's assessment, the global economic environment remains uncertain due to geopolitical developments and the threat of trade wars. Despite this, India's economy is expected to stay resilient, supported by fiscal and monetary stimulus measures. The report also noted that rural demand is holding up well, and sectors like services, exports and domestic travel are continuing to expand. The report also expects services exports and remittances to remain steady in FY26. However, growth in these areas could slow down, mainly because of weaker demand from the US. Taking these factors into account, the report projects India's current account deficit (CAD) to stand at USD 30 billion in FY26, which is 0.7 per cent of GDP. In FY25, India's trade deficit rose to USD 287 billion, up from USD 245 billion in FY24, due to a 6.2 per cent increase in imports. While exports in the current fiscal year have shown a modest growth of 3.1 per cent year-on-year so far, this rise is largely led by a strong 22 per cent increase in exports to the US, whereas exports to other countries declined by 1.2 per cent. Despite the challenges in global trade and expected pressure on exports, the report remained optimistic about India's external position. It said, "FPI and FDI inflows should see improvement as the domestic growth cycle is improving. Overall, BoP to see a mild surplus".
Bloomberg
24-06-2025
- Business
- Bloomberg
Korean Consumer Confidence Jumps to 4-Year High on Stimulus Hope
South Korea's consumer confidence rose to the highest in four years as easing domestic political uncertainty, fresh fiscal stimulus and hopes for pro-growth policies under the new administration buoyed sentiment. The composite consumer sentiment index climbed 6.9 points to 108.7 in June, rising well below the threshold of 100 that divides optimism from pessimism, according to a Bank of Korea survey released Tuesday.
Yahoo
20-06-2025
- Business
- Yahoo
Find Big Beautiful Profits in Trump's Budget Bill
There's a new sheriff in town, or at least that's what the budget bill Trump is back in the saddle, and he's riding in with a 'Big, Beautiful Bill' that aims to reshape the fiscal landscape of America. Whether you love it or loathe it, one thing's certain: there's money to be isn't about political ideology. This is about dollars and cents. And if you're the kind of investor who likes to get ahead of the curve, now's the time to pay I'm breaking down exactly how Trump's latest budget proposal can translate into a market-moving opportunity. We're going to zero in on the sectors that are poised to benefit and understand why policy creates get into the Budget BoomTrump's budget isn't a 'skinny bill' or some placeholder draft. It's a fireworks show of federal spending. This is fiscal stimulus with a red hat and a bullhorn. Infrastructure, defense, border security, energy independence, you name it, there's a line item for are forward-looking machines, and as the bill takes shape, capital is already shifting. Institutional money doesn't wait until the ribbon-cutting ceremony; it loads up when the ink hits the page. That's why understanding the thematic shifts before they materialize in quarterly earnings is key to Government, Big Gains It may seem counterintuitive, but historically, markets have been fond of spending. It doesn't matter if the budget is balanced or busted; the important thing is where the money is going. And Trump's Big, Beautiful Bill tells us that loud and clear. Follow the money for take a look at the big-ticket themes in this budget that are likely to push equity valuations Spending ExplosionThis one is self-explanatory right now. If there's one part of the federal budget Trump never skimps on, it's defense. With ongoing geopolitical tensions and a hawkish stance on global military presence, the defense budget is poised to increase planes, tanks, missiles, cybersecurity, satellites, and advanced warfare tech. The contractors that feed the Pentagon machine are going to be very busy. Of course, Aerospace and Defense stocks immediately come to mind. But don't let yourself get caught up in 20th-century thinking on this one. The future of warfare is all about escalation in the Middle East is very unnerving. The threat of this conflict spilling over to other nations is Hat Capitalism: Infrastructure Gets the Green Light Trump is back to preaching 'America First,' and that includes putting steel to pavement. Roads, bridges, tunnels, ports, and broadband infrastructure are all getting a stocks, raw materials, engineering firms, and specialized machinery manufacturers are among the first to receive contracts and for US-based stocks in these industries to fare the best, of course. 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We're talking surveillance, drones, biometric scanners, smart fencing, and AI-powered tracking involved in security hardware, software, and border protection will be bidding for billion-dollar contracts. As the world evolves and shifts increasingly to the digital realm, cybersecurity becomes and Mineral Independence Energy policy under Trump has always been built on independence and dominance. This budget loosens the reins on domestic drilling, pipelines, and nuclear energy—all under the banner of 'unleashing American energy.'Coal is politically symbolic, but the real money is in LNG, shale, and infrastructure upgrades. Energy services, fracking equipment, and even uranium players stand to more than just energy this time around. The bill was introduced to Congress around the same time as several Executive Orders aimed at achieving mineral independence for the US. That means that the US does not want to rely on imports for the critical minerals it needs to manufacture critically essential Reindustrialization & Anti-China SentimentThis bill has echoes of Trump's earlier 'Bring Jobs Home' campaign. This means reshoring chip production, subsidizing critical industries, and boosting American-made manufacturing, particularly in strategic sectors such as semiconductors, robotics, and that with anti-China tech policies and you've got a recipe for selective decoupling. Expect friendly tax treatment for U.S.-based manufacturers and aggressive tariffs or bans on Chinese you've been following along the NVIDIA saga at all, you've already seen this. One day, NVIDIA can sell lower-end chips to China, and the next day, it can't. If you're reading between the lines, it's best to bet on US chip manufacturers that don't deal with the Far and Rural Healthcare Expansion Bipartisan support for improved care for veterans and underserved rural populations means healthcare stocks, particularly those focused on logistics, telehealth, and clinic expansion, could receive a significant Federal ContractorsThe big companies, such as Lockheed and Raytheon, will get the headlines. However, the real alpha is hidden in the small- to mid-cap firms that secure subcontractor work. These companies often fly under Wall Street's radar, and their earnings are disproportionately affected by a single large contract.I'm referring to niche suppliers of military-grade connectors, battlefield software, rural broadband specialists, or regional construction companies with existing government ties. 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Bloomberg
12-06-2025
- Business
- Bloomberg
South Korea Enters a Post-Election Bull Market
South Korea's June presidential election ended six months of political uncertainty and policy paralysis in the country. Investors are optimistic that President Lee Jae-myung, with the support of the legislative assembly, can boost the economy with fiscal stimulus and corporate governance reform. The Kospi Index has surged more than 20% this year, surprising many global investors who have until now been hesitant to allocate capital in the country. President Lee faces many challenges, however, including the threat of US tariffs, increasing competition from Chinese exports and a sluggish economy. And what does a return to democratic party policies mean for the chaebols, the scions of Korean industry? Peter Kim, investment strategist and managing director for KB Securities, discusses the outlook for Asia's fourth-largest economy with John Lee and Katia Dmitrieva on the Asia Centric podcast.
