Introduction: Japan joins the rate-hiking party, as Bank of England lurks<\/p>\n
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.<\/p>\n
The global interest rate rising cycle has spun again today, after the Bank of Japan<\/a> decided to raise interest rates to their highest level in 31 years.<\/p>\n The BoJ voted to raise its target interest rate by a quarter of one percentage point to 1.25%, the highest level since 1995. The vote was not unanimous \u2013 with two board members dissenting to the hike.<\/p>\n The move meant the BoJ has joined the US Federal Reserve and the European Central Bank in tightening monetary policy this month, as part of the global fight against inflation.<\/p>\n But the Bank of England is, so far, resisting joining the battle, having yesterday voted to leave UK interest rates on hold at 3.75%.<\/p>\n The BoJ has been in a rate-rising cycle since 2024, when it lifted its policy rate out of negative territory. It has been under pressure to raise borrowing costs as the yen weakened steadily against the dollar this year, to levels which prompted policymakers to intervene to stabilise the currency.<\/p>\n A hike today had been expected. So the news that two BoJ policymakers opposed the move has excited the markets.<\/p>\n Jim Reid, strategist at Deutsche Bank, reports:<\/p>\n double quotation markSo although the central bank reiterated that it will continue raising rates if economic and inflation conditions evolve as projected, the market has reacted to the two high profile dissenters. The Yen is -0.72% lower at 157.10, having been at around 153.40 at the start of the week and the JGB curve has steepened, with 2yrs -2.2bps and 30yrs +3.2bps<\/p>\n The agendaShare<\/a><\/p>\n Key events<\/p>\n Mothercare facing \u201chighly uncertain\u201d future as Middle Eastern partner plans store closures<\/p>\n Mothercare has warned it faces a \u201chighly uncertain\u201d future after its Middle East franchise partner revealed it was set to close most of its franchised stores across the region next year.<\/p>\n The troubled baby products group said it was a \u201cheavy blow\u201d for the firm and has now launched an urgent strategic review, adding that it has sufficient resources to trade for \u201ca number of months\u201d<\/p>\n Clive Whiley, chairman of Mothercare, told shareholders this morning:<\/p>\n double quotation mark\u201cWhilst our recent financial performance has been resilient, this is a heavy blow to the Mothercare business and our stakeholders. We will continue to pursue discussions to restore critical mass and value for stakeholders, against this more difficult backdrop.\u201d<\/p>\n Investors are taking fright, knocking Mothercare\u2019s share down by 67% in early trading.<\/p>\n Share<\/a>BoJ governor Ueda give press conference – the key quotes<\/p>\n Bank of Japan governor Kazuo Ueda is giving a press conference in Tokyo now, to explain today\u2019s decision to hike interest rates.<\/p>\n Reuters has helpfully collated some of the important quotes<\/p>\n ON 50-BP OR BACK-TO-BACK RATE HIKES:<\/p>\n double quotation mark\u201cThat depends on how \u200bprice conditions develop. There could be \u200cvarious possibilities. We shouldn\u2019t \u200crule anything out.\u201c<\/p>\n \u201cWe\u2019re at a phase where we need to look at various data carefully. \u200cBut that doesn\u2019t mean we can move slowly. We will analyse data carefully and take timely action as needed.\u201c<\/p>\n \u201cAs for the pace of future rate hikes, we don\u2019t have any pre-set idea in mind such as once every three months. We will determine at each policy meeting how best to ensure underlying inflation stabilises \u200cat 2%.\u201c<\/p>\n RISK FACTORS:<\/p>\n double quotation mark\u201cIf the renewed rise in energy costs persists, that could add further pressure to wholesale inflation and then consumer inflation. That\u2019s something \u200bwe need to look out for.\u201c<\/p>\n FINANCIAL CONDITIONS:<\/p>\n double quotation mark\u201cFinancial conditions are becoming less accommodative as we raise rates … It\u2019s important to avoid financial conditions from tightening too much, or to cause a big adjustment in asset prices, by raising rates too sharply.\u201c<\/p>\n NEUTRAL RATE UNCERTAIN:<\/p>\n double quotation mark\u201cIt is hard \u2060to pinpoint where the neutral rate is, and therefore the terminal rate. \u200bIt might be the \u200bcase that as we adjust policy \u200bas appropriate, we will know where those rates sit ex-ante.\u201c<\/p>\n ON INFLATION:<\/p>\n double quotation mark\u201cUp till \u200bnow, our short-term \u200cpolicy focus was \u200bto push \u200bup underlying inflation from levels below 2%. Now, underlying inflation is approaching 2%. If risks of underlying inflation overshooting 2% materialise, that could have a negative impact on Japan\u2019s economy. It\u2019s important to stabilise underlying inflation at 2%. Our policy phase has changed.\u201c<\/p>\n Share<\/a><\/p>\n Updated at\u00a003.27 EDT<\/p>\n Fuel sales dropped again, down 1.7% in August and 2.5% across the three month period, as motorists cut back on non-essential journeys following major increases in the price of petrol and diesel since the start of the Iran conflict in February.<\/p>\n That followed a jump in sales volumes in March, when motorists stocked up on fuel after the conflict in the Middle East broke out,<\/p>\n Share<\/a>Oil falling back to $100 a barrel<\/p>\n The oil price has dropped by 2% this morning, pushed down by hopes that supply disruptions from Saudi Arabia may not be as severe as feared.<\/p>\n Brent crude has dropped to $102.55 a barrel, following reports that Saudi authorities hope to bypass a damaged section of its 1,200-km East-West Pipeline and restore roughly half its capacity within days.<\/p>\n That pipe was damaged in an attack last week which drove oil up over the $100\/barrel mark, as traders anticipated significant disruption to supplies.<\/p>\n A drop in the oil price would cheer households, businesses and central bankers alike!<\/p>\n Share<\/a>A chart showing sales volumes in Great Britain rose over the three months to August Photograph: ONSShare<\/a><\/p>\n The ONS also reports that sales at British department stores picked up in August following \u201cstock availability issues\u201d in July.<\/p>\n Share<\/a>Retail sales rise across Great Britain<\/p>\n Despite the inflationary squeeze on households, retail sales across Great Britain have risen over the summer.<\/p>\n The heatwave, a pick-up in web shopping, and the joys (and pain <\/a>and disappointment<\/a>!) of the men\u2019s football World Cup, helped to lift spending over the three months to August, new data shows.<\/p>\n Retail sales volumes rose by 0.9% in the June-August quarter, the Office for National Statistics has reported this morning.<\/p>\n Non-store retailers\u2019 sales volumes rose following a particularly strong June period \u2013 perhaps because people preferred to order goods online rather than braving the high street in the heatwave.<\/p>\n Retailers selling alcohol and beverages performed well across all three months to August, which they attributed to promotions, the hot weather, and the World Cup.<\/p>\n In August alone, retail sales volumes rose by 0.5%, reversing a 0.5% drop in July.<\/p>\n August\u2019s rise is unexpected (economists had forecast a 0.2% fall), so this is the latest piece of economic data to beat expectations after last week\u2019s jump in UK GDP<\/a>.<\/p>\n ONS senior statistician Jon Gough said:<\/p>\n double quotation mark\u201cRetail sales increased in the latest three months, with a particularly strong June for online outlets helping to boost their sales across the period. Food store sales also rose, with supermarkets doing well in July and August.<\/p>\n \u201cMeanwhile, retailers selling alcohol and beverages performed well across all three months, which they attributed to promotions, the hot weather and the World Cup.\u201d<\/p>\n Share<\/a><\/p>\n Updated at\u00a002.33 EDT<\/p>\n Introduction: Japan joins the rate-hiking party, as Bank of England lurks<\/p>\n Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.<\/p>\n