The yen’s dilemma
The Bank of Japan is contending with both rising and falling prices—what Nikkei Asia calls the “yen dilemma.” The country has been saddled with a decades-long deflationary trend that years of negative interest rates have failed to reverse. Yet the US Fed’s rate-raising campaign has caused the yen to tumble. That in turn has made imported goods more expensive, driving up inflation. But it’s not the kind of demand-, growth-, and wage-driven inflation that Japanese central bankers want. In the meantime, Tokyo has likely stepped in to prop up the yen (but won’t say whether they intervened in the market), and has signaled it will continue to maintain its ultraloose monetary policy.
US inflation for September came in higher than expected, sending Treasury yields up and stocks down. The consumer price index (CPI) rose 3.7% on the year last month—on par with August but above economists’ expectations of 3.6% and an acceleration from 3.2% seen in July. Excluding food and energy, the core inflation fell to 4.1% from 4.3%.
The quick takeaway: price increases are down from the eye-watering levels of 2022, but inflation is proving more stubborn than would be hoped for. Together with last week’s blockbuster jobs report, that means the Fed must push on with its inflation fighting campaign.
US CPI, January 2022 – September 2023
Source: Bureau of Labor Statistics
BYD spots another IRA backdoor
In August, we highlighted BYD’s talks with South Korean car maker KG Mobility Corp. to build a joint battery plant in South Korea—a setup that potentially allows the Chinese EV maker to benefit from US Inflation Reduction Act tax credits. Now BYD is pursuing another backdoor lead: its battery unit FinDreams is partnering with South Korean conglomerate LG Electronics to target US and EU markets, CNEVPost reports.