Author: admin

  • Japan finance minister flags fiscal sustainability, debt reduction focus

    Summary

    • Japan signals greater focus on fiscal sustainability
    • Debt-to-GDP reduction framed as confidence booster
    • Tax relief costs revised higher

    Japan’s Finance Minister Katayama signalled a renewed emphasis on fiscal discipline when outlining priorities for compiling the next fiscal year’s budget, highlighting the need to balance policy support with long-term sustainability and market confidence.

    Speaking on Friday, Katayama said the government would take fiscal sustainability into account “to some extent” when preparing the upcoming budget, an acknowledgement of growing scrutiny over Japan’s public finances as interest rates rise and debt servicing costs edge higher. Japan’s debt-to-GDP ratio remains the highest among advanced economies, leaving fiscal policy closely intertwined with monetary policy and market sentiment.

    Katayama said the government aims to boost market confidence by lowering the debt-to-GDP ratio, reinforcing messaging that fiscal credibility remains a priority even as policymakers consider measures to support households and growth. While the comments stopped short of committing to specific consolidation targets, they suggest a cautious approach to budget expansion following years of pandemic-era stimulus and elevated spending.

    The finance minister also highlighted the fiscal trade-offs associated with proposed tax relief measures. The Ministry of Finance now estimates that lifting the tax-free income threshold would reduce annual tax revenue by around ¥650 billion, significantly more than its earlier estimate of ¥400 billion. The revision underscores the budgetary cost of measures aimed at easing household tax burdens, particularly at a time when inflation and wage dynamics remain in flux.

    For markets, the remarks are notable against the backdrop of an expected Bank of Japan rate hike and rising Japanese government bond yields. A stronger focus on fiscal sustainability could help reassure investors concerned about the interaction between higher rates and Japan’s debt load, particularly if policy normalisation continues gradually. Katayama said there is no gap in thinking with Bank of Japan Governor Ueda, that finance ministry communications with Bank have been very positive.

    At the same time, the government faces competing pressures: maintaining fiscal credibility while responding to political demands for tax relief and economic support. How those tensions are resolved in the final budget will be closely watched by bond investors, rating agencies and currency markets alike.

    Overall, Katayama’s comments suggest the government is keenly aware that fiscal policy will play an increasingly important role in anchoring confidence as Japan transitions away from ultra-loose monetary settings.

    This article was written by Eamonn Sheridan at investinglive.com.

  • EU seals €90bn financing deal for Ukraine for 2026–27 – long-term funding plan for Ukraine

    Summary

    • EU approves €90bn Ukraine financing for 2026–27
    • Deal builds on budget headroom borrowing plans
    • Multi-year support aims to boost certainty

    European Union leaders have reached agreement on a major new financial support package for Ukraine, approving €90 billion of funding for 2026–27, according to comments from European Council President António Costa. German Chancellor Merz confirms the 90bn euro loan is interest free and the Europe will keep Russian assets frozen until Putin has compensated Ukraine.

    “We have a deal to finance Ukraine,” Costa said, confirming that the decision to provide €90bn of support over the two-year period had been approved. The announcement follows earlier indications that EU leaders were close to consensus on a financing framework built around collective borrowing and the use of EU budget headroom.

    The agreement builds on draft conclusions seen earlier by Reuters, which outlined plans for the European Commission to raise funds on capital markets, with the loans backed by unused EU budget capacity rather than direct national contributions. EU officials had said there was a realistic path to unanimity, particularly after clarifications that the mechanism would not affect the financial obligations of certain member states, including Hungary, Slovakia and the Czech Republic.

    The structure is designed to ensure predictable, multi-year funding for Ukraine as the war with Russia continues, while limiting immediate fiscal strain on individual EU governments. Leaders have also called for continued work on the technical and legal aspects of the instruments underpinning the financing, including options linked to so-called “reparations loans” and the potential future use of frozen Russian assets.

    The €90bn envelope underscores the EU’s intent to provide sustained support rather than rolling short-term packages, a shift aimed at improving financial certainty for Kyiv and strengthening longer-term planning for reconstruction and defence. It also reflects a growing willingness within the bloc to deploy EU-level borrowing as a geopolitical tool, following precedents set during the pandemic and energy crisis.

    From a market perspective, the deal is unlikely to materially disrupt near-term sovereign issuance or euro-area funding conditions. However, it reinforces the structural trend toward greater EU-level debt issuance and deeper fiscal coordination, with longer-term implications for euro-area bond markets and regional stability.

    This article was written by Eamonn Sheridan at investinglive.com.

  • EU moves toward budget-backed loan for Ukraine – EU leaders agree in principle

    Summary

    • EU agrees in principle on Ukraine loan
    • Funding to be backed by EU budget headroom
    • Unanimity among member states appears possible

    European Union leaders have agreed in principle to provide a new loan to Ukraine, funded through EU borrowing on capital markets and backed by unused EU budget headroom, according to draft conclusions seen by Reuters.

    Under the proposal, the European Commission would raise funds on financial markets, with the loan guaranteed by the EU’s budgetary capacity rather than direct national contributions. An EU official said there appears to be a pathway toward unanimity among member states to use the headroom of the EU budget to provide funding for Ukraine, according to draft text seen by Reuters.

    The draft also specifies that any mobilisation of EU budget resources used as a guarantee for the loan would not affect the financial obligations of the Czech Republic, Hungary or Slovakia, addressing concerns from some governments about potential fiscal exposure, the draft text showed.

    EU leaders further agreed that work should continue on the technical and legal aspects of the instruments establishing what has been described as a “reparations loan,” according to the draft seen by Reuters, as discussions continue over longer-term funding mechanisms and the possible use of frozen Russian assets.

    The agreement in principle highlights the EU’s continued commitment to supporting Ukraine while navigating internal political sensitivities. By relying on collective borrowing and budget guarantees, EU leaders aim to sustain financial assistance without placing immediate strain on national budgets.

    This article was written by Eamonn Sheridan at investinglive.com.

  • Trump admin reviews Nvidia AI chip sales to China – Trump backs chip sales to China

    Summary

    • U.S. launches interagency review of Nvidia H200 exports
    • Trump backs controlled chip sales to China
    • National security concerns remain central

    The Trump administration has initiated a multi-agency review that could pave the way for the first-ever sales of Nvidia’s H200 artificial intelligence chips to China, according to sources familiar with the process cited by Reuters, marking a potential shift in U.S. technology export policy.

    The review follows President Donald Trump’s recent pledge to allow sales of Nvidia’s H200 chips to China, subject to a 25% fee paid to the U.S. government. Trump has argued that permitting controlled exports would help U.S. firms maintain technological leadership by reducing incentives for China to accelerate domestic chip development.

    According to sources, the U.S. Commerce Department has circulated license applications for the proposed shipments to the State, Energy and Defense Departments for interagency review. Under export control rules, those agencies have 30 days to assess the applications, with the final decision resting with the president if disagreements emerge. The start of the review process has not been previously reported.

    The move has reignited debate in Washington. China hawks across both parties have warned that advanced AI chips could enhance Beijing’s military capabilities and undermine U.S. dominance in artificial intelligence. The H200, while slower than Nvidia’s flagship Blackwell chips, remains a powerful and widely used accelerator that has never been permitted for sale to China.

    Nvidia has reportedly been considering increasing production of the H200 after initial demand from China exceeded available capacity, according to a separate Reuters report. However, uncertainty remains over whether Chinese authorities would approve domestic firms purchasing the chips if U.S. licenses are granted.

    Within the administration, officials led by White House AI adviser David Sacks argue that allowing limited sales could blunt the rise of Chinese competitors such as Huawei, discouraging accelerated efforts to rival Nvidia and AMD at the cutting edge.

    While you’d expect this to be a positive for NVDA, and it is, its not like Trump’s support for sales to China is new news. This should keep any positive market response more subdued than otherwise.

    This article was written by Eamonn Sheridan at investinglive.com.

  • PBOC sets USD/ CNY reference rate for today at 7.0550 (vs. estimate at 7.0378)

    The People’s Bank of China (PBOC), China’s central bank, is responsible for setting the daily midpoint of the yuan (also known as renminbi or RMB). The PBOC follows a managed floating exchange rate system that allows the value of the yuan to fluctuate within a certain range, called a “band,” around a central reference rate, or “midpoint.” It’s currently at +/- 2%.

    The close of the previous session was at 7.0412.

    The rate at 7.0550 today is the strongest setting for CNY since 30 September, 2024.

    Earlier:

    The daily fixing of this mid-rate is often interpreted as a policy signal rather than just a technical reference point. A higher-than-expected USD/CNY midpoint is typically read as a sign the PBOC is leaning against CNY appreciation pressure, like today.

    —

    While you’re here, an ICYMI via Reuters.

    China has made a significant, if still incomplete, advance in its push to challenge Western dominance in advanced semiconductor manufacturing, according to sources familiar with a highly classified project in Shenzhen.

    In a secure laboratory, a team of Chinese engineers has built a prototype extreme ultraviolet (EUV) lithography machine, the critical technology required to manufacture the most advanced chips used in artificial intelligence, smartphones and military systems. The machine, completed in early 2025 and now undergoing testing, reportedly occupies most of a factory floor and was developed by former engineers from Dutch chip-equipment maker ASML who reverse-engineered the technology, sources said.

    EUV lithography sits at the centre of what has become a technological Cold War, as the West has sought to restrict China’s access to the machines through export controls. The systems use extreme ultraviolet light to etch circuits thousands of times thinner than a human hair, enabling the production of the world’s most powerful semiconductors.

    While China’s prototype is operational and has successfully generated EUV light, it has not yet produced functional chips, underscoring the technical hurdles that remain. The Chinese government is targeting 2028 for the production of working chips using domestically built EUV tools, though people close to the project say 2030 is a more realistic timeline.

    If successful, the effort would mark a major breakthrough in China’s quest for semiconductor self-sufficiency and reduce its reliance on Western technology, with far-reaching implications for global supply chains, geopolitics and the balance of technological power.

    This article was written by Eamonn Sheridan at investinglive.com.

End of content

End of content