PM Lee to hand over leadership to DPM Lawrence Wong by November 2024, before next General Election

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PAP Has GET READY TO FIGHT AND WIN ELECTIONS.

In addition to governing properly and keeping the party clear and incorrupt, Mr. Lee also spoke about the significance of being well-prepared to fight and win votes.

Although PAP’s plans may be effective, he pointed out that winning votes, convictions, and assistance is more difficult. According to Mr. Lee, party individuals must actively engage Singaporeans and explain to them how these plans benefit them and their families.

He continued,” We must make clear what is at stake and motivate them to fight valiantly for us and alongside us for a better coming.”

” We also need to stop opposite attempts to overthrow the government, expose them when they are less than honest, and thwart their schemes to sow doubt and misunderstandings.”

” Mps., unit chairmen, and campaigners, you have to work with voters every day on the ground so that they develop strong personal ties to you, discover with you and are comfortable toward you.

Mr. Lee discussed PAP’s history of winning 14 GEs consecutively since 1959, noting that the group was” not born powerful” following a contentious campaign in the first two votes of 1959 and 1963.

” Over the years, we have lost some tickets, but the PAP has remained in a prominent place up until this point. However, he warned that the PAP’s task has gotten more difficult with each vote.

Singaporeans now have higher expectations for the government, with” quite a few” hoping to see more alternative voices in parliament, despite the fact that” the majority overwhelmingly agree” that PAP should continue to lead the nation ,” according to Mr. Lee.

In fact, even the opposite events hold this opinion, he continued.

The PAP is, in my opinion, facing a distinct political conundrum because the vast majority of voters want us to form the government. They actually anticipate the PAP forming the state.

However, a sizable portion of those who support our formation of the government even support the performance of our adversaries.

MORE Criticism WON’T MAKE FOR A BETTER Authorities,

According to Mr. Lee, parliament today spends more time debating problems as more opposition MPs enter the fray.

While productive and responsible political discussion is great and necessary, he continued,” not infrequently it turns into a political brawl” as the opposition tries to gain political points.

The state” does its best to explain its factors, limitations, and reasons why the opponent’s ideas might not be successful.” And so it continues, in a never-ending period ,” he said.

According to Mr. Lee, some of this is to be expected given how political democracies are designed, but if it” goes too far and we will spend more energies debating one another, manoeuvring for political benefit, rather than tackling regional issues, then the problem will get unexplained.”

” Singapore and Singaporeans will undergo if society is divided. So, I assert that having more opposite MPs does not always result in better governance.

Mr. Lee warned that it might also occur in Singapore, citing nations with” adult governments” like the US where politicians have become more polarized. As a result, he continued, the PAP needs to put in more effort and think more clearly to inform Singaporeans of the issues at hand.

” I have almost been in state for 40 years, and let me tell you straight: If we constantly had to worry about whether we would still be there after the next elections ,” Mr. Lee said, there is no way the government may have taken the lengthy view, made long-term plans, or adopted difficult but important policies.

” Yesterday’s Singapore could not have been created by a weak state that was only able to hold onto power with the help of the slender preponderance, or by the governing party and its policies chopping and changing after every election.”

The social fluid may change if a sizable portion of Singaporeans want the PAP to be checked by the opposition and more opposition MPs are voted into parliament, he said. He said that the probability of the PSA being challenged for the placement of governing party is always present.

Mr. Lee added that among other things, opposition parties have informed voters that they do not intend to form the second state.

Voters must be concerned, Mr. Lee said, urging them to cast their ballots for the party they believe will” keep us together” and” build a Singapore fit for your kids and that will be there for their kids.”” But with lives and futures at stake, voters must worry ,” he said.

Mr. Lee became visibly emotional as he concluded his speech by telling party members that it had been his” great wealth and honor” to serve the country throughout his adult life.

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Temasek Trust and Earthshot Prize expand partnership, will spotlight Asia in fight against climate change

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SINGAPORE: Temasek Trust has widened its long-term collaboration with The Earthshot Prize, with a emphasis on highlighting Asia in the fight against climate change.

Temasek Trust is now a founding partner of The Earthshot Prize thanks to the multi-year partnership, the two organizations announced in press releases on Sunday( Nov. 5 ).

By utilizing the network of Temasek Trust’s habitat in Asia and beyond,” The Earthshot Prize will enhance the efforts to promote and level innovative solutions to regain the world.”

Both organizations will collaborate to bring attention to this critical area in the fight against climate change.

According to the joint press release, the expanded partnership also aims to unlock global learnings & nbsp, insights to identify, scale, and celebrate innovative solutions and eco-innovators.

In order to” connect eco-innovators with funders equally committed to driving impact ,” the two organizations will & nbsp create” convening opportunities across Asia” and collaborate on key initiatives.

Temasek Trust’s CEO, Desmond Kuech, stated that the company is dedicated to developing the facilities and systems necessary for this.

According to Mr. Kuek,” Our multi-year partnership with The Earthshot Prize is based on a shared desire to take action and catalyze inventive solutions at scale to fix our world.”

The Earthshot Prize’s CEO, Hannah Jones, stated that as Temasek Trust became its founding mate, their relationship evolved, highlighting and elevating the remarkable climate innovations that have occurred throughout the region.

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Face-off on the grand chessboard

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The recent launch of the Huawei Mate60 Pro sent a seismic shiver across the global semiconductor realm. Several years of the most drastic sanctions, culminating last year in the US CHIPS and Science Act, had failed to stop China’s technological juggernaut.

On the contrary! A cryptic Chinese poem expresses the struggle: 两岸猿声啼不住, 轻舟已过万重山 – the boat has sailed past the looming mountains with their screeching baboons. 

The Huawei Mate60 Pro is a masterful move in an unfolding global chess game. But there is much more coming.

Let’s look at the big picture.

Think back to the 2008 Beijing Olympics Opening Ceremony. China spared no expense in staging a magnificent show combining artistry and technology that narrated the trajectory of Chinese culture and civilization, from its ancient origins to the boundless potential of its high-tech future. Synchronicity and power on a breathtaking scale.

Many were ecstatic. But while the Beijing show impressed most of the world, it sent shivers down the spines of some Western elites, who were more and more terrified about China’s growing power and self-confidence.

Wheels were set in motion to slow down the Chinese juggernaut’s advance at all costs, even if it meant damaging the synergistic partnership between the West and China, which had brought enormous growth and profitability for both.

This is where I think each side made a fatal misjudgment, by projecting their own ideology on the other side.

Instinctively the West thought: “Surely when China attains the means, it will act like we would do, seeking hegemony and aiming to deal a death blow to its waning rival.” Seeing China as an existential threat, the West launched a ferocious, full-spectrum attack.

China bet erroneously that the West would act pragmatically, as China would do, and not try to kill the proverbial goose that lays golden eggs. After all, China is the biggest buyer of Western debt ($4 trillion in US Treasuries since the 2008 financial crisis), a huge market for high-value-added goods and services from the West, a manufacturing partner that enabled brands like Apple and Tesla to become global behemoths.

China was fully integrated into the supply chain of Western companies; hardly anything could be produced without inputs from China. 

‘Winner takes all’ strategy

China was therefore caught completely off guard by the series of exclusionary measures launched under the Barack Obama administration – including the Trans-Pacific Partnership (TPP) – and culminating in outright trade and technology sanctions, siege and wars orchestrated by Donald Trump, and expanded and intensified under the Joe Biden administration. 

It became a zero-sum game on The Grand Chessboard, as Zbigniew Brzezinski called it in his famous book.

Based on game theory and a ruthless “winner takes all” approach, think-tanks across the West devised ever stronger decoupling measures and punitive sanctions on a rapidly expanding “Entity List.” 

It was supposed to be a checkmate move. In a July 12, 2023, article in New York Times Magazine titled “’An Act of War’: Inside America’s Silicon Blockade Against China,” Alex W Palmer declared: “If the controls are successful, they could handicap China for a generation; if they fail, they may backfire spectacularly, hastening the very future the United States is trying desperately to avoid.”

How do the Chinese fight a zero-sum game? With Chinese math! 

In the Chinese martial art xingyiquan, one keeps a reserve strength of at least 70% on the back foot, displaying only 30% of one’s true strength in punching the opponent. The remaining 70% are reserves to be drawn on as the attacks intensify. The depth of this reservoir often catches the opponent by surprise. 

The Chinese cannot understand why the West fights with what they call a “Fist of Seven Injuries” (七伤拳), inflicting as much self-harm as it does to the opponent. The sanctions have hurt Western and Eastern Asian high-tech companies hard, as they lose not only their biggest market, but also important partners in their supply chain.

Profits plunged by double digits among tech titans from Samsung to Qualcomm. From mid-2022 to July 2023, Samsung’s operating profit fell by a whopping 95% to US$527.2 million (670 billion won). TSMC (Taiwan Semiconductor Manufacturing Co) reported a 23.3% year-over-year decline in net income – the first profit drop in four years.

China ‘Goes’ for broke

Seeing how the game was playing out on the Grand Chessboard after 2008, China imperceptibly began to switch the game from chess to weiqi (围棋) – the Game of Encirclement, otherwise known as Go.

In their book A Thousand Plateaus (1980), Gilles Deleuze and Félix Guattari offered a succinct explication of the difference between the two games. They note that in chess the conflict is “institutionalized and regulated” with a front and a rear battle line, whereas in weiqi there are no battle lines. “It is a question of arraying oneself in an open space,” they note, “of holding space, of maintaining the possibility of springing up at any point.”

Chess is played in a “structured” space, with each piece assigned a specific role in the hierarchy with a clear differentiation between the pawns and the “elite” pieces such as knights, bishops, kings and queens, each moving in its designated way.

In contrast, weiqi is played in a “fluid” space where the pieces are identical, and their roles are ambiguous. It is the strategic context that matters. The strategic orchestration of the whole is greater than the sum of its parts. 

There are as many moves in weiqi as atoms in the observable universe, offering infinite flexibility and maneuvering room to an astute player. The ambiguousness and fluidity of their roles augment the potential importance of every piece on the board, bewildering those who do not understand the weiqi game. 

China plays weiqi by radically expanding its playing field and its global political-economic space. 

China’s mobilization began in earnest, across the whole board. 

Misreading China

It is a fatal mistake to view China as a sea of identical faces. Every Chinese person is in fact a monad, an individual microcosm, a bundle of energy, deeply interconnected with the macrocosm. 

With their constant harping on China’s “authoritarianism,” the Western media erroneously ascribed a fossilized top-down model to this elastic, evolving system.

Today’s China thinks in multidimensional feedback loops, meritocracy, distributed control, complexity, emergence, networks, manufacturing chain reactions, AI, Big Data, quantum technologies, synergy, Hive Intelligence. 

There is a Chinese expression, 举国之力, literally “the strength of a nation.” But its full meaning is hard to translate. 

In terms of infrastructure, security, from health care to education, Chinese people place high demands on their government to deliver. But when the call comes to mobilize in the face of an outside threat, the role is reversed. “The country needs you,” was the message. Under the mortal threat of the Tech War, a billion monads sprang into action. 

It wasn’t just a directive from Beijing and planning by top players like Huawei. Students voluntarily switched their graduate studies from other sciences to information and communications technology (ICT). Rival companies set aside differences to cooperate.

Tech war in multipolar world

A turbo chain reaction propagated across the monadic space, from R&D to a complete ICT supply chain, not only in Shenzhen, Shanghai and Beijing, but Anhui, Hefei, Harbin, Xian, Wuxi, Changsha, China’s microcosms coalescing into mission-driven cells and divisions, each taking on specific challenges within the macrocosm. 

Huawei, SMIC, SMEE, YMTC, ZTE etc are just the most visible tip of the iceberg. A plethora of lesser-known brands such as Origin Quantum, JCET, AMEC, Changchun Institute of Optics, CHEER Tech, etc, many of which had nearly gone out of existence, suddenly reappeared on the scene.

Would it have happened without an all-out tech war against China? 

No. 

China had always viewed chips as ordinary electronic products and as long as it could rely on a steady supply, there would be little interest in reinventing the wheel. Huawei had a huge reserve of strength and could have punched sooner – 10+ years sooner for a number of technologies.

Nevertheless, under the leadership of chief executive officer Ren Zhengfei, Huawei remained a steadfast customer for its partners such as Qualcomm, TSMC, SK Hynix, ARM, etc, emphasizing the need to preserve the global ecology of this sector. 

The High Tech War has changed all this.

This difference is key to understanding the outcome of this High Tech War. The issue is not merely Huawei’s Mate60 Pro smartphone, but rather that China is creating an entire perfectly networked universe, of which only the tip is visible.

The chessboard has morphed into today’s weiqi game, with 70% of the world on joining China, in the form of BRICS and the angiogenic growth of BRI investments, both physical and virtual.

Huawei chief financial officer Meng Wanzhou (Sabrina Meng) strongly hinted at this during September 20-22 Huawei Connect 2023 Conference. Protocols are being negotiated and a global nexus of next-wave technology – with customized security and decentralized control – is being stitched together.

A person in a red dress Description automatically generated
Meng Wanzhou speaking at the Huawei Connect 2023 Conference, September 20, 2023.  Photo:  Huawei

This sets the stage for a full spectrum of AI-aided products and services for consumers (2C), but more importantly for businesses (2B), industries, agriculture and infrastructure, all plugged into the same backbone. 

The very formation of a complete Chinese semiconductor supply chain nearly from scratch demonstrates how the backbone described by Huawei is already working.

Who else would be able to mobilize so swiftly, to create a competitive global 6G nexus?

And China hasn’t even begun to fight back.

What does this paradigm shift mean for of Brzezinski’s Game Theory? It means that the West must get out of its boxed-in zero-sum thinking and join the new, expanding multipolar world.

With its multiplicities, this multipolar world realizes the great principle 海纳百川 – the Greatness of the Ocean lies in its embracing hundreds of diverse rivers and streams into its generous, unfathomable, perpetual vastness. 

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North Korea protests to US over Minuteman III missile test

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SEOUL: According to state media KCNA on Friday( Nov 3 ), North Korea vowed to carry out military action while criticizing the United States over a recent intercontinental ballistic missile ( ICBM ) test. Without mentioning the author’s name, a military commentator for KCNA stated in an article that” TheContinue Reading

Revived Russia-N Korea alliance heralds new Cold War

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Isolated from the international community and in urgent need of weapons and ammunition to continue its fight in Ukraine, Russia has chosen to double down on its alliance with North Korea.

Although Moscow and Pyongyang have been allies for decades, recent developments point to deepening military cooperation, which may prolong the war in Ukraine and increase provocations on the Korean peninsula.

Russia reaffirmed its intentions on October 26, when the Kremlin pledged to “continue to develop close relations in all areas” with Pyongyang. Similarly, North Korean Foreign Minister Choe Son Hui warned on October 28 that North Korea’s relations with Russia will act as a “powerful strategic” element if security in the region is endangered as a result of US-led trilateral military alliance with South Korea and Japan.

The deepening of the North Korea–Russia alliance took off in July of this year when North Korean leader Kim Jong Un welcomed a Russian delegation to Pyongyang, headed by Russian Defence Minister Sergei Shoigu, to mark celebrations of the 70th anniversary of the Korean War Armistice Agreement.

The visit marked the first time North Korea had welcomed a foreign delegation since the start of the Covid-19 pandemic. Shoigu reportedly proposed trilateral naval exercises involving China and North Korea – a move that highlights just how far Moscow is willing to go to deepen cooperation with Pyongyang.

Although North Korea has yet to commit to such joint drills, Kim Jong Un expressed his interest in deepening ties with Moscow in a highly public manner by making a personal visit to Russia on September 12. The timing of the trip was bold, given recent moves by the United States to strengthen trilateral deterrence efforts against the North with South Korea and Japan.

The United States also has been accusing North Korea of supplying arms to Russia for its war in Ukraine and threatened serious consequences if Kim strikes an arms deal with Russian President Vladimir Putin. But the North Korean and Russian leaders seem undeterred.

Putin expressed his intention to help North Korea build satellites and develop its space program. He also aims to discuss further cooperation on a broad range of topics with Kim Jong Un. Although no official agreement was made public, the two leaders likely concluded a win-win deal.

The fruits of the summit seem to be materializing already. An October report indicated “a dramatic and unprecedented level of freight railcar traffic” at North Korea’s Tumangang Rail Facility on the North Korea-Russia border. According to the report, “the dramatic increase in rail traffic likely indicates North Korea’s supply of arms and munitions to Russia.”

Claimed Noth Korean solid-fuel missile launch. Photo: Yonhap

In exchange for the weapons, Russia may offer advanced military technology to help North Korea develop and expand its military capabilities.

For example, technology for the refinement of solid-fuel missiles and nuclear-powered submarines could be included in a list of North Korean requests. Ordinary North Koreans are also hoping to receive food aid from Russia.

Besides the material goods Kim may receive from Putin, the North Korean leader’s visit to Russia also served to show the world that the hermit kingdom is not as isolated as many may think. North Korea is part of its own trilateral bloc including Russia and China in opposition to the US–South Korea–Japan trilateral alliance.

The deepening ties with Moscow also serve Pyongyang’s interests in reducing its overwhelming dependence on China for aid and trade.

China is in a tricky position as it seeks to maintain North Korea as a buffer state to counter the United States while also wanting to maintain stability on the Korean peninsula and prevent the escalation of tensions. To this end, North Korea’s denuclearization would also be in Beijing’s interests as, arguably, it would call into question the need for US troops to remain in South Korea.

China faces a challenging balancing act. Russia providing North Korea with advanced military technologies would result in a more dangerous weapons program. This would likely lead to greater tensions close to China’s border. But North Korean support for Russia in Ukraine could prevent Moscow from suffering utter defeat, which would serve China’s interests by containing US power.

Given China’s strong influence, North Korea and Russia are unlikely to engage in actions that would directly hurt Chinese interests. Both North Korea and Russia will likely maintain close communication with China over the course of their deepening bilateral ties. Days after Kim left Russia, Putin hosted China’s top diplomat Wang Yi.

Putin also visited China on October 17. The news coincides with the Kremlin’s call for closer policy coordination between Moscow and Beijing to counter Western aims at the”‘double containment of Russia and China.”

With Russia, China and North Korea united against a US-led world order, Cold War-era blocs are becoming increasingly solidified. The revival of these blocs is raising tensions across continents from Europe to Asia.

Gabriela Bernal is a PhD candidate at the University of North Korean Studies, Seoul.

This article was originally published by East Asia Forum. It is republished under a Creative Commons license.

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US-Philippine defense treaty is losing credibility

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Following its predecessors, the Biden administration threatened to go to war with China after a Chinese coast guard vessel scraped a Philippines ship on a resupply mission near a shoal in the South China Sea.

Shortly thereafter, a Chinese fighter flew within 10 feet of a US bomber above the disputed tract of reefs and islets.

While US-China relations appear to be emphasizing diplomacy, with Chinese Foreign Minister Wang Yi’s visit to Washington and US representation at China’s Xiangshan Forum, its premier defense conference, a possible conflict over sandbars is likely top of mind.

However, the US pledge to go to war with a nuclear-armed China over largely uninhabited rocks and reefs – stemming from post-colonial disputes – is not credible, harms US interests and creates unnecessary regional tensions.

The United States going to war with China to defend the Philippines’ claims to rocks and reefs in the South China Sea is not credible. These islets are largely uninhabited – save for a grounded ship Manilla uses to press its claims – and strategically irrelevant.

The Sierra Madre, the grounded ship used by the Phillippines as a guard station on the Second Thomas Shoal. Photo: US Naval Institute

Although trillions of dollars in global trade traverse these waters annually, an overwhelming majority goes to China. Additionally, ships are moving objects, they can change their course. Though more expensive, merchant ships can often go around the South China Sea to reach destinations in Southeast and Northeast Asia, as well as the United States.

Strategically, controlling the small bits of territory makes little difference. While they can serve as military outposts and bases, these locations are highly vulnerable to missile bombardments. Resupplying these military installations would be difficult, as supply vessels would have to worry about missile and submarine attacks.

Their size also makes them poor staging grounds for wider invasions. If China were to invade the Philippines, it would unlikely be able to muster enough troops on the rocks for a successful landing.

More importantly, the risks to US survival are too high and opportunity for tangible gains too little for Washington to be serious about its threat to defend disputed rocks and reefs.

America is highly unlikely to risk nuclear war or an equally deadly conventional war over a single Filipino ship or plane – let alone a small group.

The United States did not declare war on North Korea when it sank a South Korean ship and bombarded an island, nor did Washington mobilize when a Chinese boat – likely linked to China’s government – collided with two Japanese coast guard vessels in 2010.

Such moves would set negative precedents for US allies, signaling that Washington is willing to back their territorial claims – even potentially irredentist and imperialist ones – and disproportionality at the expense of US interests.

Just like the Philippines, China cares far more about its South China Sea claims than the United States for nationalist and territorial integrity reasons. The islets are also an essential pillar of China’s Century of Humiliation narrative and factor into the Chinese Communist Party’s legitimacy.

As such, the disputed territory is part of Beijing’s “core interests” – national interests in which China will use force to defend. Moreover, China’s geographic proximity – despite the US military presence in the Philippines – gives it the edge.

Instead of focusing on defending rocks and reefs in the Western Pacific, Washington should reorient its alliance with Manilla to be purely defensive and aimed at protecting the Philippines’ home islands. The new policy could enhance military training, defensive planning and coordination, and defensive arms sales centered on the Filipino homeland.

At the same time, Washington should publicly and privately signal that America would only come to the Philippines’ aid if one of its main islands is attacked unprovoked. This would likely restrain the Philippines from risking activities that could embroil it in a conflict with China and, therefore, reduce regional tensions.

Further underscoring the purely defensive nature of the alliance, Washington should also rule out using its bases in the Philippines as a staging ground to defend Taiwan. Manilla would not only agree with this, but it would be in the Philippines’ interest. It could help protect them from becoming collateral damage from a Chinese invasion of Taiwan.

The Philippine Coast Guard vessel BRP Cabra encounters two Chinese Coast Guard ships blocking its path on August 22, 2023, while sailing to the Second Thomas Shoal in the disputed South China Sea. Photo: Twitter Screengrab / Jakarta Post

This would also help reduce tensions in the South China Sea – as closer US-Philippines defense ties are likely contributing to increased Chinese assertiveness. Southeast Asian nations would also appreciate reduced regional tensions to focus on improving their people’s livelihoods, which would also improve America’s standing in the economically important region.

Washington’s commitment to go to war over some rocks and reefs in the South China Sea lacks credibility. The area is simply not economically or strategically important enough to risk US survival.

Transforming the Philippines alliance into a purely defensive one would better secure American interests, improve its credibility, and reduce regional tensions. America should act now before it’s too late. 

Quinn Marschik is a contributing fellow at Defense Priorities.

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MSCI makes new client coverage leadership appointments in Asia | FinanceAsia

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New York-headquartered financial services provider, MSCI, announced yesterday (October 30) via media note two leadership appointments across the firm’s Asian client coverage teams.

Ryoya (Tera) Terasawa has been appointed as head of Japanese client coverage, based in Tokyo. Meanwhile, Chitra Hepburn has taken on the role of head of South and Southeast Asia client coverage, from Singapore.

Terasawa’s new role takes immediate effect and sees him report to Kazuya Nagasawa, head of Asia Pacific (Apac) client coverage. He will lead the team’s commercial activities in the Japanese market, managing key client relationships.

“Tera will lead MSCI’s go-to-market strategies, drive revenue growth across new business and renewal targets, and represent MSCI in Japan. Teras will also partner closely with key stakeholders and product management globally to deliver a cohesive, solutions-driven strategy for our clients in Japan,” a spokesperson for MSCI told FinanceAsia.

Prior to his new role, Terasawa spent over 23 years with JP Morgan, most recent serving as head of Japan sales and marketing, dealing with institutional clients. His past expertise spans areas including fixed-income derivatives sales, and equity derivatives trading and structuring.

“We will continue to strengthen commercial success in the Japan market and capitalise on accelerating growth across all client segments in Japan,” the spokesperson noted.

In Singapore, Hepburn started her new South and Southeast Asian role on October 16, also reporting to Nagasawa. The new post is an expansion of her current remit as Asia-based leader of environment, social and corporate governance (ESG) and climate client coverage.

“We are confident that under Chitra’s strategic leadership, the South and Southeast Asia region will continue to scale and achieve newer heights,” the contact said. She confirmed that Hepburn will remain responsible for MSCI’s ESG and climate business across Apac.

Hepburn joined MSCI in Singapore in 2019 to lead the firm’s regional ESG and climate business, after over two years serving as managing director with software provider, ESG Global, according to her LinkedIn profile. She has 15 years of project finance experience in investment banking, and over six years of extensive experience in China, focussing on corporate development and cleantech investments.

“I am confident that we will continue to build on our capabilities to support the huge demand from our clients in the region, as institutional investors are increasingly integrating climate transition into their mainstream investment strategies,” she told FA.

MSCI is expected to release its 2023 third quarter (Q3) earnings later today, US-time. 

As of June 2023, the firm’s ESG and climate operating revenues in Q2 stood at $71.2 million globally, up 29.2% from a year ago. The growth was attributed to strong growth from recurring subscriptions related to ratings, climate and screening products. Meanwhile, MSCI’s total operating revenues in 2023 Q2 increased by 12.6% year-on-year to reach $621.2 million.

Commenting on both appointments, Nagasawa noted in the announcement: “This is an important testimony to the value we place on these Apac markets and on our growing commitment to them.”

“I am confident that their wealth of experience working across client segments and deep industry insights, will be key to ensuring we bring the best products and solutions to our established and growing client base in the region.”

¬ Haymarket Media Limited. All rights reserved.

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Japan reminds world why it’s stuck in QE quicksand

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TOKYO – The Bank of Japan bowed to financial realpolitik Tuesday (October 31) by allowing bond yields to top 1%. But Governor Kazuo Ueda remains tethered to a level of policy unreality sure to keep the yen under strong downward pressure.

Ueda’s step was the tiniest the BOJ could have gotten away with without shoulder-checking global markets. It means far less than currency traders may think in terms of when and how Japan might exit a 23-year-old quantitative easing (QE) experiment.

The BOJ meeting “ended up somewhat confusingly but largely dovish leaving the yen still vulnerable to a further sell-off versus the dollar,” says Gary Dugan, chief investment officer at Dalma Capital.

In fact, the events of the last month might have ensured that Ueda’s team remains stuck in the QE quicksand longer than markets appreciate.

Since taking the helm in April, Ueda has been testing markets’ readiness for BOJ “tapering.” It hasn’t gone well so far. A move in late July, for example, to let 10-year bond yields rise from 0.5% to 1% sent the yen higher than Tokyo expected.

In the weeks that followed, the BOJ executed countless large and unscheduled bond purchases. That signaled to traders that the July tweak was inevitable given the surge in US yields to 17-year highs and that overall BOJ rate policies hadn’t changed. It was similar to the one-step-forward-two-steps-back maneuver the BOJ pulled off in December.

Tuesday’s tweak is more of the same. As US rates continue drifting upward, causing extreme tensions between dollar and yen rates, the BOJ has no choice but to adjust. After all, it remains to be seen how many more US tightening moves are in store for global markets. News that US gross domestic product (GDP) rose at a 4.9% annualized pace in the third quarter upped the odds the Federal Reserve will keep hiking rates.

Yet Ueda’s challenge grew markedly bigger this month for other reasons, too. One is the sudden explosion of violence in the Middle East. The Hamas-Israel war threatens to accelerate increases in oil prices, adding to inflation risks caused by Russia’s 2022 Ukraine invasion. Japanese inflation is running the hottest in three decades at close to 3% year on year.

Significantly, the BOJ raised its inflation forecast to 2.8% from 2.5% for fiscal 2023. For 2024, price expectations have been raised to 2.8% as well.

But even as commodity price surges warrant tighter policies, China’s economic downshift is pulling BOJ priorities in the other direction. In October, mainland factory activity slid back into contraction, while the services sector slowed more than expected.

The manufacturing purchasing managers index dropped to 49.5 from 50.2 in September. Non-manufacturing activity fell to 50.6 from 51.7.

“China’s economic activity fell to an extent, and the foundation for a continued recovery still needs to be further solidified,” says Zhao Qinghe, senior statistician at China’s National Bureau of Statistics. Economist Raymond Yeung at Australia & New Zealand Bank adds this “downside surprise” means Beijing “will still need to deliver growth-supportive policy.” 

As Japan’s top trading partner stumbles, exporters are bracing for a rough 2024. That’s dimming hopes that Japan Inc might boost wages, kicking off a virtuous cycle of income and consumption gains.

As headwinds mount, Prime Minister Fumio Kishida’s government is rushing to roll out fresh stimulus. They include proposals for tax cuts for the middle class, reduced corporate levies and cash handouts to households facing higher inflation.

Japanese Prime Minister Fumio Kishida’s ‘new capitalism’ looks a lot like the old. Photo: Government of Japan

The large and growing price tag for fiscal initiatives could increase pressure on the BOJ to add more, not less, liquidity. Otherwise, government bond yields might surge, adding to financial pressures on banks and households.

Yet Kishida’s latest proposals complicate Ueda’s options in another way. By shoveling fiscal money to fill economic holes, the ruling Liberal Democratic Party is treating the symptoms of Japan’s troubles, not the underlying ailments.

As inflation spikes higher, Kishida’s approval ratings are plummeting, currently around 29%, to the lowest of his two years in power. Hence the rush to ramp up fiscal stimulus efforts.

Missing, though, are proposals to raise Japan’s political game. When he took power in October 2021, Kishida pledged to implement a “new capitalism” plan to spread more equitably the benefits of economic growth.

Part of the strategy was addressing the unfinished business from the “Abenomics” era, reference to Shinzo Abe’s 2012-2020 premiership, the longest in Japan’s history.

Abe promised a supply-side revolution the likes of which modern Japan had never seen. It included moves to loosen labor markets, reduce bureaucracy, boost innovation and productivity, empower women and restore Tokyo’s place as Asia’s premier financial center for multinational companies and stock listings.

Mostly, Abe leaned on the BOJ to supersize QE. In March 2013, he hired Haruhiko Kuroda as governor to turbocharge an experiment that the BOJ pioneered in 2000 and 2001.

Within five years, Kuroda’s binging on bonds and stocks pushed the BOJ’s balance sheet above $4.9 trillion, topping Japan’s annual GDP. A resulting plunge in the yen boosted exports, juicing the stock market and generating record corporate profits.

Yet Abe’s team put very few reform wins on the scoreboard. Other than steps to strengthen corporate governance, the Abe era failed at nearly every turn to recalibrate growth engines, level playing fields and give chieftains confidence to fatten paychecks.

One big concern is that Tokyo’s same-old-same-old policy approach has lost potency over time. Economist Sayuri Shirai at Keio University notes that, this time a falling yen isn’t altering Japan’s export and trade deficit dynamics like in the past. Industrial production and corporate investment also “remain sluggish,” says Shirai, a former BOJ policy board member.

“While the government’s revenue is increasing due to inflation-induced income and consumption taxes, this is essentially a tax hike,” she explains. “Wage growth has not caught up with the rate of inflation. Given rising government and corporate debt, a rapid interest rate hike is likely to cause significant stress to the economy.”

But weak exchange rates leave Japan uniquely vulnerable to surging energy and food prices. This dynamic is colliding with a domestic economy that might not be ready for a shift away from ultraloose monetary policy. One big worry: the risk of a Silicon Valley Bank-like blowup amongst Japan’s 100-plus regional lenders.

Worries about another SVB abound in the US, too. As Fed Chairman Jerome Powell’s team mulls another rate hike — perhaps as soon as November 1 – investors are scouring the financial landscape for the next bank that might buckle under the pressure of rising US yields.

A relentlessly strong dollar is also raising default risks in Asia, particularly in China. It’s making offshore debt harder to manage.

“The greenback continues to draw smaller benefits from strong US data and high rate advantage than it should, likely due to its overbought status, but upside risks remain predominant,” says Francesco Pesole, an analyst at ING Bank.

Analyst Adam Button at ForexLive says the constant threat that Japan’s Ministry of Finance might intervene to support the yen is capping the dollar’s gains – at least for now. But the dollar, Button notes, “should be stronger than it is this week, and I think it’s just a matter of time until it materializes.”

In general, though, traders need to figure out where both US and Japanese rates are heading to know where risks lie. “Additional positioning doesn’t really make sense until those two key risk events are out of the way,” says Bipan Rai, currency strategy at CIBC Capital Markets.

The fragility of Japan’s sprawling regional bank network remains a clear and present danger to Asia’s second-biggest economy. Many of these lenders service rapidly aging communities in already sparsely populated areas of the country. That squeezed profits well before the banking shocks of the last 15 years, including fallout from the 2008 “Lehman shock.”

That crisis, fast-aging customer bases and an accelerating exodus of companies to Tokyo had regional banks these last 15 years hoarding government and corporate bonds instead of lending the credit the BOJ has been churning out. It was a similar practice that blew up SVB and New York-based Signature Bank.

Earlier this month, Japan’s Financial Services Agency telegraphed efforts to stress-test at least 20 banks to surface any SVB-like landmines across the nation. Part of the worry is the specter of similar social-media-fueled bank runs.

No developed economy prizes stability and financial market decorum more than Japan. And few, if any, face greater concerns about hidden cracks than Japan with scores of fragile regional banks in harm’s way.

Photo. Reuters / Yuya Shino
The Bank of Japan has some tough decisions to make. Image: Asia Times Files / Reuters

At the start of 2023, SMBC Nikko Securities estimated that regional leaders were sitting on about $10.5 billion of unrealized losses on foreign bonds and other securities. That has Ueda’s team wondering how big losses might become if government bond yields rose to 2% or even higher.

The comparisons between midsize banks in the US and Japan are limited, of course. SMBC Nikko analyst Masahiko Sato argues that the average threat to capital ratios is only about 2%. Therefore, Sato does “not think potential losses are on a scale with systemic implications.”

At the same time, many of Japan’s regional lenders, like SVB, tend to prioritize bonds that can be sold rather than holding debt to maturity. But BOJ tapering or even a rate hike or two could change this calculus, and fast.

If regional banks face profit pressures with rates at zero, the fallout from a big rate pivot by Ueda could be extreme. This could explain in part why “markets are seemingly underpricing the risks of an early normalization,” says Charu Chanana, a senior market strategist at Saxo Capital Markets.

Stefan Angrick, senior economist at Moody’s Analytics, says “this doesn’t rule out the BOJ dropping negative rates at some point — we speculate this may happen in April 2024, after the spring wage negotiations that year.”

But, he concluded, “it suggests that the way forward is towards zero interest rate policy with some form of quantitative easing, rather than a sharp lift-off on the short end.”

Follow William Pesek on X at @WilliamPesek

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