MNI EUROPEAN OPEN: RESEND: Japanese Gov’t Pushes Back Against Need To Tweak BoJ Accord After Source Reports

EXECUTIVE SUMMARY

• FED NEEDS HIGH RATES FOR ‘A WHILE’ TO COOL PRICES, MESTER SAYS (BBG)
• FED STILL HAS A ‘LONG WAY’ TO GO TO DEFEAT INFLATION, DALY SAYS (BBG)
• ITALIAN MINISTERS STEP UP ECB CRITICISM, WARN OF CREDIT CRUNCH (BBG)
• UK BRACES FOR WIDESPREAD STRIKES AS GOVERNMENT DIGS IN (FT)
• UK MINISTERS TO OFFER BUSINESS ENERGY SUPPORT PACKAGE UNTIL EARLY 2024 (FT)
• JAPAN GOVERNMENT DENIES PLANS TO REVISE ACCORD WITH BOJ (BBG)
• EU MULLS LOWER GAS-PRICE CAP IN LATEST PLAN TO LIMIT CRISIS (BBG)
• U.S. BEGINS BUYING BACK OIL FOR STRATEGIC PETROLEUM RESERVE (RTRS)

Fig. 1: 10-Year JGB Yield Vs. Japan 10-Year Swap Rate

Source: MNI - Market News/Bloomberg

UK

ENERGY: The UK is encouraging consumers to cut their energy use as part of a campaign aimed at scaling back demand for power and natural gas in the face of soaring bills this winter. (BBG)

ENERGY: Rishi Sunak has abandoned his predecessor's plan to intervene in global energy markets by spending billions of pounds on foreign gas imports. (Sky)

FISCAL/ENERGY: Ministers are close to finalising plans for a two-pronged package of support for businesses to help with energy costs all the way through next winter — when prices are feared to rise sharply again — and into spring 2024. (FT)

FISCAL/ECONOMY: Britain is bracing for one of the most disruptive weeks of strike action in recent history after the government signalled its determination to face down the unions despite calls for pay negotiations from health leaders and some Conservative MPs. Nurses, ambulance workers, customs and immigration staff, postal and rail workers will all walk out in the coming days. (FT)

ECONOMY: The UK has already entered a “shallow and protracted recession” that will hit living standards and last until the end of next year, according to a new analysis. (The Times)

BANKS/MARKETS: City of London heads have backed the government’s financial services reforms as necessary to keep London competitive outside of the EU, even if the unwinding of safeguards from the last financial crisis increases risk. However, many of the FT’s City Network — a 50-strong group of senior executives — did not believe that chancellor of the exchequer Jeremy Hunt’s “Edinburgh reforms” were significant enough to yield a second “big bang” for the City of London. (FT)

EUROPE

ECB/ITALY: Italian Defense Minister Guido Crosetto and Foreign Minister Antonio Tajani stepped up criticism of the European Central Bank’s latest rate increase and President Christine Lagarde’s hawkish rhetoric. (BBG)

GERMANY: German natural gas trader Uniper expects the European Commission to decide in coming days on whether Germany's planned bailout of the company violates state aid rules, its chief executive said, adding that any approval was likely to be tied to conditions. (RTRS)

BANKS: Swiss National Bank President Thomas Jordan has voiced support for Credit Suisse Group AG doing less investment banking, as the lender struggles to recover from billions in losses over the past two years, recent client defections and asset outflows with a strategy revamp. (BBG)

U.S.

FED: Federal Reserve Bank of Cleveland President Loretta Mester said her estimate for interest rates is higher than that of her colleagues and the central bank needs sustained tight policy to defeat inflation. (BBG)

FED: Federal Reserve Bank of San Francisco President Mary Daly said policymakers are committed to lowering inflation and are not close to accomplishing that task. (BBG)

FED: Minneapolis Fed President Kashkari tweeted the following on Friday: “These developments more likely to raise investment and thus raise R*. Higher R* doesn't argue for higher inflation target (actually the opposite).” This came in response to a tweet from hedge fund manager Bill Ackman, who suggested that “The @federalreserve 2% inflation target is no longer credible. De-globalization, the transition to alternative energy, the need to pay workers more, lower-risk, shorter supply chains are all inflationary. The Fed cannot change its target now, but will likely do so in the future.” (MNI)

FED: The Federal Reserve may avoid hiking interest rates beyond 5% if inflation keeps slowing while resisting pressure to cut for longer than investors expect, former vice chairman Alan Blinder told MNI. (MNI)

INFLATION/DATA: The Bureau of Labor Statistics said Friday that it found no evidence its systems were compromised or that there was any suspicious activity around the release of the US consumer price index earlier this week. (BBG);

CORONAVIRUS: As Covid and flu hospitalizations have climbed in the weeks since Thanksgiving, White House’s Covid-19 coordinator Dr. Ashish Jha said families will be safer at upcoming holiday gatherings if they get their updated vaccines. (CNBC)

POLITICS: The Jan. 6 select committee is preparing to vote on urging the Justice Department to pursue at least three criminal charges against former President Donald Trump, including insurrection. (POLITICO)

POLITICS: Rep. Adam Schiff, D-Calif., said Sunday that the House Jan. 6 committee has evidence that former President Donald Trump broke the law, but he declined to get specific about the criminal referrals it could make ahead of the panel's final meeting Monday. (NBC)

POLITICS: House Republicans are privately plotting to release their own 100+ page rebuttal timed to the January 6 committee report this week, Axios has learned. (Axios)

POLITICS: Sen. Joe Manchin (D-W.Va.) punted a question Sunday about whether he would leave the Democratic Party, saying "I’ll let you know later what I decide to do." (Axios)

EQUITIES: The head of Elon Musk’s family office has approached investors who helped the billionaire buy Twitter for $44bn in October to try and raise new funds as the social media company continues to bleed cash and faces heavy interest payments on its debts. (FT)

EQUITIES: Elon Musk launched a poll on Sunday asking: "Should I step down as head of Twitter?” (RTRS)

OTHER

UK/CHINA: China poses "a significant threat" to the UK and the government should move to curb its dependence on the superpower to enable it to respond to aggression or abuses by Beijing, MPs have said. (Sky)

GLOBAL TRADE: Germany has become even more dependent on Huawei for its 5G radio access network equipment (RAN) than in its 4G network despite growing worries about Chinese involvement in critical infrastructure, according to a new report. (RTRS)

GLOBAL TRADE: Tensions between the world's two superpowers are "distorting" the semiconductor market and erasing the benefits of globalization, the CEO of the world's top contract chipmaker said on Saturday in a speech that also expressed reservations over the global rush by countries to bring chip production onshore. (Nikkei)

GLOBAL TRADE: Taiwan’s government said on Saturday it would fine Foxconn, the world's largest contract electronics maker, for an unauthorized investment in a Chinese chipmaker even after the Taiwanese company said it would be selling the stake. (RTRS)

GLOBAL TRADE: EU member states have reached a deal on the world’s first major carbon border tax, finalising the details early on Sunday in the face of claims from the bloc’s key trading partners that the levy creates protectionist trade barriers. (FT)

BOJ: Japan’s top government spokesman denies reports of plans to revise a 10-year-old accord with the central bank that pledges to achieve 2% inflation. (BBG)

BOJ: The Bank of Japan (BOJ) must make its monetary policy framework more flexible and stand ready to raise its long-term interest rate target next year if the economy can withstand overseas risks, former deputy governor Hirohide Yamaguchi told Reuters. (RTRS)

BOJ: The Bank of Japan could discuss changes to its easy policy framework as early as June as the government considers revising its joint statement with the central bank on its inflation target, with a mid-year timeframe allowing the new governor time to conduct a policy review and assess wages growth, MNI understands. (MNI)

BOJ: The Bank of Japan (BOJ) could unwind its ultra-loose monetary policy between March and October next year, according to almost half the economists in a Reuters poll on Monday, much sooner than predicted in previous projections. (RTRS)

AUSTRALIA/CHINA: Foreign Minister Penny Wong will visit Beijing on Tuesday to meet with her Chinese counterpart, the latest breakthrough in the Albanese government’s bid to stabilise relations with Australia’s largest trading partner. (Sydney Morning Herald)

SOUTH KOREA: South Korea’s finance minister said on Monday the economy is slowing at a more rapid pace than previously expected and would bottom in the first half of next year. (RTRS)

SOUTH KOREA: Banks will resume bond sales "gradually" in a way that doesn't burden the market amid lingering worries over a credit crunch, Seoul's financial regulator said Monday. (Korea Times)

NORTH KOREA: North Korea fired two ballistic missiles towards the sea off the Korean Peninsula’s east coast on Sunday, South Korea’s military said. (CNBC)

NORTH KOREA: North Korea's state media KCNA said on Monday the country conducted an "important, final phase" test on Sunday for the development of a spy satellite, which it seeks to complete by April 2023. (RTRS)

HONG KONG: Hong Kong’s status as an international financial center hinges on ensuring investors have confidence that the city follows the “conventional” rule of law in place in other global hubs and maintaining its special role as a bridge between the world and China, according to Ashley Alder, the outgoing top market regulator. (BBG)

NORTH AMERICA/RATINGS: A mild recession, stubborn inflation and tighter financial conditions are the main features of the 2023 deteriorating sector outlook for the U.S. and Canada. (Fitch)

TURKEY: Turkish President Recep Tayyip Erdogan’s rival may not be able to rule the country even if he wins the country’s presidential race, the head of Turkey’s top electoral body said. (BBG)

RUSSIA: Ukraine is bracing for the possibility that Russia will sharply escalate the war in a winter offensive as Moscow tries to turn the tide on the battlefield and limit political backlash at home, a senior adviser to President Volodymyr Zelensky said on Sunday. (New York Times)

RUSSIA: UK Prime Minister Rishi Sunak will announce a major new artillery package for Ukraine at the Joint Expeditionary Force gathering on Monday in Riga, Latvia, according to a statement from his office. (BBG)

RUSSIA: The European Union implemented a new sanctions package on Russia Friday that officials hope will significantly relieve food-security problems facing developing and poor countries. (WSJ)

SOUTH AFRICA: Delegates of South Africa's ruling African National Congress (ANC) gathered on Sunday to choose a new party leader, pitting President Cyril Ramaphosa against former health minister Zweli Mkhize. (RTRS)

SOUTH AFRICA: South African state power utility Eskom said on Sunday it will decrease rotational power cuts to "Stage 5" from "Stage 6" on Monday morning at 05.30 a.m. (RTRS)

SOUTH AFRICA: South Africa has started deploying its army at power stations as theft and vandalism adds to the inability of state-owned utility Eskom Holdings SOC Ltd. to meet electricity demand. (BBG)

SOUTH AFRICA: South African Finance Minister Enoch Godongwana said plans for the government to take over part of the troubled state power utility’s debt remain on track and the pending departure of its chief executive officer hasn’t affected negotiations with bondholders. (BBG)

PERU: Peruvian President Dina Boluarte, who has said she is leading a transitional government, urged the country's Congress to pass a proposal to bring forward general elections in a news conference from the presidential palace on Saturday. (RTRS)

EQUITIES: The world’s biggest money managers are set to unload up to $100 billion of stocks in the final few weeks of the year, adding to a selloff that’s snowballed since Jerome Powell’s unequivocal message that policymakers will press on with aggressive tightening at the risk of job cuts and a recession. (BBG)

ENERGY: European Union member states will on Monday discuss a gas-price cap that’s almost one-third lower than an original proposal as they attempt to break a deadlock over the controversial proposal to contain the impact of a historic energy crisis. (BBG)

ENERGY: Germany has opened its floating liquefied natural gas terminal in the North Sea port of Wilhelmshaven, marking a crucial milestone in its quest for energy independence from Russia. (FT)

OIL: The U.S. Energy Department said on Friday it will begin buying back oil for the Strategic Petroleum Reserve, or SPR, the first purchase since this year's record 180 million barrel release from the stockpile. (RTRS)

OIL: Workers in Iran’s key oil and gas sector went on strike in several districts on Saturday as Iran’s anti-regime protests entered their fourth month. (BBG)

OIL: A winter blizzard sweeping across the northern United States has cut North Dakota's oil output by 200,000 to 250,000 barrels per day (bpd), or 18% to 22%, state Pipeline Authority Director Justin Kringstad estimated on Friday. (RTRS)

OIL: Colombia is targeting a 15% increase in crude oil output by using "enhanced recovery" technologies to take advantage of higher energy prices, even as it pushes towards decarbonization, Minister for Mines and Energy Irene Velez said in an interview. (RTRS)

CHINA

CORONAVIRUS: More than a month after China started seeing an exponential surge in Covid cases, the country has only reported two virus deaths, defying the experience of other, more vaccinated and better resourced places as they reopened and fueling suspicion the true scale of fatalities is being hidden. (BBG)

CORONAVIRUS: Medical institutions should build a hierarchical diagnosis and treatment system for senior patients, Chinese experts said, as the protection of the vulnerable groups has shifted to be the focus of the country's COVID-19 prevention and treatment since many epidemic restrictions were dismantled. (Global Times)

CORONAVIRUS/ECONOMY: Chinese companies are reeling from a coronavirus wave that is immobilising workforces, threatening to close down factory production lines and bringing chaos to supply chains as truck drivers succumb to Covid-19, disruptions which analysts say will bring short-term pain but speed up China’s exit from pandemic isolation. (FT)

CORONAVIRUS: Shanghai's education bureau has asked most grades in primary, middle and high school to hold classes online from Monday as worsening COVID-19 infections hit major cities across China. (RTRS)

CORONAVIRUS: Macau's government said on Monday that it would cancel its regulations on risk zones in mainland China starting from Tuesday, the latest unwinding of stringent COVID-19 rules that have hammered revenues in the world's biggest gambling hub. (RTRS)

ECONOMY: China will eye rapid economic growth next year, said economists when attending the 2023 Global Times Annual Conference on Saturday, as a slew of measures to tackle major risks as well as promote an overall improvement in economic operations will be implemented after the tone-setting central economic meeting. (Global Times)

ECONOMY: China’s economic rebound next year depends on a recovery in aggregate demand, according to Zhu Min, former Deputy Managing Director at the International Monetary Fund. (MNI)

ECONOMY: Defusing real estate market risk and boosting domestic demand are the top priorities following the Central Economic Work Conference (CEWC), according to Han Wenxiu, the Deputy Director of Central Financial and Economic Commission. (MNI)

ECONOMY: China's business confidence hit its lowest level since at least January 2013, a survey by World Economics showed on Monday, reflecting the impact of surging COVID-19 cases on economic activity and hinting at possible recession next year. (RTRS)

PBOC: Banks may be reluctant to offer lower quotes on the five-year Loan Prime Rate (LPR) due to a rise in wholesale funding costs, despite concerted efforts by China’s government to stabilise the troubled property sector, advisers and analysts said. (MNI)

PBOC: The intensity of monetary policy next year should be no less than this year’s, with sufficient liquidity to meet the needs of the real economy and maintain stable prices for funds, the Securities Times reported citing Liu Guoqiang, deputy governor of the People’s Bank of China. (MNI)

CHINA MARKETS

PBOC NET INJECTS CNY83 BILLION VIA OMOS MONDAY

UP TODAY (TIMES GMT/LOCAL)

Date	GMT/Local	Impact	Flag	Country	Event
19/12/2022	0800/0900			EU	ECB de Guindos Speech at Economia Forum
19/12/2022	0900/1000	***		DE	IFO Business Climate Index
19/12/2022	1000/1100	**		EU	Construction Production
19/12/2022	1100/1100	**		UK	CBI Industrial Trends
19/12/2022	1330/0830	*		CA	Industrial Product and Raw Material Price Index
19/12/2022	1500/1000	**		US	NAHB Home Builder Index
19/12/2022	1630/1130	*		US	US Treasury Auction Result for 13 Week Bill
19/12/2022	1630/1130	*		US	US Treasury Auction Result for 26 Week Bill