TOKYO: The Bank of Japan appears to have accomplished a tactical masterstroke in giving Prime Minister Shinzo Abe an ambitious inflation target and an “open ended” commitment to buying assets, without expending any of its policy firepower.
At least that is financial markets’ initial read. Japan’s central bankers see it differently; a hard-fought compromise that allowed the Bank of Japan to fend off the most serious threat to its 15-year independence, but which left it obliged to carry out more radical policies in the future.
“For the BOJ, once the law is revised it’s game over,” said a source familiar with policymaker thinking. The source spoke on condition of anonymity due to the sensitivity of discussing central bank issues.
Markets were less than impressed with the BOJ measures. The yen, which fell steadily in the buildup to the meeting on expectations of bold action, has risen. Tokyo’s Nikkei average, which rose in the hope a weaker yen would boost exports, fell on Wednesday to a three-week closing low.
The disappointment is based on the fact that the BOJ’s open-ended asset purchases will only begin next year and will expand the central bank’s balance sheet by a relatively modest 10 trillion yen ($ 114 billion). The BOJ topped up its existing asset buying program by 46 trillion yen in 2012 alone.
It will not boost asset purchases this year beyond its existing program and refrained from taking on longer-dated bonds or risky assets, a sign it remains cautious, not bold.
Abe lauded the BOJ decision as “epoch making” and the government’s top spokesman said he now saw less need to revise the BOJ Law guaranteeing its independence, given the central bank’s commitment to a new price target. That suggested the BOJ had bought some time.
“They’ve been very smart, getting the government not to change the BOJ law without doing anything that dramatically different,” said Neale Vincent, strategist at Nomura Securities in Tokyo.
As time goes by a different picture could emerge. By committing in a joint statement with the government to double its inflation target to 2 percent, the BOJ gave politicians a pressure button that could be pressed at any time given doubts the country can achieve such an inflation level anytime soon.
It has experienced 2 percent inflation in only a handful of months since the late 1990s.
The next trigger point is likely to be the appointment of a successor to BOJ Governor Masaaki Shirakawa in two months time, analysts say. Abe has made no secret of the fact he wants a governor in office more sympathetic to his views and once in place Abe could press his advantage.
The government will also review progress in achieving the inflation target on a quarterly basis at its top economic panel.
At the next such review in April, it is almost certain the target will not have been met. Both headline consumer prices, or the more closely watched core consumer index that excludes volatile fresh food prices, have struggled to rise beyond 0.5 percent at any point in several years.
“Abe seems to be quite happy with the new inflation target, so I don’t think he will pressure the BOJ into acting again next month. But there could be one more easing by April,” said Izuru Kato, chief economist at Totan Research Institute in Tokyo.
“Much will depend on the economic outlook and the future direction of the yen,” he said.
When bolder action from the BOJ is needed, the new open-ended approach gives the central bank more flexibility. It can increase monthly purchases if it needs to roll over huge amounts of treasury discount bills.
If it wants to expand its balance sheet, it can extend the maturity of government bonds it accepts to five years from the current three years, the sources say.
There is not much to stop the board from boosting the volume of monthly asset purchases, shifting to longer-dated bonds or bringing forward its launch — all of which would make it into a much more potent stimulus.
To be sure, the central bank managed to push back on several fronts in its policy battle with the government. It avoided setting a deadline for achieving the inflation target and avoided adding job growth to its mandate, which it sees as problematic because of the government’s role in influencing both factors.
The statement also included a caveat that meeting the inflation target depended on government efforts to lift the economy’s long-run growth potential, and obliged the government to provide assurances that it will respect fiscal discipline.
“The BOJ threw the ball back in the government’s court,” said Daisuke Karakama, market economist for Mizuho Corporate Bank in Tokyo.
Although further government pressure on the BOJ is likely in the months ahead, the central bankers may find allies in unlikely places. Some politicians are growing wary of pushing the BOJ too hard, fearing that threats to its independence could scare investors into selling bonds en masse, an unappetizing prospect for a country with the biggest debt burden among industrialized nations.
Japan’s aggressive push for monetary stimulus and resulting yen decline have also sent ripples abroad, which may temper how hard Abe’s government pushes the BOJ.
Both International Monetary Fund chief Christine Lagarde and Bundesbank chief Jens Weidmann have voiced concerns about threats to the BOJ’s independence. Russia and Germany have warned Tokyo is contributing to a global liquidity glut that risks competitive currency devaluations.
“Japan cannot afford a diplomatic row over currency. It’s mindful of the risk of going too far,” said another source familiar with policymakers’ thinking.
Bank of Japan: A hard-fought compromise
Bank of Japan: A hard-fought compromise
Saudi POS spending hits $4bn pre-Adha, fueled by increased spending across all sectors
RIYADH: Saudi Arabia’s point-of-sale transactions climbed 33 percent to SR15.5 billion ($4.15 billion) in the week preceding Eid Al-Adha, driven by increased spending across all sectors.
The latest data from the Saudi Central Bank, also known as SAMA, showed that the clothing and footwear sector led the growth seen in the week ending May 31, registering the largest jump in transaction value, up 72.7 percent to SR1.2 billion.
The sector also saw a 61.6 percent rise in the number of transactions, reaching 8.6 million.
The education sector followed, recording a 61.6 percent increase in transaction value to SR242.1 million. Telecommunication spending ranked next, rising 44.5 percent to SR136.2 million, with transactions up 19.9 percent to 2.1 million.
Food and beverages — the sector with the biggest share of total POS value — recorded a 34.2 percent increase to SR2.2 billion.
Transportation spending rose 29.7 percent to SR898.8 million, while restaurants and cafes saw a 24.3 percent increase, totaling SR2 billion and claiming the second-biggest share of this week’s POS.
The smallest spending gains were in hotels, rising by 9 percent to SR207.5 million, and construction and building materials, which increased by 12.9 percent to SR267.6 million.
Health outlays rose by 28.4 percent to reach SR952.8 million, while the public utilities sector increased by 29.1 percent to SR55.3 million.
Spending on electronics followed the trend, rising 23.1 percent to SR187.2 million, and recreation and culture edged up 42.5 percent to SR324.3 million.
Miscellaneous goods and services claimed the third-largest share of total transactions value, with an uptick of 34.4 percent to SR1.9 billion.
The top three categories — food and beverages, miscellaneous goods and services, and clothing and footwear — accounted for 39.9 percent of the week’s total spending, amounting to SR6.2 billion.
Geographically, Riyadh dominated POS transaction value, with expenses in the capital reaching SR5.4 billion, a 42.7 percent increase from the previous week.
Jeddah followed with a 27.7 percent rise to SR2.1 billion, while Dammam ranked third, up 25.1 percent to SR776.5 million.
Hail saw the biggest weekly increase in transaction value, inching up 52.6 percent to SR262.6 million, followed by Tabuk with a 51.3 percent uptick to SR323.6 million.
Hail recorded 4.3 million deals in transaction volume, up 24.7 percent, while Tabuk reached 5.2 million transactions, rising 21.1 percent.
Hong Kong-based Gaw Capital plans to step up Middle East investments
- Gaw Capital targets UAE, Saudi Arabia for investments
- Firm plans separate investment vehicle for Middle East
HONG KONG: Gaw Capital plans to bolster investments in the Middle East, its top executive said, as the Hong Kong-based multi-asset investment manager looks to tap into the post-COVID boom in the region’s real estate and other industrial sectors.
Christina Gaw, Gaw’s managing principal and global head of capital markets, said the firm is looking at real estate and other businesses in the UAE and Saudi Arabia as their population has a large demand for real assets.
Gaw acquired a residential building in Abu Dhabi in May for more than $150 million, and signed a pact in November with Expo City Dubai and Lingang Group to explore creating the Expo Life Science Park in Dubai.
The firm, which had $34.4 billion of assets under management as of the end of 2024, expects to close another deal in the region in the second half of the year, said Gaw, whose two elder brothers founded the company in 2005.
Gaw’s interest in the Middle East comes against the backdrop of a post-pandemic property boom there, fueled by business demand and foreign investment.
“(The Middle East) is very wealthy, what can you bring to them? It’s the expertise ... they want to attract talents and different businesses,” Gaw said in an interview. “And we have tenants and business who want to expand there, so we act as a bridge ... to provide them funding and local connections.”
The firm plans to set up a separate vehicle to build an investment track record in the Middle East first before using its main funds in the future.
Gaw, whose main focus has been Greater China and in recent years in Japan and Australia, is also raising a $2 billion fund for private equity and private credit opportunities in Asia Pacific.
The fund is receiving interest from Middle Eastern and Asian investors, as well as in North America, who are looking to diversify amid changing geopolitics.
“Currently the US has many uncertainties. Investors who have been overweighting the US and have done well for many years now may say, ‘I need a little level play’,” Gaw said.
“Asia, on the other hand, has underperformed in the past five years, creating relative value, and people feel they need a repositioning and add some positions in Asia.”
Besides the Middle East, Gaw this year also made investments including more than $1 billion in the Tokyu Plaza Ginza mall in Tokyo with a joint venture partner, and a 45 percent stake in Agility Asset Advisers, a real estate manager in Japan.
In its home market, Gaw said that the firm was focusing on a private credit business linked to upper-middle class residential projects, and was in talks with developers with liquidity needs as well as banks that are selling their non-performing loans.
Oil Updates — crude slips on rising OPEC+ output, despite Canadian supply concerns
LONDON: Oil prices slipped in Asian trade on Wednesday, weighed down by concerns of increasing OPEC+ output and tariff tension that threatens the global economic outlook, though worries about Canadian supply provided a floor.
Brent crude futures dipped 17 cents, or 0.3 percent, to $65.46 a barrel by 9:44 a.m. Saudi time, while US West Texas Intermediate crude was down 19 cents, or 0.3 percent, at $63.22 a barrel.
Both benchmarks climbed about 2 percent on Tuesday to a two-week high, driven by worries over supply disruption from Canadian wildfires and expectations that Iran would reject a US nuclear deal proposal key to easing sanctions on the major oil producer.
“Despite fears over Canadian supply and stalled Iran-US nuclear talks, oil markets are struggling to extend gains,” said Tsuyoshi Ueno, senior economist at NLI Research Institute, adding that the OPEC+ increases were capping the upside.
Ueno said hopes for progress in US-China trade talks were overshadowed by profit-taking, as investors stayed cautious over the broader economic fallout from tariffs.
US President Donald Trump and Chinese leader Xi Jinping are likely to speak this week, White House press secretary Karoline Leavitt said on Monday, days after Trump accused China of violating a deal to roll back tariffs and trade curbs.
On Tuesday, the Organization for Economic Co-operation and Development cut its global growth forecast as the fallout from Trump’s trade war takes a bigger toll on the US economy.
Analysts weighed the impact of OPEC+ increases and the Canadian wildfire situation on oil supply.
“The current backwardation in the front of the crude oil futures curve is a result of low inventory balances observed since the beginning of the year,” BofA analysts told clients in a note.
“In contrast, the contango further out on the curve suggests the market anticipates future slack due to OPEC’s planned supply increases and a broader deceleration of the global economy.”
Markets were still expecting the wildfires that have swept Canada since May to crimp supply, despite a temporary respite from wet weather.
“However, this relief could be short-lived amid forecasts for drier and warmer weather toward the end of this week,” ING analysts said in a client note.
Some analysts expect the loss in Canadian supply to offset more than half the increases next month planned by OPEC+.
“Estimates suggest around 350,000 barrels per day have been affected and shut in,” said SEB analyst Ole Hvalbye, referring to the impact of the wildfires.
“To put this in context, the disruption exceeds three-quarters of the volume OPEC+ agreed to add to the market in July.”
Lebanon embraces digital transformation as key to reform and recovery
- Aoun calls it a ‘sovereign decision’ to combat corruption and modernize governance
BEIRUT: Lebanon has pledged to pursue comprehensive digital transformation, with President Joseph Aoun framing it as the nation’s best hope to tackle corruption, moderne governance, and engage its skilled diaspora in rebuilding efforts.
Speaking at the “Smart Government, Diaspora Experts for Lebanon” conference in Beirut on June 3, Aoun described the initiative as a “sovereign decision to build a better future.”
The event, organized by the Lebanese Executives Council, aimed to connect Lebanon’s global talent pool with efforts to revitalize both public and private sectors.
The conference’s core themes included smart governance, public sector reform, and private sector collaboration, all driven by digital innovation. Aoun emphasized that Lebanon must abandon outdated and corrupt administrative structures in favor of efficient, transparent systems.
“Digital transformation is not a technical choice. Digitalization is not just a government project; it is a national project.” He also announced Lebanon’s application to join the Digital Cooperation Organization, a global body founded in 2020 to promote inclusive growth in the digital economy.
Aoun criticized systemic corruption that forces citizens to navigate bureaucracy through bribery or political favors. He highlighted the need for a government that serves all Lebanese equally, free from sectarian or partisan influences.
“We want Lebanon to open up to regional and international partnerships and to be eligible for foreign investments. This goal is an absolute necessity, indispensable and unavoidable,” Aoun said. “The time has come for them (the diaspora) to achieve it for their homeland and in their homeland.”
The day-long conference brought together ministers, private sector leaders, and diaspora experts for panel discussions on digitizing Lebanon’s institutions. Topics included the creation of a national digital ID, policy harmonization, and leveraging technology to reconstruct public services.
In an interview with Arab News, LEC President Rabih El-Amine highlighted the importance of engaging the Lebanese diaspora.
“We know by fact that diaspora is willing to help, but they don’t have the medium to offer this help, and we know by fact that the government needs this help, but they don’t know how to reach the diaspora,” he said.
El-Amine stressed that despite weak governance, Lebanon’s private sector and diaspora have helped sustain the country. However, implementing modern laws and digital systems is now critical. He called the digital ID system a foundational step toward enabling services like passport renewals and license issuance.
“This is probably the starting point. But I think the biggest challenge for us is how we can make the government and the parliament work together in order to issue modern laws for this system to take place,” he added.
Hajar El-Haddaoui, director general of the DCO, expressed strong confidence in Lebanon’s digital potential, citing the country’s talent pool and expansive diaspora.
“We trust that Lebanon does have all the ingredients to succeed during this digital economy transformation,” she told Arab News.
She said the DCO’s support will focus on investment, public-private partnerships, and capacity-building, including the Digital Economy Navigator program, which helps countries assess and close gaps in digital readiness.
El-Haddaoui underscored the importance of aligned policies, strong infrastructure, and openness to international cooperation.
“Any digital economy or digital transformation needs harmonization of policies. That’s really important and critical. Working on a regulation and standard of regulation is really one of the pillars of successful digital transformation,” she said.
Speaking to Arab News, Fadi Makki, Lebanon’s minister of state for administrative development affairs, outlined key reforms to upgrade the country’s administrative structures.
“We’re far behind in digital readiness. We’re trying to catch up through digital transformation, skilling, and reskilling programs,” he said.
Makki explained that Lebanon lacks planning and performance monitoring units that are standard in functional governments. He proposed modernizing human resources and encouraging the private sector to deliver services, while the government ensures oversight.
“We don’t want to compete with them (the private sector), but at the same time, we want to create opportunities for them while ensuring we provide the necessary oversight like any government,” he told Arab News..
“One of the missing functions in government is planning and performance monitoring. We don’t have that. So, part of our work is creating these basic units, not just centrally but eventually in every ministry. Without them, we’re building on weak foundations,” he added.
The event also featured remarks from Lebanese American University’s Chaouki Abdallah and panels with Minister of Technology and Artificial Intelligence Kamal Shehadi, along with global figures like Jad Bitar of the Boston Consulting Group.
In closing, Prime Minister Nawaf Salam thanked all participants for their contributions and reaffirmed the government’s resolve.
“Digital transformation in Lebanon is not a luxury but a necessity and a reform,” he said. “It directly serves the citizens, reduces corruption, and enhances the quality of life. It is also a prerequisite for economic growth.”
Salam called for full inter-ministerial coordination, asserting, “Lebanon cannot remain outside the digital world or on its margins.”
He concluded: “We are determined to be part of the regional and global digital economy and to reconnect Lebanon with the chains of knowledge and production in the 21st century.”
As Lebanon continues to navigate a complex political and economic crisis, the conference marked a clear call for reform. The message from both domestic and diaspora leaders was unambiguous: digital transformation is not only possible—it is imperative.
Saudi Arabia’s non-oil sector growth continues in May as PMI climbs to 55.8
RIYADH: Saudi Arabia’s non-oil private sector registered an improvement in operating conditions in May, as the Riyad Bank Purchasing Managers’ Index rose to 55.8, signaling continued economic expansion, a new analysis showed.
According to the latest Riyad Bank Saudi Arabia PMI report compiled by S&P Global, the index edged up from 55.6 in April, remaining well above the 50 mark that separates growth from contraction.
However, the figure remained below the recent high of 60.5 recorded at the beginning of 2025.
The latest data pointed to a sharp increase in new order volumes, which rebounded after weakening in April.
Companies linked the increase to stronger customer demand, improved sales performance, industrial development, and marketing efforts. Foreign orders also rose, but at the slowest pace in seven months.
“Saudi Arabia’s non-oil economy maintained solid momentum in May, with the PMI rising slightly to 55.8 from 55.6. While the pace of output growth eased to its softest since September 2024, overall activity remained robust,” Naif Al-Ghaith, chief economist at Riyad Bank, said.
He added: “Firms reported improvements in demand, new project starts, and greater labor capacity as key drivers. This expansion, though slightly softer, reflects stable operating conditions and continued confidence across the private sector midway through the second quarter.”
The survey showed that output continued to grow, though at a softer rate for the fourth straight month. The construction sector recorded the strongest rises in both output and new business.
Employment in the non-oil sector rose sharply in May, with the increase in staffing levels among the fastest seen in over a decade. Surveyed businesses attributed this to expansion efforts and higher output needs.
“Looking ahead, sentiment among non-oil firms has strengthened visibly. Business expectations looking forward reached their highest level since late 2023. Hiring momentum remained strong as companies expanded teams to support output growth, particularly in operations and sales,” Al-Ghaith said.
Meanwhile, purchasing activity surged to a 14-month high. However, firms showed greater caution toward stockpiling, resulting in a slower accumulation of inventories compared to April.
The report also indicated that input prices rose sharply, mainly due to increased supplier charges for raw materials.
Wage-related inflation, however, eased. Despite cost pressures, companies reduced their selling prices, largely driven by a decline in service sector charges and competitive market conditions.
The survey data were collected from around 400 private sector companies across the manufacturing, construction, wholesale, retail, and services sectors.
