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News for March 5

Japanese inflation accelerated in January but remained far from the target level.

The Core Consumer Price Index slightly accelerated in Japan in January but remained far below the Bank of Japan’s target level of 2% year-over-year. Consumer prices excluding the cost of fresh food, which is the key inflationary parameter monitored by the central bank) grew by 0.8% last month compared to the same period in the previous year after climbing by 0.7% in December. Consumer prices excluding fresh food and energy prices rose by 0.4% after growing by 0.3% in the previous month. The overall consumer prices grew by 0.2% year-over-year in January after the spike of 0.3% in December. The energy prices growth was the main driving factor for the inflationary pressure in Japan. However, the sharp decline in oil prices affected a lowering pressure on the cost of consumer goods prices such as petroleum and kerosene at the end of the last year. Gasoline prices were almost flat in January while electricity and gas bills, which reflect the oil prices dynamics but with a lag of several months, kept rising. The inflationary pressure stays significantly below the target level of 2%, which is traditionally monitored closely by the Bank of Japan in the monetary policy update. Even the soft financial conditions and stimulative measures did not help the nation to pick up the growth momentum as Japanese consumers are traditionally conservative in the scope of spending. Another factor for the low inflation is that the exports volume kept declining recently, therefore, the income and revenue levels are becoming lower for Japanese export-oriented corporations. According to several sources, BoJ Governor Kuroda is intended to announce another round of stimulative measures by the regulator in order to soften the financial conditions which are already at historically low levels.

UBS: China will increase the government debt in order to support the economy in 2019.

The government debt to the GDP ratio will be increased in China this year after staying flat in 2017 and declined in 2018, according to UBS Head of Economic Research in Hong Kong Van Thao. The composite funding index, which is the widest official figure of credit volume in China, will accelerate by almost 12% this year compared to 9.8% in 2018, Van Thao considers. According to her assessments, the nominal GDP growth will slow down to 8% from 9.7% previously, while the inflation would remain moderate. Such a scenario suggests the debt/GDP ratio growth. Although the debt increase might become a positive factor for the second largest world’s economy, especially in the field of equities, company shares and short-term government bonds, it might also reinforce investors’ concerns regarding China’s medium-term target for holding the debt and financial sector risks. Meantime, Chinese banks had reportedly given a record-high level of credits away. According to the People’s Bank of China, the volume of new bank credits in national currency exceeded 3.23 trillion yuan ($477 billion) last year. The overall funding level (including bank credits, balanced credits, shares and securities offerings) grew to a record level of 4.64 trillion yuan ($685.18 billion) in China last month. The Chinese GDP growth slowed down to 6.6% last year for the first time since 1990. The Chinese government is trying to support economic growth in order to provide enough level of private sector funding, especially small companies struggling with liquidity issues.

Apple will launch own video streaming service.

The US tech giant decided to develop its business expansion in the field of online services. According to preliminary data, Apple will announce its own service for video streaming, a similar one to Netflix, Amazon Prime Video and so on. A number of US celebrities were invited to the open ceremony of the service in March 2019 - Jennifer Aniston, Jennifer Gartner, JJ Abrams and others. The online service will include original videos and serials. The company had spent an amount of more than one billion dollars for creating its own unique content for the service and had already signed contracts with such celebrities as Oprah Winfrey, Stephen Spielberg, Rise Witherspoon and others. In the light of smartphones market getting exaggerated, and the competition getting tighter from the side of Chinese smartphones producers, Apple decided to shift the focus to the online services market, which should bring sustainable revenue to the company.

JP Morgan launches own cryptocurrency JPM Coin.

One of the largest US banks - JP Morgan Chase - became the first US bank to create own cryptocurrency for immediate transactions for large payments, CNBC reported. Huge financial institutions perform daily transactions for the total volume of more than 6 trillion dollars. JP Morgan will start a 4-month testing period for a digital token JPM Coin developed by the bank’s software developers. That new option will allow the bank’s clients to perform real-time online transactions.

The company’s blockchain-project head Umar Farukh sees three main application to use the coin:

International transactions. Large corporations transfer millions of dollars on daily basis using bank transfers in the SWIFT network, which usually requires several days to reach the destination, while the token transactions will become immediate.
Securities operations. Farukh stated that JPMorgan created a depositary blockchain certificate for $150 million in a Canadian bank.
Replacement of dollars saved in treasury bills. The token could change dollars, which are owned by large corporations’ subsidiaries around the globe.

Umar Farukh
Source: SUCH TV

That’s the way the bank is getting ready for the future, using the latest technology developments. There are predictions that all of the financial technologies will be transferred to the blockchain technology sooner or later. The first stage is to impose immediate payments, allowing to significantly increase the speed of transactions compared to the existing system of electronic payments. Umar Farukh also stated that “all of the assets which exist in the world will be transferred to the blockchain in one way or another. The technology’s possibilities are unlimited”.

The new JPMorgan’s currency could significantly affect on, or even totally change, the existing financial system. Transactions with JPM Coin will become the first real banking transactions using cryptocurrency. Traditional banks do not use digital currencies as these types of assets are too risky. JPMorgan had prohibited purchasing cryptocurrencies using its cards last year. Although the bank’s token would not be available for retail investors and clients, only institutional investors such as corporations and banks-dealers will be able to use it. Every JPM Coin has to be exchanged to the US dollar, this is why its cost should not fluctuate. The bank decided to use the concept of currently popular stablecoins. A client gets JPM Coins after depositing US dollars on the bank account. After the fiat currency was cashed out of the account, the tokens are destroyed.

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