21/01/2026

BIZ & FINANCE WEDNESDAY | JAN 21, 2026

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Indonesia minister pledges central bank independence

Japan bond yields surge to record highs as election stokes fiscal concerns TOKYO: Japanese government bonds (JGBs) plunged yesterday, sending yields to record highs, while Tokyo stocks and the yen also fell after Prime Minister Sanae Takaichi’s calling of a snap election shook confidence in the country’s fiscal health. Takaichi’s fresh campaign pledge to cut sales taxes on food sent yields on 20-year JGBs soaring as much as 19.5 basis points (bps), the steepest one-day move since last April, to an unpre cedented 3.45% as demand for the notes slumped at an auction. The benchmark Nikkei 225 Index dropped 1.1% to close at 52,991.10, losing 2.5% over the last four days in its longest selloff in two months. Short- and long-term yields have hit successive all-time highs on concerns that tax cuts, touted by both Takaichi’s ruling Liberal Democratic Party and opposition groups, will impair Japan’s already strained finances. “It’s all fear of Takaichi’s reflationary policy and particularly on the consumption tax cuts, because she was ambiguous about timing and how she finances it,” said Naka Matsuzawa, chief macro strategist for Nomura Securities. “The bottom line is no one wants to buy or catch the falling knife at this point.” After more than a week of speculation, Takaichi on Monday made it official in calling for a snap election on Feb 8. She pledged to suspend the nation’s 8% levy on food for two years, a move that would reduce annual government revenue by about ¥5 trillion (RM128.3 billion), according to official data. The yen, which sank to a 1½-year low against the dollar last week, weakened 0.2% to 158.44. The Ministry of Finance sold about ¥800 billion in 20-year debt yesterday. The bid-to cover ratio at the auction, a measure of demand, fell to 3.19 from 4.1 at the previous sale in December. Bond prices accelerated declines after the auction, sending yields sharply higher. The benchmark 10-year yield touched 2.35%, the highest since February 1999. The yield on the 40 year JGB, Japan’s longest tenor, rocketed 26 bps to a record 4.205%. – Reuters UAE SIGNS US$2.5B LNG DEAL WITH INDIAN COMPANY DUBAI: The United Arab Emirates (UAE) has announced a new liquified natural gas (LNG) deal with a state-run Indian company valued at more than US$2.5 billion (RM10.1 billion). The contract, signed between Adnoc Gas – a subsidiary of Abu Dhabi National Oil Company – and Hindustan Petroleum Corporation Ltd, provides for the supply of an annual half a million tonnes of LNG over a 10-year period, the Emirati company said on Monday. The deal “brings the total value of contracts being supported and operated by Adnoc Gas to over US$20 billion”, and will make India the UAE’s largest natural gas customer, Adnoc Gas said. – AFP BRITAIN’S LABOUR MARKET LOSES MORE STEAM LONDON: Britain’s job market weakened in the run-up to November’s budget announcement by finance minister Rachel Reeves, according to official data published yesterday which showed a drop in employ ment and a cooling of wage growth. A measure of payrolls data from the tax office showed a drop of 43,000 in December from November, the biggest monthly fall since November 2020, an Office of National Statistics official said. A fall of 38,000 first reported for November was revised to show a decline of 33,000 people in payrolled employment. Annual pay growth in the private sector excluding bonuses slowed to 3.6% in the three months to November, its slowest rise since the November 2020, from 3.9% in the three months to October. – Reuters

The world’s second-largest economy grew 5% last year, according to official data released on Monday, buoyed by record-breaking exports and reaching the government’s official target. But economists warned that the growth rate – among the lowest in decades – masked longstanding weak consumer sentiment in China that has shown no sign of reversing. Beijing’s newest “five-year plan” for 2026 2030, expected to be approved in March, will implement policies to address this key issue, officials said at a news conference yesterday. “The current economy faces the problem of strong supply but weak demand,” said Wang Changlin, vice-chairman of the National Development and Reform Commission (NDRC), the country’s top body for economic planning. Wang said the NDRC will “study and JAKARTA: Indonesia’s finance minister said yesterday that the government would ensure the central bank’s independence and not use its funds to pay for its policy programmes, noting that the rupiah was likely to rebound with economic fundamentals still strong. The comments came after the rupiah hit a record low after concerns over the independence of the central bank resurfaced, with lingering fiscal worries rattling investors in Southeast Asia’s biggest economy. “Although the rupiah has weakened, in percentage terms it is only a small amount compared to previous levels, so the (financial) system should already be accustomed to this,” Finance Minister Purbaya Yudhi Sadewa told journalists, adding that the impact on the economy was minimal. The currency has fallen nearly 2% against the dollar in January after dropping 3.5% in 2025. The yield on 10-year Indonesia government bond was 3.3 basis points higher at 6.33%, an over-three-month high. The latest bout of weakness in the rupiah, which slid to 16,985 per US dollar yesterday, came after President Prabowo Subianto nominated his nephew to join the board of governors of Bank Indonesia (BI). Prabowo’s nephew, Thomas Djiwandono, currently a deputy finance minister, is one of three nominees whose names have been submitted to parliament, presidential spokesperson Prasetyo Hadi told reporters on Monday. The focus will now switch to BI’s policy meeting on Wednesday, where analysts expect BI to stand pat on rates. Indonesia’s widening budget deficit has worried investors. Trinh Nguyen, senior economist for emerging Asia at Natixis Corporate & Investment Banking, expects the rupiah to underperform other Asian currencies in the short term due to investors demanding a higher risk premium for the economy. o Rupiah hits record low on investor fears over autonomy, fiscal health

A teller prepares rupiah bank notes at a money changer in Jakarta in April 2025. The Indonesian currency has fallen nearly 2% against the dollar in January after dropping 3.5% in 2025. – REUTERSPIC

Prabowo abruptly removed Indonesia’s influential finance minister Sri Mulyani Indrawati, as investors feared that the hard fought fiscal credibility could soon be eroded. That also brought Bank Indonesia and its autonomy into the spotlight as investors fretted that independent monetary policymaking in Indonesia might be under pressure, with Prabowo targeting economic growth of 8% by 2029 from about 5% currently. – Reuters

“Concerns preceded the appointment as investors question the lunch programme and the impact on Indonesia’s bright spot – which is low fiscal debt and hard rule on 3% fiscal deficit on GDP.” “Now with the appointment of his nephew, Bank Indonesia will be under pressure to ease monetary conditions. But with the rupiah weak, we do not expect the central bank to cut,” Nguyen said. Markets were stunned in September when

BR I E F S

China vows to boost demand in new economic plan BEIJING: China pledged “forceful” measures yesterday to boost demand in coming years, formulating plans to relieve a domestic spending slump exacerbated by property sector woes and demographic pressure. formulate an implementation plan for expanding domestic demand from 2026 to 2030”, vowing to “create new demand through new supply and provide strong innovative measures”. the end of 2026 to revive softening domestic demand.

The extension seeks to “further boost consumption and expand domestic demand, continue to reduce the cost of personal consumer credit, and enhance residents’ willingness to spend”, the finance ministry said. The ministry will also roll out interest subsidies for up to two years for loans issued to micro, small and medium-sized private enterprises from this year. It also introduced a guarantee plan totalling 500 billion yuan (RM291 billion) over two years for private investment. Zhou Chen, an official at the NDRC, said the government would continue to use trade-in subsidies to support consumption of goods like electric vehicles, but its focus was shifting towards services. Officials say services, including elderly care, healthcare and leisure, offer substantial room for growth. “The services sector has now become a key focus in efforts to expand domestic demand,” Zhou said. – AFP, Reuters

A protracted debt crisis in China’s vast real estate sector has discouraged would-be homebuyers from investing in property – long a key store of wealth. Complicating the challenges are demographic trends, with a shrinking and ageing population weakening the outlook for a future spending boom. Recent figures have highlighted the hurdles facing policymakers in their bid to spur spending. Retail sales grew just 0.9%t year-on-year in December, official data showed on Monday. That marked the weakest pace since the end of 2022, when the country’s stringent zero-Covid measures were scrapped. Yesterday, China’s finance ministry said it would extend interest subsidies for consumers, consumer-service enterprises and businesses in need of equipment upgrades to