DECEMBERASIA BUSINESS OUTLOOK8NEWSROOMSINGAPORE GOVERNMENT INCREASES GOVT. SECURITIES BILL CAP TO SG$1.5TJapan's drivers behind the spike in wholesale inflation were higher costs for rice, nonferrous metals, food, and oil. This indicates that companies continue to face pressure from rising raw material costs. Despite these rising costs, the yen-based import price index fell by 2.2 percent compared to the previous year, a smaller decline than the 2.5 percent drop in September. On a month-on-month basis, the index rose by 3.0 percent, as the yen weakened by 4.3 percent against the dollar, keeping import costs high.Takeshi Minami, Chief Economist at Norinchukin Research Institute, noted that inflationary pressure on wholesale goods prices remains persistent. While consumption lacks momentum, wage increases are continuing, which raises the likelihood of a Bank of Japan (BOJ) interest rate hike in December.Japan's wholesale inflation surged in October, reaching its highest annual pace in over a year. The Corporate Goods Price Index (CGPI), which tracks the prices companies charge each other for goods and services, climbed by 3.4 percent year-on-year, surpassing market forecasts of a 3.0 percent increase. This follows a 3.1 percent rise in September, marking the fastest growth since August 2023.The Bank of Japan ended its negative interest rate policy in March and raised short-term rates to 0.25 percent in July, citing progress toward its 2 percent inflation target. Governor Kazuo Ueda emphasized the bank's readiness to raise rates again if inflation shifts from being driven by rising raw material costs to being fueled by strong domestic demand and wage growth.A Reuters poll from early October showed that most economists expect the BOJ to raise interest rates by the end of March 2025, with some predicting a rate hike as early as December. The issuance cap was last raised in 2021 to S$1.065 trillion, and it is projected that the government will reach this limit by 2025. As of October 2023, the total outstanding amount of government securities and T-bills stood at S$955 billion. MP Jamus Lim (WP-Sengkang) questioned the size of this increase, noting it was larger than previous increments. The approved an increase in the limit for government securities and Treasury bills (T-bills) issuance, allowing the government to raise an additional S$450 billion (US$337 billion). This brings the new cap to S$1.515 trillion, effective until 2029.According to the Ministry of Finance (MOF), this increase ensures that the CPF Board will have the funds needed to pay its members. Chee Hong Tat, Second Minister for Finance, highlighted that the growth in CPF balances is anticipated to continue over the next five years, driven by higher wages and policy enhancements. For instance, the median gross monthly income from employment grew by 3.2 percent annually from 2018 to 2023.The majority of this increase, over 60 percent, is expected to come from the issuance of Special Singapore Government Securities (SSGS), which are government bonds sold to the Central Provident Fund (CPF) Board. These special securities are fully guaranteed by the government, and the funds from the CPF are invested in them, earning a coupon rate linked to the interest rates paid to CPF members.To meet the growing investment needs of CPF, particularly due to higher contribution rates for senior workers, more SSGS issuances are expected. Additionally, the rest of the raised limit will support the issuance of T-bills, Singapore Savings Bonds, and Singapore Government Securities to promote the development of a strong Singapore Government Securities market. This market plays a crucial role in the expansion of the corporate and retail debt market and serves to meet the demand for high-quality liquid assets. SURGING JAPANESE INFLATION DRIVEN BY RISING FOOD COSTS
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