BoJ set to face off with traders as yields near limit

February 9, 2022 | 12:01 am

JAPAN’S government bond yields are edging toward the upper limit of the central bank’s tolerance level, raising questions over how policy makers will respond to the challenge.

As the 10-year yield approaches the 0.25% mark, the Bank of Japan (BoJ) could boost scheduled purchases, buy debt outside of its normal operations, as well as offer to secure an unlimited amount of bonds at a fixed rate in a repeat of what happened in July 2018.

The BoJ’s response will determine whether Japan can defy the worldwide rise in yields as traders ramp up bets for policy normalization. Governor Haruhiko Kuroda has dismissed talk of a rate hike and domestic inflation remains anemic but the global repricing is still altering expectations for Japan’s bond market.

“It’s hard to expect JGB yields to defy BoJ’s aggressive buying and continue their climb as the rise is driven by external factors,” said Naomi Muguruma, a senior market economist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “The BoJ has the option to conduct fixed-rate operations broadly, not just the 10-year zone, to counter a surge in yields.”

Japan’s 10-year yield has risen for two straight months and hit 0.21%, its highest since January 2016 on Tuesday. Under its curve control policy, the BoJ has a desired trading range for the benchmark of 0.25% either side of zero.

Here’s a closer look at the various bond-purchase operations the BoJ can deploy to curb the advance:

UNSCHEDULED OPERATIONS
The BoJ regularly buys set amounts of government bonds from the secondary market on scheduled dates, but it can act at any time. The last time it stepped in unannounced was during the height of the pandemic in March 2020, when the benchmark yield surged about 30 basis points in 10 days.

Given that inflation remains far below the central bank’s 2% target and wage growth is subdued, a shift in policy doesn’t seem imminent, though market expectations look to be shifting.

“Investors’ target levels may be rising a bit, such as 0.1% to 0.2% for 10-year yields from between zero and 0.1% previously, and the 30-year closer to 1%,” Mitsubishi UFJ’s Ms. Muguruma said.

FIXED-RATE BUYING
This method lets the BoJ buy unlimited amounts of debt at pre-determined yields. If it decides to do so for consecutive days, it is expected to announce details of the operation ahead of time.

Some strategists say the BoJ will likely to resort to this before the 10-year yield rises to 0.25%, unlike in July 2018 when it stepped in after the yield rose above the 0.10% limit allowed back then.

“Unscheduled bond operations could just encourage market participants to speculate the BoJ will keep buying, so they aren’t very effective,” said Eiji Dohke, chief bond strategist in Tokyo at SBI Securities Co. in Tokyo. “The BoJ is more likely to use the fixed-rate operation. It could offer to buy 10-year notes at 0.25% when the yield in the secondary market is around 0.22% to 0.23%.”

While such a level below the market price of the bonds would be unlikely to generate any takers, it would mark a line in the sand for the BoJ and could ease the upward pressure on yields.

SCHEDULED OPERATIONS
Alternatively, the BoJ could use its scheduled buying operations to adjust the shape of the yield curve if it sees distortions, said Mari Iwashita, chief market economist at Daiwa Securities Co.

The BoJ has abandoned its monthly purchase schedule in favor of a quarterly plan since July, where it announces fixed amounts for each maturity with set dates for the operations. The next plan will be released on March 31.

“The BoJ could flexibly change the amounts during a month if needed, if it sees some issues in yield levels after conducting fixed-rate operations,” said Ms. Iwashita. If necessary, the BoJ could decide to change the amount or frequencies for the April-June quarter, she added.

Japan’s bond yields look unlikely to drop back to levels seen late last year, given the aggressive pricing for rate hikes by the Federal Reserve and European Central Bank, according to strategists.

Furthermore, markets may factor in a potential policy shift after Mr. Kuroda’s term ends in April 2023, said Eiichiro Miura, general manager of the fixed-income department at Nissay Asset Management Corp.

“Even if the 10-year yield is contained by BoJ operations, super-long sectors will remain volatile as investors won’t rush to buy when there is potential for a future change in BoJ policy,” he said. — Bloomberg

Philippine factory output growth eases in December

February 9, 2022 | 12:00 am

FACTORY PRODUCTION grew at a slower pace in December but remained in the positive territory for the ninth straight month despite the supply chain disruption in the aftermath of Typhoon Odette. Read the full story.

How minimum wages compare across regions in January

February 9, 2022 | 12:00 am

How PSEi member stocks performed — February 8, 2022

February 9, 2022 | 12:00 am

Here’s a quick glance at how PSEi stocks fared on Tuesday, February 8, 2022.

DTI expecting investment boost from bill amending PSA

February 8, 2022 | 11:12 pm

THE proposed amendments to the Public Service Act (PSA) will help drive the economic recovery by attracting more investment, according to the Department of Trade and Industry (DTI).

Trade Secretary Ramon M. Lopez said in a statement on Tuesday that the bill amending the PSA will help improve the investment climate.

“Once President Rodrigo R. Duterte signs the bill into law, foreign equity restrictions will be eased which shall attract more global players (to) modernize several sectors such as telecommunications, shipping, air carriers, railways, and subways,” Mr. Lopez said.

“Similarly, there will be increased competition in terms of services and products which will generate better-quality services and competitive pricing to the benefit of the consumers. Higher investments will also generate more jobs and income for the people,” he added.

On Feb. 2, Congress ratified the bicameral conference committee report of the bill amending the PSA, which would permit 100% foreign ownership in telecommunications, domestic shipping, railways and subways, airlines, expressways and tollways, and airports.

These will not be covered by the 40% foreign ownership limit provided under the 1987 Constitution. Currently, the bill is awaiting Mr. Duterte’s signature.

The bill retained the “public utility” classification only for the distribution and transmission of electricity, petroleum and petroleum products pipeline transmission systems, water pipeline distribution systems and wastewater pipeline systems; sewerage pipeline systems; seaports; and public utility vehicles.

Any industry not included in the list of “public utilities” will be considered a “public service” and can be liberalized and fully owned by foreigners.

“I am confident that we can make an economic recovery happen in the Philippines this year. With the amended PSA, we expect the entry of new foreign investors and the introduction of modern and new technologies in the aforementioned sectors,” Mr. Lopez said.

Trade Undersecretary Rafaelita M. Aldaba said the proposed amendments to the PSA will boost the competitiveness of the services sector.

“A more competitive services sector will have indirect consequences toward economic growth. High-quality transport or telecommunication infrastructure, for example, could influence the production costs and competitiveness of all firms across all sectors of the economy,” Ms. Aldaba said.

The DTI said the bill still bars foreign nationals from owning more than 50% of companies involved in the operation and management of critical infrastructure if their home country does not provide reciprocal rights to Philippine nationals.

“The President is granted the authority to suspend or forbid any proposed merger or acquisition, or investment in a public service that effectively results in the grant of control to a foreigner or a foreign corporation,” the DTI said.

“With the economic headwinds brought by the prevailing pandemic, the amended PSA, the Retail Trade Liberalization Act, as well as the Foreign Investment Act are expected to hasten the country’s recovery from the present global health crisis,” it added. — Revin Mikhael D. Ochave

Rice tariff collections hit P18.9 billion in 2021

February 8, 2022 | 11:12 pm

RICE TARIFF collections amounted to P18.9 billion in 2021, the Department of Finance (DoF) said on Tuesday, giving the government a surplus of P8.9 billion over and above the P10 billion that must be automatically appropriated from tariffs for farm modernization.

The 2021 total was up 22% from a year earlier, Customs Commissioner Rey Leonardo B. Guerrero said in a report to the DoF.

The government deregulated the rice market, allowing private parties to import rice while paying a 35% tariff on Southeast Asian grain. The tariffs generated provide P10 billion a year to the Rice Competitiveness Enhancement Fund, a modernization program authorized by Republic Act 11203 or the Rice Tariffication Law.

Collections beyond P10 billion will be added to the national budget of the following year. The authorized uses of the surplus include financial aid to rice farmers, the titling of agricultural land, the expansion of crop insurance coverage and the promotion of crop diversification.

The Department of Agriculture has reported that RCEF has helped boost rice farmer earnings while reducing production costs.

“We have posted record harvests for the last two years at 19.2 million metric tons (MMT) in 2020 and 19.96 MMT in 2021,” Agriculture Secretary William D. Dar said in a statement on Tuesday.

Mr. Guerrero said collections from pork imports between April 9, 2021 and Jan. 28 totaled P3.75 billion. Pork import volume was 242 million kilograms.

“The bureau, however, estimates that it had foregone P4 billion in revenue during this period as a result of the Presidential directives lowering the import tariffs on pork,” the DoF said.

In April, the government temporarily lowered pork import tariffs and increased the allowable import volumes of the meat to quell elevated inflation levels after the hog population was decimated by an outbreak of African Swine Fever.

The Bureau of Customs collected P645.77 billion in 2021, exceeding its goal by 4.7%. — Luz Wendy T. Noble

Metro Manila water shortage projected for April or May

February 8, 2022 | 11:12 pm

THE National Water Resources Board (NWRB) said that Metro Manila may experience a water shortage by April or May as Angat Dam levels continue to decline.

“The level of Angat Dam is already at 196 meters. The ideal level would be somewhere past 200 meters,” NWRB Executive Director Sevillo D. David, Jr. said in a radio-television interview.

“We are (trying to avoid) reaching 180 meters, which is the minimum operating level. But based on the projections and rainfall forecasts, we may reach this in April or May,” he said.

On Dec. 31, the water elevation at the dam was 202.80 meters, which was below the target level of 212 meters.

“Before the year ended, there was not much rainfall in the watershed. Right now, our water levels continue to decrease. We need to manage the release of water and take care of this supply these coming months, particularly in the summer,” he added.

Mr. David said that the NWRB is planning measures with water concessionaires to ready deep wells and treatment facilities to make up for the potential shortage.

“Maynilad has supply augmentation measures in place to prepare for the summer months given the low water level in Angat Dam. These include the construction of four modular treatment plants that will get raw water from rivers, reactivation of deep wells in various points of our concession area, management of pressure across the pipe network, and sustained leak repair and pipe replacement activities,” Maynilad Spokesperson Jennifer C. Rufo said in a Viber message.

“We are proactively working on solutions that will provide additional and augmentation sources of water especially during the coming summer months,” Manila Water Group Head of Corporate Communications Nestor Eric T. Sevilla said in a Viber message.

Manila Water is working on projects to augment supply, such as maximizing the capacity of the Cardona Water Treatment Plant, continuing the operation of deep wells, drawing water from the Marikina River, and tapping the Alat Dam, according to Mr. Sevilla.

The water concessionaires encouraged the public to conserve water to head off possible shortages.

“While we work with the Metropolitan Waterworks and Sewerage System (MWSS) and NWRB on providing the needed supply, we also encourage consumers to use water responsibly so we can maximize the available supply and avoid wastage,” Ms. Rufo said.

“We believe that the conservation of our water resources is a shared responsibility of the government and the concessionaires who closely coordinate with each other to provide the needed water supply, and the public to ensure that water distributed is used wisely and responsibly,” Mr. Sevilla added.

Meanwhile the National Irrigation Administration (NIA) said that it is also working to secure water for farmers in anticipation of the shortage.

“We distributed 500 shallow tubewell pumps to the farmers in Bulacan and Pampanga last Jan. 28 in cooperation with MWSS and their concessionaires. These include subsidies for gasoline,” NIA Administrator Ricardo R. Visaya said in a Viber message.

“In the long term, we are fast tracking the construction of Bayabas Dam in Bulacan so that Angat Dam can best serve the water needs of Manila and that farmers in Bulacan and Pampanga will be assured of a 24/7 supply of water for irrigation purposes,” he added. — Luisa Maria Jacinta C. Jocson

Sugar administrator says imports needed to build buffer; strong demand seen

February 8, 2022 | 11:12 pm

SUGAR regulator Hermenegildo R. Serafica said imports of 200,000 metric tons of standard and bottler’s grade refined sugar will cover the shortfall in supply and provide a buffer stock to tide the country over until the next milling season.

“During a stakeholder’s consultation conducted by (Sugar Regulatory Administration), stakeholders posed no objection to an importation program, while they recommended its mechanics, type of sugar to be imported, and arrival dates of shipments, among others,” Mr. Serafica said.

“Eligible participants to this open and voluntary importation program are industrial users of refined sugar in good standing that are duly registered international traders,” he added.

On Feb. 6, The United Sugar Producers Federation questioned the decision to import and called for the resignation of Mr. Serafica.

The SRA reported that the Philippine Association of Sugar Refineries revised its refined sugar production forecast for crop year 2021 to 2022 to 16.748 million LKg — one LKg is equivalent to a 50-kilogram bag of sugar —down from the initial production estimate of 17.572 million LKg before Typhoon Odette (international name: Rai).

“According to SRA’s projections on sugar supply and demand, this will give the country a very tight sugar stock balance at the end of milling which will not be enough to cover the two to three months’ demand for refined sugar in between the milling seasons,” Mr. Serafica said.

“Recently, SRA monitoring of sugar prices also recorded wholesale prices for both raw and refined sugar increasing to record highs. Likewise, retail sugar prices were also up,” he added.

He said more demand is expected at the start of the year.

“As the economy is once again starting to open up, the demand for raw sugar and refined sugar for January this year have also increased when compared to the same month in the three previous years. Hence the need to augment sugar stocks to ensure food security and availability of sugar to cover sugar demand until the next crop year or milling season begins again,” he said.

The crop year for sugar runs from Sept. 1 to Aug. 31 of the following year.

Mr. Serafica said that sugar mills and refineries generally stop operations from around May to June. Mills will begin operations for the next season in September or October while the refineries typically start around two weeks after the mills. — Luisa Maria Jacinta C. Jocson

Microbial fertilizers being promoted to rice farmers amid tight fertilizer supply

February 8, 2022 | 11:10 pm

THE Department of Agriculture (DA) is promoting microbial-based fertilizers following a tightening in the supply of inorganic fertilizers, which is raising prices.

“To mitigate the possible impact of the rising cost of fertilizer on farmers’ income, rice production, and food security, there is a need to mainstream and scale up the use of microbial-based fertilizers nationwide,” the DA said in an administrative order.

“The increasing cost of inorganic fertilizer limits the farmers to adopt the recommended (fertilizer dosage), directly affecting the crop yield of many farmers (and possibly reducing) total rice production,” it added.

The DA said organic fertilizer technology is available but needs a large volume of raw materials, a shortfall which is preventing them from being widely adopted.

“Microbial formulations have complementary and synergetic effects with inorganic fertilizers and have been increasingly used as bio-fertilizers. Using the recommended application rate, the microbial-based fertilizer contributes a minimum increment yield of 10%,” the DA said.

Microbial-based fertilizers are usually derived from a micro-organism and are believed to improve plant growth.

The National Integrated Rice Program (NIRP) will be tasked with helping farmers reduce their usage of inorganic fertilizers and adjust to microbial-based types.

The NIRP is expected to establish demonstration sites in every rice-producing province and partner with microbial-based fertilizer producers, farmers’ organizations, and the local government units, the DA said. — Luisa Maria Jacinta C. Jocson

IPOPHL in anti-piracy tieup with Japanese content organization

February 8, 2022 | 11:10 pm

THE Intellectual Property Office of the Philippines (IPOPHL) said it has entered into an anti-piracy partnership with Japan’s Content Overseas Distribution Association (CODA).

IPOPHL said the memorandum of understanding with CODA, signed on Jan. 25, will seek to protect the copyrighted Philippine and Japanese content in their respective jurisdictions via information exchange, research, online monitoring, and site blocking to improve enforcement efforts in the Philippines and Japan.

IPOPHL Director General Rowel S. Barba said cross-border collaboration is important amid increased digitalization and globalization.

“Cross-border collaboration can help keep the wheels of creativity moving forward and help open greater international opportunities to the Philippine creative industry, which suffered massive job losses in this pandemic,” Mr. Barba said.

IPOPHL said that its Intellectual Property Rights Enforcement Office recorded 31 piracy complaints and reports in 2020.

“This MoU will be a game-changer in our fight against piracy, a matter we must urgently address amid heightened intellectual property violations during the pandemic,” Mr. Barba said.

CODA promotes the international distribution of Japanese music, film, animation, TV programs and video games. — Revin Mikhael D. Ochave

USAID, Nestlé PHL in climate change, waste management partnership

February 8, 2022 | 11:10 pm

plastic-water-pollution-trash — PHILIPPINE STAR/ MICHAEL VARCAS

THE United States Agency for International Development (USAID) and Nestlé Philippines, Inc. have entered into a partnership to improve solid waste management practices and implement a climate change education program.

“Combatting ocean plastics pollution is a challenge that requires strong partnerships. USAID is pleased to partner with Nestlé Philippines in supporting local governments to reduce waste-linked contributions to ocean plastics and the climate crisis,” USAID Philippines Mission Director Ryan Washburn said in a statement.

The partnership will be undertaken via the Clean Cities, Blue Ocean (CCBO) program, with a focus on local solid waste management. The program will be conducted in conjunction with Nestlé Philippines’ Climate Change and Solid Waste Management Education Program.

Launched in 2019, CCBO is a P2.5-billion program that will run until 2024.

“As a food and beverage manufacturer with a major presence in the country, we are called upon to be at the forefront in helping tackle the urgent issues of climate change and plastic waste. As Nestlé Philippines sustains plastic neutrality, and other pioneering initiatives for the environment, it is important for us to help capacitate people at the grassroots level,” said Nestlé Philippines Chairman and Chief Executive Officer Kais Marzouki.

USAID said that the program is also intended to help local government units that struggle to implement and enforce regulations.

“By strengthening waste management systems and building circular economies city by city, the program builds sustainable solutions that reduce ocean plastics while empowering vulnerable populations and mitigating pollution that affects human health and the climate,” USAID said. — Luisa Maria Jacinta C. Jocson

Hiring managers have generally positive views of ‘job hoppers’ — survey

February 8, 2022 | 11:08 pm

JOB HOPPING is generally viewed positively in the Philippines, according to the results of a survey conducted by consumer data and analytics firm Milieu Insight.

In a statement on Tuesday, Milieu Insight said the survey, conducted in December with 6,000 respondents drawn from Singapore, Thailand, Malaysia, Indonesia, Vietnam, and Philippines.

According to the survey, 64% of Philippine respondents involved in hiring had a positive view of job switchers, while 28% held neutral opinions, and 7% considered the practice to be negative.

The study defined a job-hopper as someone who has less than one year’s tenure in his or her current job but is searching for new employment.

Milieu Insight said 57% of respondents in the Philippines believe that job hoppers are capable of learning faster in a new environment, while 55% see them to have more diversified skill sets.

The study found that 46% of respondents consider job hoppers to be resilient to changes in the working environment while 41% of respondents believe them to hold clear ideas of what they want and do not want.

The main concerns about the practice of frequent job switching were the fear that such workers will be seeking opportunities elsewhere (66% of respondents) and that such workers are uncertain of their ultimate career goals (48%).

Milieu Insight added that 43% of respondents are concerned about a lack of worker loyalty.

The survey also found that 72% of respondents in the Philippines are somewhat or very likely to take an offer and leave their current company if they are presented with a better opportunity, while 21% were neutral on the matter, and 6% were somewhat or very unlikely to leave their jobs.

The Philippine Statistics Authority estimated the employment rate at 93.5% in November, against the 92.6% posted in October. The November rate is the equivalent of 45.48 million employed persons.

Unemployment in November was 6.5%, equivalent to 3.16 million persons. The October rate was 7.4% or 3.50 million unemployed persons. — Revin Mikhael D. Ochave