The end of this week could mark an important moment for global markets, as Japan heads to the polls in an election that has already roiled the yen and the price of Japanese government borrowing.
Japan is also taking part in a meeting this week in the US, where both countries, along with the UK, EU and others, will be discussing a potential new pact on critical minerals.
Critical minerals meeting
The UK, US, EU, Australia, Japan and New Zealand are meeting this week for talks over a new alliance to boost access to critical minerals.
Australia has pledged to build a £610m strategic reserve of critical minerals that are exposed to policy changes from China, which has in recent years squeezed exports in a sector where it controls most of the world's refining capacity.
A Reuters report last week (29 January) suggested that the US administration had decided against one idea that has been floated to support diversification away from China in the sector: price floors. The White House has supported a price floor for rare earth firm MP Materials since last year, which is currently being reviewed by a committee in the US Senate.
Head of the US Office of Critical Minerals and Energy Innovation, Audrey Robertson, is reported to have told firms that “we’re not here to prop you guys up”, warning them: “Don’t come expecting us to do that.”
However, the administration may swap out price floors for individual firms for market-wide floors for specific mineral, an administration official told Reuters.
The Washington DC meeting, convened by US secretary of state Marco Rubio, aims to boost non-China supply chains as soon as possible.
The US State Department wrote:
“Strengthening critical mineral supply chains with international partners is vital for the US economy, national security, technological leadership, and a resilient energy future.”
Japan election
A looming election in Japan could be one of the most consequential for the country – and the world economy – for a long time.
New Japanese prime minister, Sanae Takaichi, has called a snap election for the House of Representatives on Sunday (8 February), hoping to capitalise on strong opinion polling. markets have already reacted nervously to the prospect of her Liberal Democrat Party (LDP) achieving a strong majority, with the cost of borrowing for the Japanese government up sharply, while there has also been volatility in the price of the yen.
On Thursday, US$4.5bn in 30-year government bonds will go up for sale, a test of the markets’ views on a policy platform that includes a complete suspension of consumption tax on food. Japan’s existing government debt is the largest among the world’s most advanced economies, coming in at 230% of GDP.
The LDP lost control of the House of Representatives in 2024, suffering its second worst ever result and were forced into a minority administration. They lost control of the House of Councillors, Japan’s upper house, last year, and Takaichi is hoping to wrest control back for the LDP after several years of instability.
China visit rewards
UK PM, Sir Keir Starmer, is to speak to Parliament later today (2 February) on the outcomes of his recent trip to China.
The spoils include a ‘Bilateral Services Partnership’, which the government says will “increase market access for services firms” through deepened “practical government cooperation”.
Alongside this new partnership, the UK and China have agreed to “conduct a joint feasibility study to consider the potential for negotiating a bilateral Trade in Services agreement”. The government added:
“If it goes ahead, a Trade in Services agreement would establish clear, legally binding rules, giving UK services exporters greater certainty when doing business in China, consistent with existing World Trade Organization obligations.”
China has made a range of concessions to UK trade, including allowing the import of vintage UK cars and cutting the tariff rate on UK whisky from 10% to 5%.
UK legal firms will now be able to establish representative offices in China, and a range of new UK-made vaccines and medical devices have been approved for export to China. UK qualification providers will also gain recognition in Shanghai.
Other dates for the diary
- Monday: UK manufacturing PMI published
- Tuesday: Colombian President Gustavo Petro to meet US counterpart Donald Trump in Washington DC
- Wednesday: Quarterly results published by Alphabet and Novo Nordisk
- Thursday: European interest rate decision and New START nuclear proliferation treaty expires
- Friday: US January employment report published
- Saturday: Directors Guild of America awards ceremony
- Sunday: Elections in Japan, Portugal and Thailand
