China Imposes New Export Controls, Deepening Japan Row

FILE PHOTO: A China yuan banknote featuring late Chinese chairman Mao Zedong and a computer keyboard are seen reflected on an image of Chinese flag in this illustration picture taken November 1, 2019.  REUTERS/Florence Lo/Illustration/File Photo
FILE PHOTO: A China yuan banknote featuring late Chinese chairman Mao Zedong and a computer keyboard are seen reflected on an image of Chinese flag in this illustration picture taken November 1, 2019. REUTERS/Florence Lo/Illustration/File Photo
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China Imposes New Export Controls, Deepening Japan Row

FILE PHOTO: A China yuan banknote featuring late Chinese chairman Mao Zedong and a computer keyboard are seen reflected on an image of Chinese flag in this illustration picture taken November 1, 2019.  REUTERS/Florence Lo/Illustration/File Photo
FILE PHOTO: A China yuan banknote featuring late Chinese chairman Mao Zedong and a computer keyboard are seen reflected on an image of Chinese flag in this illustration picture taken November 1, 2019. REUTERS/Florence Lo/Illustration/File Photo

China put 20 more Japanese organizations on a blacklist Monday over the export of items with both military and civilian possible uses, adding fuel to a months-long row with Tokyo.

The new additions, including major companies, "have participated in enhancing Japan's military capabilities", the Chinese commerce ministry said in a statement.

Japan's government spokesman Minoru Kihara called the measures "unacceptable and deeply regrettable" and said Tokyo had "lodged a strong protest and demanded that the measures be withdrawn."

The countries' have been at row since Japanese Prime Minister Sanae Takaichi suggested in November that Tokyo may react militarily to an attack on Taiwan, the self-ruled island Beijing has vowed to seize control by force if necessary.

China responded furiously, including by advising its citizens -- previously the biggest cohort of foreign tourists -- to avoid Japan.

Chinese authorities ramped up pressure in February by imposing export restrictions on dozens of Japanese firms it said were involved in building up Tokyo's military.

The 20 additions to the export blacklist named Monday include specialized subsidiaries and technology firms involved in supplying components and engineering support for Japan's defense sector.

Among them are the National Institute for Defense Studies and Mitsubishi Electric Defense and Space Technologies Corporation, the statement said.

China's commerce ministry said the controls require exporters to submit risk assessments and guarantees that dual-use items will not enhance Japanese military strength prior to making shipments.

Those named on the watchlist can apply to be removed by cooperating with "verification" procedures according to Chinese law, the ministry said.

China is the world's largest producer and refiner of rare earths, which are crucial for various high-tech products including electric vehicles, smartphones, missile guidance systems and lasers.

Japan has "strayed further down the wrong path, intensifying its push for a 'new form of militarism'", an unnamed commerce ministry spokesperson said in a statement on the latest measures.

- China-Russia patrols -

Since Takaichi took office in October, Japan has quickened its pivot towards a more proactive defense policy, further shaking off -- with US encouragement -- a pacifist outlook, which has been in place since the end of World War II.

Tokyo has loosened rules on exports of lethal weaponry and deepened military cooperation with other countries in the region at odds with China including the Philippines.

Japan and the United States, as well as many other countries, are seeking to curb dependence on China in rare earths, as Beijing increasingly uses its dominance for geopolitical leverage.

Japan on Monday also joined South Korea in criticizing joint flights by Chinese and Russian bombers and fighters over the weekend in the region.

Fellow US allies South Korea and Japan both scrambled fighter jets in response to the patrols by the convoy of around 15 aircraft on Saturday.

"This marks the 10th instance of such long-range activities by Chinese and Russian bombers in the vicinity of Japan since December last year," Japanese government spokesman Kihara said Monday.

Beijing's defense ministry said that the Chinese and Russian air forces conducted a "strategic air patrol" over the Sea of Japan, the East China Sea and the western Pacific Ocean, "demonstrating their determination and capability to jointly uphold regional peace and stability".

Tokyo last week also rejected Beijing's accusations that the Japanese military "harassed" a Chinese aircraft carrier strike group during 40 days of exercises in the Pacific.

 



Norway's Sovereign Fund Proposes Deep Cuts to US Treasury Holdings

A general view of the Norwegian central bank in Oslo, Norway March 6, 2018. Picture taken March 6, 2018. REUTERS/Gwladys Fouche
A general view of the Norwegian central bank in Oslo, Norway March 6, 2018. Picture taken March 6, 2018. REUTERS/Gwladys Fouche
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Norway's Sovereign Fund Proposes Deep Cuts to US Treasury Holdings

A general view of the Norwegian central bank in Oslo, Norway March 6, 2018. Picture taken March 6, 2018. REUTERS/Gwladys Fouche
A general view of the Norwegian central bank in Oslo, Norway March 6, 2018. Picture taken March 6, 2018. REUTERS/Gwladys Fouche

The manager of Norway's $2.3 trillion sovereign wealth fund has proposed significantly cutting its exposure to US Treasuries as part of a wider shake-up of its bond investments to improve returns, according to a letter published this week.

Norges Bank Investment Management has recommended reducing its weighting to government bonds within its benchmark bond index to 50% from 70%, with US Treasuries, the biggest holding, getting the biggest cut, according to the letter.

The changes would mean cutting nearly $80 billion from the fund's current holdings of about $215 billion of US Treasuries as of the end of June, according to Reuters calculations.

Government bond markets have been under pressure recently, with long-term borrowing costs soaring as rising inflation and government debt levels spooked investors.

Norway's sovereign wealth fund, the world's largest, owns on average 1.5% of ⁠all listed companies ⁠globally. Its scale means that portfolio decisions can influence broader market flows. Any cuts to its bond holdings are unlikely to be implemented until several months into 2027 at the earliest.

The letter containing the fund's proposals was sent in response to questions from Norway's finance ministry about the wealth fund's investment strategy for bonds.

Norges Bank IM said it would await the ministry's response, and any changes would be done gradually to limit market impact and transaction costs.

The proposals will form part of recommendations to the ministry in January.

They will be discussed ⁠as part of the fund's annual white paper process next spring, after which the ministry will make a final recommendation to parliament which will then hold a hearing, a Norges Bank IM spokesperson said.

"We recommend that the government subindex of the bond index be reduced from 70% to 50%," Ida Wolden Bache, governor of Norges Bank, and Norges Bank IM CEO Nicolai Tangen wrote in the letter.

"A government share of 50% will be sufficient to cover the liquidity needs, including in periods of turbulence in financial markets."

The fund also proposed considering an increase in investments in unlisted assets in a separate letter, in part as a way to reduce concentration risks that have grown in its equity portfolio amid the boom in the share prices of a handful of US tech companies.

Under its current mandate the fund can own unlisted real estate and renewable energy assets, but it has a lower share of unlisted investments ⁠than comparable funds.

Norges Bank IM said the biggest change to its bond index would be investing in more non-government debt, including mortgage-backed securities, to give it better diversification and exposure to risk premiums.

The spokesperson said total US dollar exposure would remain around 50%, adding: "What changes is the mix inside the dollar market: less US government debt, correspondingly more US mortgage and government-related bonds."

Under the proposals, the bond index weighting to US government bonds would reduce from 34.1% to 21.9%, according to the letter, with the allocation to euro area debt falling more modestly from 16.8% to 14.1%.

The allocation to Japanese government bonds would increase from 4.6% to 7.4%, while the UK allocation would remain unchanged at 4.2%. The fund said the changes would align the index more closely with the broader market weightings.

While US Treasuries exposure would fall, the proposed allocation to US non-government debt would jump from 16.2% to 27.6%, meaning that the overall bond index's weighting to the US dollar would fall only slightly, from 52.9% to 52.5%.

Europe's biggest pension fund, Dutch fund ABP, cut the value of its own US Treasury holdings in the first quarter of this year, Reuters previously reported.


J.P. Morgan, BNP Paribas Forecast December ECB Rate Hike

FILE PHOTO: The logo of the European Central Bank (ECB) is pictured outside its headquarters in Frankfurt, Germany, April 26, 2018. REUTERS/Kai Pfaffenbach/File Photo
FILE PHOTO: The logo of the European Central Bank (ECB) is pictured outside its headquarters in Frankfurt, Germany, April 26, 2018. REUTERS/Kai Pfaffenbach/File Photo
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J.P. Morgan, BNP Paribas Forecast December ECB Rate Hike

FILE PHOTO: The logo of the European Central Bank (ECB) is pictured outside its headquarters in Frankfurt, Germany, April 26, 2018. REUTERS/Kai Pfaffenbach/File Photo
FILE PHOTO: The logo of the European Central Bank (ECB) is pictured outside its headquarters in Frankfurt, Germany, April 26, 2018. REUTERS/Kai Pfaffenbach/File Photo

J.P. Morgan and BNP Paribas said on Thursday they expect the European Central Bank to deliver another 25-basis-point rate hike in December, as persistent inflation risks and elevated energy prices strengthen the case for further tightening.

Both brokerages had previously expected the ECB's tightening cycle to end without a December rate increase.

The revised outlooks suggest borrowing costs in the euro zone will remain elevated for longer than previously anticipated, reflecting resilient regional economic ⁠growth and ongoing energy ⁠supply concerns.

"We think the persistence of the energy shock and the resilience of the economy make second-round effects more likely to materialize," said analysts at BNP Paribas in a note.

Markets have almost fully priced in ⁠a 25-basis-point interest rate hike by the European Central Bank at its September 10 policy meeting, indicating a 99.2% probability, according to data compiled by LSEG.

Oil prices eased but remained above $95 a barrel. At the same time, eurozone bond yields retreated from multiyear highs, following recent market pressure as the escalating conflict in Iran boosted energy prices, stoking fears of persistent inflation and ⁠tighter ⁠monetary policy.

According to Reuters, J.P. Morgan said "an interaction between more persistent energy price pressures, solid growth, sticky core inflation and a neutral rate that the ECB sees edging higher" would be the reason for a further rate hike in December.

BNP Paribas expects the ECB to hike interest rates by 25 bps at its meeting next week while leaving the door wide open to delivering more if evidence of second-round effects builds.


US Sanctions Turkish Bank, 2 Subsidiaries to Pressure Iran

ASHEVILLE, NORTH CAROLINA - SEPTEMBER 1: Treasury Secretary Scott Bessent arrives for a press conference as the 2026 G20 Financial meetings come to a close on September 1, 2026 in Asheville, North Carolina. Melissa Sue Gerrits/Getty Images/AFPages via AFP)
ASHEVILLE, NORTH CAROLINA - SEPTEMBER 1: Treasury Secretary Scott Bessent arrives for a press conference as the 2026 G20 Financial meetings come to a close on September 1, 2026 in Asheville, North Carolina. Melissa Sue Gerrits/Getty Images/AFPages via AFP)
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US Sanctions Turkish Bank, 2 Subsidiaries to Pressure Iran

ASHEVILLE, NORTH CAROLINA - SEPTEMBER 1: Treasury Secretary Scott Bessent arrives for a press conference as the 2026 G20 Financial meetings come to a close on September 1, 2026 in Asheville, North Carolina. Melissa Sue Gerrits/Getty Images/AFPages via AFP)
ASHEVILLE, NORTH CAROLINA - SEPTEMBER 1: Treasury Secretary Scott Bessent arrives for a press conference as the 2026 G20 Financial meetings come to a close on September 1, 2026 in Asheville, North Carolina. Melissa Sue Gerrits/Getty Images/AFPages via AFP)

The US Treasury Department said on Friday it imposed new Iran-related sanctions on a small Turkish investment bank and two subsidiaries as part of the Trump administration's effort to increase economic pressure on Iran.

The entities targeted are Instanbul-based investment bank Golden Global Yatirim Bankasi Anonim Sirketi, asset manager Golden Global Portfoy Yonetimi Anonim Sirketi, and asset leasing company Golden Global Varlik Kiralama Anonim Sirketi, according to the Treasury's Office of Foreign Assets Control.

The sanctions put all three entities on the Treasury's OFAC Specially Designated Nationals list, cutting them off from the dollar-based financial system.

The Treasury Department also issued a general license to allow the wind-down of transactions with the sanctioned entities.

In an interview with news outlet America's Voice News, US Treasury Secretary Scott Bessent ⁠said that the ⁠latest action "is code for you are out of business."

"And we will probably sanction another bank next week, and we are telling the financial system bad actors: 'We know who you are, you know who you are, it's over, and our allies are helping with this," he said.

Golden Global Yatrim Bankasi is the 35th-largest bank in Turkey by total assets, according to database TheBanks.EU, with total assets of 25,024.68 million Turkish lira ($516.63 million) in 2025.

The bank did not immediately respond to a request for comment.

The Treasury said in a statement that Golden Global was established for the purpose of enabling Iran's shadow banking network to transfer oil revenues from China to Türkiye,
where it could then be converted to cash and gold by money exchangers.

The Treasury said that Golden Global has knowingly offered to provide correspondent banking services to Iranian financial institutions, enabling transactions through accounts controlled by the Iranian Revolutionary Guard Corps Qods Force and its proxies.

The action is the latest in the Trump administration's campaign to economically pressure Tehran six months into the US-Israel war with Iran, which has pushed energy prices higher worldwide.

Bessent, who last month announced an "economic onslaught" against Iran's financial links around the world, has said Washington is seeking to force Tehran back to the negotiating table.

Last week, Washington moved to impose Patriot Act curbs ⁠on Egyptian lender Banque Misr's ⁠branches in the United Arab Emirates from US dollar transactions over their dealings with Iran. But the action fell short of full OFAC sanctions on the institution that did not affect Misr's head office or branches elsewhere.

In an interview with Reuters on Sunday, Bessent said the Treasury Department was likely to roll out new secondary sanctions every week, initially focusing on banks, as part of a broader campaign to intensify economic pressure on Iran.