By Echo Wang

NEW YORK (Reuters) -Private equity-owned Medline Industries is aiming to raise more than $5 billion in its U.S. initial public offering expected to occur in 2025, people familiar with the matter told Reuters on Thursday.

The stock market flotation could value the medical supplies provider at about $50 billion and come as early as the second quarter, the sources said, cautioning that the company’s plans are subject to market conditions and could change.

Northfield, Illinois-based Medline, which is owned by buyout firms Blackstone (NYSE:BX), Carlyle, and Hellman & Friedman, has invited several investment banks to pitch for lead roles on what is likely to be one of the marquee IPOs next year, the sources said, requesting anonymity as the discussions are confidential.

Medline did not immediately respond to requests for comment. Blackstone, Carlyle, and Hellman & Friedman declined to comment.

The preparations for a stock market flotation come as dozens of other high-profile names are gearing up for potential listings next year, after several bouts of market volatility shut down the IPO market for much of the last two years.

AI cloud platform operator CoreWeave and cybersecurity firm SailPoint are among those pushing ahead with their plans for stock market debuts next year, the sources said.

Medline, which was acquired by its current private equity owners in a deal worth $34 billion in 2021, is one of the largest manufacturers and distributors of medical supplies such as surgical equipment, gloves and laboratory devices used by hospitals around the world.

The company was founded in 1966 by brothers James and Jon Mills and it went public in 1972, before being taken private again by the brothers. Its longtime CEO Charlie Mills, the son of James Mills, retired from Medline last year, with company veteran Jim Boyle replacing him at the helm.

Medline, which employs about 43,000 people worldwide and operates in more than 100 countries, generates annual sales of more than $23 billion, according to its website.

Bloomberg reported on Medline’s IPO preparations in July.

By Stine Jacobsen

COPENHAGEN (Reuters) -Northvolt’s CEO and co-founder Peter Carlsson is stepping down, the Swedish maker of battery cells for electric vehicles said on Friday, one day after the group filed for U.S. Chapter 11 bankruptcy protection.

Northvolt in a matter of months this year went from being Europe’s best shot at a home-grown electric-vehicle battery champion to racing to stay afloat, hobbled by production problems and as funding ran out.

It now needs to raise between $1 billion and $1.2 billion in order to restore its business, Carlsson told reporters.

“The Chapter 11 filing allows a period during which the company can be reorganised, ramp up operations while honouring customer and supplier commitments, and ultimately position itself for the long-term,” the outgoing CEO said.

Carlsson co-founded the company and is a former Tesla (NASDAQ:TSLA) executive.

The lithium-ion battery maker on Thursday said it only had cash to support operations for about a week and that it had secured $100 million in new financing for the bankruptcy process, allowing operations to continue.

Northvolt, which employs around 6,600 staff across seven countries, in its Chapter 11 filing said it expects to complete the restructuring by the first quarter of 2025.

Carlsson will take on a role as senior adviser and remain a member of the board, the company said, adding that the search for a new CEO has started.

In the meantime, the company will be led by Chief Financial Officer Pia Aaltonen-Forsell and its president of battery cells, Matthias Arleth, who takes up a new role as chief operations officer.

On Monday, Reuters reported that Northvolt had missed some in-house targets and curtailed production at its battery-cell plant in northern Sweden, underscoring the challenge of ramping up output.

Northvolt on Thursday said it is conducting a search for one or more partners to finance its restructuring and return the company to long-term sustainability, including the completion of major battery plants in Germany and Canada.

“Any and all interested parties, regardless of their desired transaction type, are encouraged to contact Rothschild as soon as possible and submit proposals by early December,” Northvolt said in its Chapter 11 filing at a Texas court.

Failing this, Northvolt said it has also engaged financial services company Hilco Global to assist with “an orderly liquidation process if necessary”.

While the path forward remains uncertain, the company stands ready to engage with all interested parties, it said in the Chapter 11 filing document.

“Northvolt trusts that it can build on its billions of dollars of investment and groundbreaking facilities and technology to achieve a value-maximising recapitalisation or sale in Chapter 11,” it said.

By William Schomberg

LONDON (Reuters) – British business output shrank for the first time in more than a year and tax increases in the new government’s first budget hit hiring and investment plans, a survey showed, a fresh setback for Prime Minister Keir Starmer’s push for economic growth.

The preliminary S&P Global Flash Composite Purchasing Managers’ Index, published on Friday, fell to 49.9 in November – below the 50.0 no-change level for the first time in 13 months – from 51.8 in October.

“The first survey on the health of the economy after the budget makes for gloomy reading,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

Employers cut staffing levels for a second month in a row – with manufacturers reducing headcount at the fastest pace since February – as they turned more pessimistic about the outlook.

The survey’s measure of overall new business was the weakest since last November.

A weaker outlook for the global economy weighed on companies with the automotive sector in a slump. But the first moves of Britain’s Labour government were also a cause for concern.

“Companies are giving a clear ‘thumbs down’ to the policies announced in the budget, especially the planned increase in employers’ National Insurance Contributions,” Williamson said.

Finance minister Rachel Reeves raised the rate of social security contributions paid by employers and lowered the threshold at which companies must pay them as she sought to raise more money to fund public services.

Many employers have said the budget changes fly in the face of the pledge by Reeves and Starmer to turn Britain into the fastest-growing Group of Seven economy.

Momentum was already weak with gross domestic product edging up by only 0.1% in the July-to-September period, according to official data published last week.

Figures on Thursday showed government borrowing shot past forecasts in October, underscoring how reliant Reeves is likely to be on an improvement in economic growth to generate the tax revenues needed to fund more spending on public services.

Friday’s survey found firms were not replacing departing staff as they braced for April’s rise in payroll costs.

Williamson said the survey suggested the economy was contracting at a quarterly 0.1% pace but the hit to confidence hinted at worse to come, including further job losses.

Selling prices rose at the slowest rate since the coronavirus pandemic but high rates of growth in input prices and costs related to wages were hurting the service sector.

That could worry some interest rate-setters at the Bank of England which is watching prices in the service sector closely.

Inflation also jumped by more than expected last month, showing why the central bank is moving cautiously on interest rate cuts.

The business activity index for the dominant services sector fell to a 13-month low of 50.0 from 52.0 in October. The manufacturing index slid to 48.6, its lowest in nine months, from 49.9 in October.

FRANKFURT (Reuters) – European Central Bank President Christine Lagarde renewed her call for economic integration across Europe on Friday, arguing that intensifying global trade tensions and a growing technology gap with the United States create fresh urgency for action.

U.S. President-elect Donald Trump has promised to impose tariffs on most if not all imports and said Europe would pay a heavy price for having run a large trade surplus with the U.S. for decades.

“The geopolitical environment has also become less favourable, with growing threats to free trade from all corners of the world,” Lagarde said in a speech, without directly referring to Trump.

“The urgency to integrate our capital markets has risen.”

While Europe has made some progress, EU members tend to water down most proposals to protect vested national interests to the detriment of the bloc as a whole, said Lagarde.

But this is taking hundreds of billions if not trillions of euros out of the economy as households are holding 11.5 trillion euros in cash and deposits, and much of this is not making its way to the firms that need the funding.

“If EU households were to align their deposit-to-financial assets ratio with that of U.S. households, a stock of up to 8 trillion euros could be redirected into long-term, market-based investments – or a flow of around 350 billion euros annually,” Lagarde said.

When the cash actually enters the capital market, it often stays within national borders or leaves for the U.S. in hope of better returns, Lagarde added.

Europe therefore needs to reduce the cost of investing in capital markets and must make the regulatory regime easier for cash to flow to places where it is needed the most.

A solution might be to create an EU-wide regulatory regime on top of the 27 national rules and certain issuers could then opt into this framework.

“To bypass the cumbersome process of regulatory harmonisation, we could envisage a 28th regime for issuers of securities,” Lagarde said. “They would benefit from a unified corporate and securities law, facilitating cross-border placement, holding and settlement.”

Still, that would not solve the problem that few innovative companies set up shop in Europe, partly due to the lack of funding. So Europe must make it easier for investment to flow into venture capital and for banks to fund start ups, she said.

Investing.com — Wall Street is set for a muted start Friday, but the main averages are on course to register a positive week. Bitcoin nears an important threshold, while the debate continues over who will fill the role as Treasury Secretary in the new Trump administration.. 

1. Warsh to become Treasury Secretary?

The search for the person to  fill the role of Treasury Secretary in the new Trump administration continues, with the Wall Street Journal reporting that President-elect Donald Trump has floated the idea of appointing Kevin Warsh as Treasury Secretary on the understanding that he could later be Federal Reserve Chairman.

Warsh is a former investment banker who served on the Federal Reserve Board from 2006 to 2011, and currently lectures at Stanford.

No announcement has been made by Trump, and the likes of Marc Rowan, who co-founded Apollo Global Management (NYSE:APO), US Senator Bill Hagerty of Tennessee and Robert Lighthizer, who served as Trump’s U.S. trade representative for essentially the then-president’s entire term, are also considered to be in the running for the role.

“The relevance of the pick for financial markets will probably be how the US Treasury market reacts,” analysts at ING said, in a note. 

“A candidate with proven reliability will be well-received by the bond markets, while those with less experience – or perhaps a candidate that will offer less of a counterweight to some of President-elect Trump’s plans – could see the long end of the US Treasury market sell-off and perhaps even soften the dollar too.”

Trump announced late Thursday that his new pick for attorney general is Pam Bondi, who previously served as Florida’s attorney general.

The announcement came just hours after his controversial first selection, Matt Gaetz, withdrew from consideration.

2. Futures set for muted start

US stock futures traded in a muted fashion Friday, at the end of a broadly positive week on Wall Street. 

By 03:50 ET (08:50 GMT), the Dow futures contract was up 40 points, or 0.1%, S&P 500 futures climbed 2 points, or 0.1%, and Nasdaq 100 futures fell by 12 points, or 0.1%.

The main benchmarks closed higher Thursday, helped by Nvidia (NASDAQ:NVDA), the world’s most valuable listed company, posting gains after an earnings beat.

The Dow Jones Industrial Average is on course to record gains of 1% this week, while the S&P 500 is 1.3% higher and the Nasdaq Composite up 1.6%. 

Investors will study the preliminary purchasing managers index reports for November, while both Gap (NYSE:GAP) and Intuit (NASDAQ:INTU) will also be in the spotlight after the companies reported quarterly earnings after Thursday’s close.

3. Bitcoin nears $100,000 milestone

Bitcoin is fast approaching the $100,000 threshold as demand for the world’s most widely-used cryptocurrency remains strong as investors anticipate Donald Trump’s return to the White House.

At 03:50 ET (08:55 GMT), Bitcoin rose 1.9% to $98,744.0, having hit a record high of $99,289.3 earlier in the session, breaching the $99,000 level for the first time. 

The digital currency was up around 9% this week, and has more than doubled in value from its lows so far in 2024. 

The prime driver of these gains has been the result of the US presidential election as investors bet that President-elect Donald Trump and his administration will bring in friendlier regulations.

Trump promised to make America the “crypto capital of the planet” during his campaign, and had also floated the idea of a Bitcoin national reserve.

Crypto markets were also enthused by Securities and Exchange Commission Chairman Gary Gensler stating he will step down in January after Trump takes office. 

Gensler has led a harsh crackdown on the crypto industry over the past two years.

Bitcoin’s recent moves higher also triggered a wave of short liquidations – more than $100 million in a 24-hour period at one point, according to CoinGlass – sending the price further up overnight.

4. Europe’s economic woes

Data released earlier Friday vividly illustrated the economic woes that Europe is currently suffering, pointing to further interest rate cuts by both the European Central Bank and the Bank of England.  

The German economy grew less than previously estimated in the third quarter, as gross domestic product grew by 0.1% in the third quarter of 2024 compared with the previous quarter, down from a preliminary reading of 0.2% growth.

The annual reading showed a fall of 0.3% from the same quarter a year ago, weaker than the earlier reading of a drop of 0.2%. 

The rest of the eurozone is doing notably better than Germany, but the world’s third-biggest economy still represents more than 30% of the bloc’s gross domestic product.

The ECB last trimmed interest rates in October, and is widely anticipated to ease again at the December meeting.

Additionally, British retail sales fell by much more than expected in October, dropping 0.7% on  a monthly basis, the sharpest since June when sales fell by 1.0% from May. 

A monthly rise in sales in September was also revised down to 0.1% from a previous estimate of a 0.3% gain.

The Office for National Statistics said retailers across the board reported that consumers held back on spending ahead of the new government’s first tax and spending budget on Oct. 30.

The BoE cut its base rate by 25 basis points to 4.75% earlier this month, and the market is pricing in four more reductions in 2025.  

5. Crude set for strong weekly gains

Crude prices edged higher Friday, on course for hefty weekly gains amid increasing concerns the conflict between Russia and Ukraine will lead to supply disruptions.

By 03:50 ET, the US crude futures (WTI) climbed 0.7% to $70.62 a barrel, while the Brent contract rose 0.7% to $74.78 a barrel.

Both contracts were trading up between 4% and 5% for the week, the strongest weekly performance since late September, with traders attaching a greater risk premium to crude after Kyiv began using Western-made long-range missiles. 

Russia responded by lowering its threshold for nuclear retaliation, and reportedly fired a hypersonic medium-range ballistic missile at a Ukrainian target, warning of a global conflict that could impact oil supply from one of the world’s largest producers.

Supply disruptions in Norway and reports that the Organization of Petroleum Exporting Countries and allies, known as OPEC+, was likely to postpone a planned production hike have also supported oil prices this week.

LONDON (Reuters) – World markets continue to assess what a Donald Trump administration will bring, as attention turns to an escalation of the war in Ukraine.

The U.S. Thanksgiving holiday will usher in a key shopping period, while inflation is in focus in Japan and Europe.

Here’s a look at the week ahead from Rae Wee in Singapore, Lewis (JO:LEWJ) Krauskopf in New York, and Naomi Rovnick, Amanda Cooper and Yoruk Bahceli in London.

1/ BINGO ANYONE?

“Trump trades” will likely continue dominating market action.

Anyone with “buy crypto and the dollar, sell anything foreign, or green” on their markets’ bingo card would still be in the money, even if momentum has softened. Bitcoin is within a hair’s breadth of $100,000, up around 50% from early October, when online betting markets pointed to a Trump election win. The dollar index is up 3.6%.

Clean energy, a Trump bug-bear, is the biggest loser, with iShares’ clean energy exchange-traded fund down almost 14%. Mexico’s peso has shed just over 4% and European equities, around 3%. With a few more Trump cabinet appointees to be announced and a little over 60 days before his inauguration, there’s still room for surprises.

Resistance to Trump trades could grow, from a realisation that stocks are expensive or from geopolitics providing a reality check on the risk assets’ rally.

2/ FOREIGN AFFAIRS

Group of Seven foreign ministers meet next week as Russia’s Ukraine invasion just passed the grim milestone of 1,000 days of war and risks a major escalation.

Russia fired a hypersonic intermediate-range ballistic missile at the Ukrainian city of Dnipro on Thursday after the U.S. and UK allowed Kyiv to strike Russia with advanced Western weapons, a further escalation of the 33-month-old war.

Safe-haven bonds have rallied in a sign of investor unease. But markets will struggle to assess the significance of fresh G7 communiques until Trump’s policy on Ukraine becomes clearer.

Trump regularly clashed with G7 allies during his first presidency and has pledged to end the war.

Investors expect Europe to pay more of Ukraine’s support bill and raise overall defence spending, which may require big changes like lifting Germany’s constitutional spending cap.

3/ BARGAIN HUNT

Thanksgiving week in the United States ends with Black Friday, which traditionally marks the start of the holiday shopping period. Investors are watching the extent to which inflation will weigh on buying habits, with consumer spending accounting for more than two-thirds of U.S. economic activity. In one worrisome sign, Target (NYSE:TGT) shares tumbled this week after the retailer forecast holiday-quarter comparable sales and profit below estimates. Inflation trends are also in focus with Wednesday’s release of the Personal Consumption Expenditures Price index, the Federal Reserve’s preferred gauge. The PCE index, which is expected to have climbed 0.2% for October, is one main data point before the Fed’s Dec. 17-18 meeting. Markets indicate investors are split over whether the Fed will hold rates steady or deliver another quarter-point cut, which would be another boost to consumers.

4/ RUSH HOUR

It’s a jam-packed Friday for the euro zone, kicking off with inflation data watched closely by traders betting on the European Central Bank outlook.

Inflation rebounded to 2% in October after falling below target a month. Pay growth meanwhile accelerated in Q3, though policymakers may look through that.

Traders see just under a 20% chance of a 50 bps ECB rate cut in December, versus 40% a month earlier.

Next (LON:NXT) up, S&P reviews France’s credit rating – Fitch and Moody downgraded their outlooks to negative recently.

Uncertainty remains high as Michel Barnier’s government seeks to pass a belt-tightening budget, with far-right leader Marine Le Pen threatening to topple the fragile ruling coalition.

And Ireland holds an election, where ambitious spending plans banking on a sustained boom in multinational corporate tax revenues could be threatened by Trump’s presidency.

5/ HIKE OR NO HIKE?

    Also on Friday, Tokyo inflation numbers will be watched by investors and Bank of Japan policymakers gauging whether interest rates should rise in December.

    While officials have kept markets guessing on when they will hike next, a sliding yen could spark a hawkish BOJ shift sooner rather than later.

    The market odds of a 25-bps December hike are now up to about 54% from negligible levels a month ago.

The yen, down more than 7% since the end of September to trade around 155 per dollar, has entered territory that previously triggered intervention by Japan to shore up the currency.

Officials are back to jawboning about yen weakness, while politics complicates matters.

The Liberal Democratic Party is looking to regain public support after a poor showing in recent election, and a rate hike is unlikely to sit well with voters.

(Graphics by Pasit Kongkunakornkul, Vineet Sachdev, Prinz Magtulis and Sumanta Sen; Compiled by Dhara Ranasinghe; Editing by Kate Mayberry)

By Mike Dolan

LONDON (Reuters) – It’s hard to imagine the gloom surrounding Europe’s biggest economy deepening much further than it already has, but Germany’s outlook for 2025 just keeps getting bleaker.

Germany’s economy flatlined in 2024, and it now faces potential trade wars with both the United States and China – compounding pressure on its dominant and already ailing auto sector. Geopolitical worries in Ukraine are ratcheting higher, energy prices are starting to creep back up and the country’s fiscal future is obscured by the fog of February’s election.

Germany is not the euro zone, of course, and the rest of the region is doing notably better.

But the world’s third-biggest economy still represents more than 30% of the bloc’s gross domestic product and further damage to the zone’s traditional powerhouse could force the European Central Bank to ease far further than its recent statements on gradualism suggest.

Even in a season for central banks’ financial stability reviews – and their required scary lists of outsize risks – the Bundesbank’s version stood out this week.

Germany’s central bank stressed that the country’s corporate sector is still dogged by “profound structural challenges” that have caused aggregate earnings to decline almost every quarter for two years. And it pointedly spotlighted the damage still-high interest rates could yet wreak to darken the mood.

“A significant number of corporate insolvencies are likely next year,” the Bundesbank said. “Default risk for non-financial corporations is likely to remain elevated in 2025 … given ongoing structural change and the continued economic weakness.”

Although insolvencies through the first half of 2024 remain below the peaks of the global banking crash and euro crisis over a decade ago, the report showed that they had risen 25% over the previous year.

WEATHERING A WORSENING STORM

The Bundesbank laced the gloom with some confidence, noting that the economy was still weathering the huge shocks of the past two years.

It pointed out that fixed-rate loans taken out before 2022’s interest rate shock remained relatively cheap with a median rate of 2.6%. But it also noted that almost 10% of outstanding loans that need to be refinanced by the end of 2025 with new 3-5 year tenors would likely see borrowing costs jump to 4%.

“Sound fundamentals mean that the vast majority of enterprises should be able to cope with these burdens,” it said. “If, on the other hand, developments in the macro-financial environment are noticeably weaker than forecast, higher default risks are to be expected.”

None of this will be news to the ECB, which has already cut its main policy interest rates three times since mid-year from 4% to 3.25% and is widely expected to move again next month.

Like all other central banks – it can only surmise the effects of a global trade war and needs to wait until late January at least to find out if President-elect Donald Trump actually follows through on his long-threatened tariff plans.

And yet senior ECB figures already seem to see a trade war as more worrisome for growth than inflation.

ECB chief economist Philip Lane said on Thursday that global economic output would suffer a “sizeable” loss if trade became more fragmented while an initial boost to inflation would “subside gradually”.

For Germany’s export engine, trade fears could be amplified threefold – by the direct impact of universal U.S. tariffs, any hit to overall Chinese demand for its goods due to more severe U.S. barriers on China, and also the implications of the ongoing row between the European Union and China over autos.

AGGRESSIVE TARIFFS

Given all that, the big investment houses remain remarkably sanguine about the broader outlook for Europe next year. Annual investor forecasts have been streaming in over the last week, and they mostly call for some cyclical rebound in Europe, helped by falling interest rates, a weaker euro and resilient households.

What’s more, there’s some hope for more clarity on fiscal policy after the German election.

Germany’s blue-chip stock index hit another record high last month, notching a 15% gain so far this year, and it’s only slipped about 3% from that peak since.

The problem for policymakers and investors alike is that visibility is incredibly low and may remain so for months.

Salman Ahmed, Fidelity International’s Global Head of Macro (BCBA:BMAm) and Strategic Asset Allocation, reckons U.S. tariff risks could reduce euro zone growth by half a percentage point next year and Germany could be hit additionally by its own election anxieties.

Given that the International Monetary Fund already forecasts 2025 German growth to be the weakest among the G7 countries next year at just 0.8%, a jolt of that scale would mean the country could be flirting with recession for another year.

Ahmed’s baseline view is the ECB will cut rates quickly to 2%, followed by a more gradual move to 1.5% by the end of next year. But even that hinges on a scenario where U.S. tariff hikes end up being less than Trump’s pre-election pledges.

“More aggressive tariffs risk provoking additional and accelerated easing,” he said, adding the ECB would then need to keep a close eye on the extent of the ensuing weakness.

German economic gloom may be nothing new – there’s every reason to think it could get even worse before it lifts.

The opinions expressed here are those of the author, a columnist for Reuters

(By Mike Dolan; Editing by Sonali Paul)

SINGAPORE (Reuters) – Republican Governor of Texas Greg Abbott ordered state agencies to cease investing state funds in China and sell at the first available opportunity, citing financial and security risks.

“As Chinese aggression against the United States and its allies seems likely to continue, the financial risk associated with holding investments in China will also rise,” Abbott said in a letter to Texan state agencies dated Nov. 21 and posted to his website.

“I direct Texas investing entities that you are prohibited from making any new investments of state funds in China. To the extent you have any current investments in China, you are required to divest at the first available opportunity.”

By Indradip Ghosh

BENGALURU (Reuters) – German home prices will reverse their relentless two-year fall and rise 3% next year and in 2026 on lower borrowing costs, according to analysts polled by Reuters who said rental growth would outpace housing inflation in the coming year.

Once riding high on the wave of low interest rates, the property market in Europe’s largest economy plunged into its worst crisis in decades as a sharp rise in rates after the COVID-19 pandemic tipped developers into insolvency.

Prices have plummeted 12% from a peak in Q2 2022 after surging nearly 25% during the pandemic. But the latest data showed activity in the sector is stabilising.

Residential property prices climbed 1.3% during the April-June period from Q1, the first increase since 2022, while data from JLL recently showed transactions in the sector rose slightly in the first nine months of the year.

The rebound is likely to continue in the next few years as the European Central Bank, which has already cut its deposit rate by 75 basis points this year, is widely expected to deliver at least another 100 basis points of cuts by end-2025.

Average German home prices, which fell 8.5% last year, will decline only 0.3% this year and increase 3.0% next year, according to the latest Reuters survey taken Nov. 12-21.

That was an upgrade from a fall of 1.4% and a rise of 2.0% predicted in August. Prices were forecast to climb another 3.0% in 2026.

“As mortgage rates decline, the German housing market is poised for stabilisation, with both existing and new home prices expected to find support,” said David Muir, senior economist at Moody’s (NYSE:MCO) Analytics. 

“However, current interest rates remain elevated compared to the ultra-low levels of the 2010s…This suggests while we may see a moderation in price declines, a return to the rapid appreciation of the past decade is unlikely.”

Like the residential segment, commercial real estate is also showing some signs of recovery with valuations – in decline for two years – rising 0.7% last quarter from the second quarter.

Despite the glimmers of hope emerging from improving conditions and anticipated drops in borrowing costs, concerns around stretched affordability remain.

In response to a separate question, eight of 13 respondents said purchasing affordability for first-time buyers would worsen over the coming year.

That was likely to discourage first-time home buyers to own a home but to instead rent, in a market which is already hot.

Average urban home rents will increase 4%-5% over the coming year, according to the median view. Ten of 13 analysts said rents will outpace home prices in the next 12 months.

“While demand for purchasing properties is only recovering gradually, demand for rental properties remains at a record high. At the same time, construction activity is stagnating, resulting in unmet demand,” said Carsten Brzeski, chief economist at ING.

“Until construction activity picks up significantly, the mismatch between supply and demand, which is even more pronounced in cities than in rural areas, will continue to be a structural price driver in the rental market.”

(Other stories from the Q4 global Reuters housing poll)

By Makiko Yamazaki

TOKYO (Reuters) – Japan is set to kick off discussions on raising the basic tax-free income allowance in effective permanent tax cuts worth up to $51 billion, a step that could also help ease constraints on part-time workers amid intensifying labour shortages.

The government’s plan, which will be mentioned in an economic stimulus package to be announced on Friday, comes as the ruling coalition yielded to a push by a key opposition party whose cooperation is crucial for the coalition to stay in power.

If the income tax threshold is lifted from the current 1.03 million yen ($6,674) per year to 1.78 million yen as demanded by the opposition Democratic Party for the People (DPP), tax revenue would drop by 7 trillion yen ($45.36 billion) to 8 trillion yen, according to a government estimate.

While the new threshold level has yet to be discussed, policymakers say a full increase to 1.78 million yen is unlikely.

DPP argues that 1.03 million yen has also served as constraining student part-time workers as their parents lose a tax deduction treatment if their dependent minors earn beyond the level.

Daiwa Research Institute estimates that about 610,000 students currently voluntarily limit their working hours to avoid hitting the threshold.

An increase in the deduction threshold to 1.8 million yen would boost labour supply by about 330 million hours, workers’ compensation by 456 billion yen and increase private consumption by 319 billion yen, according to Daiwa estimates.

But critics are sceptical about the impact on labour supply, pointing out that there are other barriers that prevent from such workers from working longer.

Raising the income tax threshold would also keep Japan an outlier among advanced nations that had mostly phased out pandemic-mode stimulus.

“This is effectively a dole-out policy disguised as a labour issue,” said Saisuke Sakai, senior economist at Mizuho (NYSE:MFG) Research and Technologies.

“Japan’s goal of running a primary budget surplus in the next fiscal year would be absolutely impossible. With no one caring about the fiscal discipline, concerns about Japan’s debt could intensify among investors,” he added.

In the stimulus package to be approved later on Friday, the government will spend 13.9 trillion yen from its general account to fund measures aimed at mitigating the impact of rising prices on households.

The focus will now shift to how to fund the budget.

JPMorgan said in a report to clients that it expects about 10 trillion yen in additional new government bonds for the latest package.

However, the outlook for the budget for the next fiscal year from April is growing unclear as the outcome of the discussions on the tax revision would impact tax revenue for the year.

Fixing tattered public finances has emerged as a more imminent task for Japan as its central bank moves to exit years of ultra-easy monetary policy that had kept borrowing costs ultra low.

Japan’s public debt stands at more than twice the size of its economy, by far the biggest among industrialised economies.

($1 = 154.3300 yen)