By David Shepardson

(Reuters) -Toyota Motor unit Hino Motors has agreed a $1.6 billion settlement with U.S. agencies and will plead guilty over excess diesel engine emissions in more than 105,000 U.S. vehicles, the company and U.S. government said on Wednesday.

The Japanese truck and engine manufacturer was charged with fraud in U.S. District Court in Detroit for unlawfully selling 105,000 heavy-duty diesel engines in the United States from 2010 through 2022 that did not meet emissions standards.

The settlement, which still must be approved by a U.S. judge, includes a criminal penalty of $521.76 million, $442.5 million in civil penalties to U.S. authorities and $236.5 million to California.

A company-commissioned panel said in a report in 2022 Hino had falsified emissions data on some engines going back to at least 2003.

Hino agreed to plead guilty to engaging in a multi-year criminal conspiracy and serve a five-year term of probation, during which it will be barred from importing any diesel engines it has manufactured into the U.S., and carry out a comprehensive compliance and ethics program, the Justice Department and Environmental Protection Agency said.

Assistant Attorney General Todd Kim said Hino “falsified data for years to skirt regulations” adding the company’s “actions led to vast amounts of excess air pollution and were an egregious violation of our nation’s environmental, consumer protection and import laws.”

The settlement includes a mitigation program, valued at $155 million, to offset excess air emissions from the violations by replacing marine and locomotive engines, and a recall program, valued at $144.2 million, to fix engines in 2017-2019 heavy-duty trucks

The EPA said Hino admitted that between 2010 and 2019, it submitted false applications for engine certification approvals and altered emission test data, conducted tests improperly and fabricated data without conducting any underlying tests.

Hino President Satoshi Ogiso said the company had improved its internal culture, oversight and compliance practices.

“This resolution is a significant milestone toward resolving legacy issues that we have worked hard to ensure are no longer a part of Hino’s operations or culture,” he said in a statement.

The California Air Resources Board began an investigation in 2019 when Hino’s certification applications were reviewed and found inconsistencies in the emissions data.

“Hino knowingly took unlawful advantage of California’s incentives designed to accelerate the adoption of clean transportation technologies, which safeguard the health and safety of Californians from pollution,” said California Attorney General Rob Bonta.

Hino said it booked an extraordinary loss of 230 billion yen, or about $1.54 billion, in its second quarter results in October to cover the expected costs of resolving the litigation.

Over the last decade, several automakers admitted to selling vehicles with excess diesel emissions, including Volkswagen (ETR:VOWG_p) which paid more than $20 billion in fines, penalties and settlements after it admitted in 2015 it had cheated emissions tests by installing “defeat devices” and sophisticated software in nearly 11 million vehicles worldwide.

By Tom Westbrook

SINGAPORE (Reuters) – The dollar slipped on Thursday to stand just off recent peaks as cooling U.S. inflation data knocked down bond yields, while the yen hit a one-month high on rising bets on a rate hike in Japan.

The yen was the biggest major mover on the dollar overnight, rising about 1% and extending gains in Asia, as inflation relief in the U.S. raised chances of Federal Reserve rate cuts and coincided with murmurs of a Bank of Japan hike next week.

The yen traded as firm as 155.21 per dollar, its strongest since Dec. 19. The greenback also handed back some recent gains against the Australian and New Zealand dollars and the Aussie hit a one-week high of $0.6248 in the Asia morning.

The euro ended up fairly steady and was last buying $1.0298. The dollar index was heading lower for a fourth straight session on Thursday, easing slightly to 109.02.

Foreign exchange markets made little direct reaction to the announcement of a ceasefire deal in Gaza, though the Israeli shekel did touch a one-month high.

Core U.S. inflation was 0.2% month-on-month in December, in line with forecasts and below November’s 0.3%. Annualised, the 3.2% reading was cooler than the expectation for 3.3%. That followed a similarly softer-than-expected British inflation reading and remarks from a Bank of England policymaker saying the time was right to bring down interest rates.

Traders who have been growing worried about inflation responded with relief, buying stocks and sending benchmark 10-year Treasury yields down more than 13 basis points, although the currency market reaction was a bit more muted.

The dollar index remains 0.5% firmer in January and, if sustained, would notch four consecutive monthly gains. Markets priced in about an extra 10 bps of Federal Reserve easing this year after the inflation data, reckoning on 37 bps of cuts.

“Of course, the dollar has overshot rate spreads lately,” said Deutsche Bank (ETR:DBKGn) macro strategist Tim Baker in a note.

“But it’s not all that large,” he said. “The dollar should build in risk premium given the geopolitical backdrop.

“Further,” he said, “it’s also completely normal to see dollar strength like this when U.S. growth is outperforming peers to this extent – and in previous episodes the dollar has overshot this relationship.”

Markets have a wary eye on Donald Trump’s inauguration day on Monday for a slew of executive orders, especially on tariffs, that are likely to roil asset prices and the dollar.

“USD strength may partly reflect Trump 2.0 (tariff) fears,” said Mizuho (NYSE:MFG) economist Vishnu Varathan.

China’s yuan, seen on the front lines of tariff risk, hardly caught a break and was near the weak end of its trading band at 7.3312 in early trade. [CNY/]

The New Zealand dollar, at $0.5623, is still near Monday’s two-year low of $0.5543 and the Aussie remains within reach of a recent five-year low, receiving only a brief boost from robust employment figures on Thursday.

Sterling dipped slightly to $1.2233 in Asia and there was not all that much relief for smaller currencies.

Indonesia’s rupiah had made a six-month trough on Wednesday following a surprise rate cut from Bank Indonesia. South Korea’s won did not take much of a boost, either, from the central bank defying expectations for a cut to leave its benchmark rate on hold at 3% on Thursday.

Besides the beginning of Trump’s presidency, markets are looking ahead to Chinese growth figures due on Friday and to a Bank of Japan meeting next week.

Recent remarks from BOJ Governor Kazuo Ueda and his deputy Ryozo Himino have made clear that a hike will at least be discussed and markets have priced about a 74% chance of a 25 basis point rise in short-term rates to 0.5%.

By David Lawder and Lawrence Delevingne

WASHINGTON (Reuters) -Scott Bessent, U.S. President-elect Donald Trump’s choice to head the Treasury Department, on Wednesday vowed to ensure that the dollar remains the world’s reserve currency as he laid out a vision for a “new economic golden age”.

Bessent, who faces questioning before the U.S. Senate Finance Committee on Thursday, said in prepared testimony that the new Trump administration must prioritize productive investment that grows the economy over “wasteful spending that drives inflation.”

“We must secure supply chains that are vulnerable to strategic competitors, and we must carefully deploy sanctions as part of a whole-of-government approach to address our national security requirements,” Bessent said in the remarks.

“And critically, we must ensure that the U.S. dollar remains the world’s reserve currency.”

Bessent, a hedge fund manager who has advocated for Trump’s plans to impose significantly higher tariffs on imports, did not single out China in his remarks, but he has previously said China’s trade practices have hollowed out American industry.

Trump has threatened a 60% tariff on imports from China and a 10% duty on global imports. Trump has also said he would impose 25% duties on Canadian and Mexican imports, until those two countries halt the flow of illegal immigrants and fentanyl into the United States.

$4 TRILLION TAX HIKE

Bessent also said the administration and Congress need to “make permanent” the expiring provisions of Trump’s 2017 Tax Cuts and Jobs Act.

“If Congress fails to act, Americans will face the largest tax increase in history, a crushing $4 trillion tax hike,” Bessent said.

The Trump administration and Congress also need to implement “pro-growth policies to reduce the tax burden on American manufacturers service workers and seniors,” he said.

The latter policies refer to Trump’s campaign promises to lower the corporate tax rate to 15% from 21% for companies manufacturing products in the United States, and to exempt income from tips and Social Security from taxation.

Bessent said that with support from Congress, the Trump administration could usher in a new, more balanced era of prosperity for Americans that he called “a generational opportunity to unleash a new economic golden age”.

Investing.com– South Korea’s central bank unexpectedly kept interest rates unchanged on Thursday amid heightened political uncertainty in the country after the recent arrest of impeached President Yung Suk Yeol. 

The Bank of Korea left its benchmark rate at 3%, compared to expectations that it would cut the rate to 2.75%. 

The central bank had cut interest rates twice in 2024, as it kicked off an easing cycle to help support economic growth. Consistently softer inflation in the country sparked expectations of more rate cuts.

But these expectations were dented by heightened political uncertainty in the country, after President Yoon attempted to unsuccessfully implement military law in December.

Yoon was impeached, and was arrested at the Presidential compound on Wednesday. 

Investors had also expected more easing by the BOK to help offset the impact of increased political uncertainty, especially after South Korean stocks and the won were battered over the past month. The won in particular slumped to its weakest level in 15 years. 

Analysts said that the central bank was likely to cut rates soon, amid increasing signs of economic pressure from the ongoing political crisis. The BOK’s latest easing cycle was triggered largely by signs of weaker economic growth, high household debt and slowing inflation.

“There are good reasons to expect the central bank to resume its easing cycle soon amid signs the political crisis is weighing on the economy. But even if the crisis is resolved soon, GDP growth is expected to struggle,” analysts at Capital Economics wrote in a note.

Focus is now on an upcoming press conference by BOK Governor Rhee Chang-Yong for more cues on policy.

By Cynthia Kim and Jihoon Lee

SEOUL (Reuters) – South Korea’s central bank unexpectedly left its policy interest rate unchanged on Thursday, weighing the impact of its back-to-back cuts last year while supporting the won which weakened to a 15-year low versus the U.S. dollar in recent weeks.

The Bank of Korea held its benchmark interest rate at 3.00% at its monetary policy review, an outcome expected by only seven of 34 economists polled by Reuters. The remaining 27 had expected the bank to cut the rate by 25 basis points.

The decision is the first since impeached President Yoon Suk Yeol’s attempt to impose martial law in early December threw Asia’s fourth-largest economy into its biggest political crisis in decades. The turmoil prompted the government to cut its 2025 economic growth forecast to 1.8% from 2.2%.

The crash of Jeju Air flight 7C2216, which killed 179 people in the deadliest air disaster on South Korean soil, has also weighed on the economy.

On top of that, the won’s slide has been a major concern among policymakers. In the final three months of 2024, the currency weakened 10.6% against the dollar, the biggest quarterly drop since the third quarter of 2008.

Local currency dealers said South Korea has been relying on smoothing operations in the onshore dollar-won market as well as the National Pension Service’s currency hedging operations to support the won.

“(Thursday’s rate decision) would be due to its (the BOK’s) greater focus on economic and financial stability concerns, until political uncertainty eases. Instead of January, we expect the BOK to cut the policy rate again at its February meeting, after it revises its economic outlook.” said Park Jeong-Woo, an analyst at Nomura Securities who was one of the seven analysts who correctly predicted the rate decision.

Analysts now see the central bank eying a more gradual pace of interest rate reduction in the year ahead.

Median forecasts in the survey showed one interest rate cut of 25 basis points this quarter and cuts of the same degree in both the second and third quarters taking the rate to 2.25%.

Market focus now switches to Governor Rhee Chang-yong’s press conference at 0210 GMT, where the names of any dissenters to the policy decision could be announced. Dissenting votes typically lead to policy changes in subsequent months.

By Andrea Shalal

NEW YORK (Reuters) – U.S. Treasury Secretary Janet Yellen said on Wednesday U.S. President-elect Donald Trump’s plan to set up a new government agency to collect tariffs would duplicate an existing agency and was unlikely to save money.

Yellen, taping an appearance on “The Late Show with Stephen Colbert,” dismissed Trump’s plan for an “External Revenue Service,” first announced on Tuesday on his social media platform Truth Social.

“If they’re looking to save money for American taxpayers, setting up a duplicative agency doesn’t seem like a good first step,” she told the U.S. television comedian.

Trump on Tuesday said he would create the new agency on Jan. 20, the day he takes office, “to collect tariffs, duties, and all revenue” from foreign sources.

He did not specify if the new agency would replace collections of tariffs, duties, fees and fines by the existing U.S. Customs and Border Protection, or the collection of taxes on foreign corporate and individual income by the Internal Revenue Service.

It was unclear whether the move would create additional government bureaucracy, which would appear to go against the plans of Trump’s informal Department of Government Efficiency, an effort led by billionaire Elon Musk and former biotech executive Vivek Ramaswamy aimed at finding trillions of dollars in budget savings by streamlining government operations.

Yellen also took aim at Trump’s repeated promises to impose new tariffs, saying they would amount to a “tax increase for the American consumer.”

Trump has proposed a 10% tariff on global imports, a 25% punitive duty on imports from Canada and Mexico until they clamp down on drugs and migrants crossing borders into the U.S., and a 60% tariff on Chinese goods.

Trade experts say the duties would upend trade flows, raise costs and draw retaliation against U.S. exports.

Yellen said U.S. consumers would face higher costs for any imported goods and tariffs would make U.S. companies less competitive globally, while failing to address Americans’ concerns about higher prices.

“What they’re going to see is the cost of making goods and services is going to go up. They’re going to be less competitive in the global economy,” she said. “So this doesn’t seem like a way to address the things that Americans have said are bothering them.”

BEIJING (Reuters) – Apple (NASDAQ:AAPL) smartphone shipments in China fell 25% in the fourth quarter, while Huawei’s rose 24%, data from research firm Canalys showed on Thursday.

Apple shipped 13.1 million units versus Huawei’s 12.9 million, the data showed. That give Apple a share of 17% and number one position, followed closely by Huawei.

Total (EPA:TTEF) fourth quarter smartphone shipments from China increased 5% year-over-year to 77.4 million units.

Annual shipments of smartphones in China in 2024 increased 4% year-over-year to 285 million units.

CARACAS (Reuters) – Venezuela inflation was 48% annually in 2024, the lowest in 12 years, Venezuelan President Nicolas Maduro told lawmakers in an annual address to the national assembly and other officials on Wednesday, just days after he was inaugurated for a third term.

Maduro, whose nearly 12 years in office have been marked by deep economic and social crisis and mass migration, was sworn in for a third term on Friday, despite a six-month-long election dispute and international calls for him to stand aside.

The government has employed orthodox methods to try to tamp down inflation, which has reached triple digits in recent years, with some success. Inflation was 189.8% in 2023, according to the central bank. Maduro said this month that the economy grew 9% last year.

TOKYO (Reuters) – Two-thirds of Japanese companies are experiencing a serious business impact from a shortage of workers, a Reuters survey showed on Thursday, as the country’s population continues to shrink and age rapidly.

Labour shortages in Japan, particularly among non-manufacturers and small firms, are reaching historic levels, the government has said, stoking concerns that this supply-side constraint could stifle economic growth.

Some 66% of respondents indicated that labour shortfalls were seriously or fairly seriously affecting their businesses, while 32% said the impact was not very serious.

“It goes without saying this drives up personnel costs, but it could even pose a business continuity risk,” a manager at a railroad operator wrote in the survey.

The number of bankruptcies caused by labour shortages in 2024 surged 32% from a year earlier to a record 342 cases, according to credit research firm Teikoku Databank.

Nearly a third of respondents to the Reuters survey said the labour shortage is worsening, with only 4% reporting improvements and 56% saying the situation is neither getting better nor worse.

The survey was conducted by Nikkei Research for Reuters from Dec. 24 to Jan. 10. Nikkei Research reached out to 505 companies and 235 responded on condition of anonymity.

When asked about specific measures to address the labour shortfall in a question that allowed multiple answers, 69% said they were intensifying recruitment activities for new graduates and 59% were implementing such measures as extending retirement ages and re-hiring retired employees.

The official retirement age is set at 60 for about two-thirds of Japanese companies, although most have introduced measures allowing employees to keep working until they turn 65, a poll by the Health Ministry showed last year.

In response to a Reuters survey question about investment priorities for 2025, 69% chose capital investment and 63% selected wage hikes and other human resources-related investments. This question also allowed multiple answers.

“What’s essential are wage hikes for retaining employees and capital investment for rationalising production,” an official at a chemicals company said.

This trend in investment priority among Japanese firms aligns with the government’s policy of seeking economic growth through higher wages and investments.

With labour shortages driving up wages and a weak yen raising import costs, 44% of Japanese companies plan to raise prices for their goods and services this year, the survey found. That compares with 17% that intend to keep their prices unchanged and 26% that plan to raise some prices but cut others.

“We just cannot help but raise prices because of an across-the-board increase in wages and other fixed costs, in transportation costs and in costs of raw materials,” a manager at a metals company said in the survey.

Tokyo’s core consumer price index, which excludes volatile fresh food costs, rose 2.4% in December from a year earlier. That was an acceleration from a 2.2% rise in November, keeping alive market expectations for a near-term interest rate hike.

By Jamie McGeever

(Reuters) – A look at the day ahead in Asian markets. 

At last, some breathing room for investors after U.S. and UK inflation figures on Wednesday eased the vice-like grip that the soaring dollar and global bond yields had increasingly been exerting over markets.

It is too early to say this marks a turning point, but fixed income and emerging markets have been beaten down so much lately that they were primed for a ‘good news’ reversal. Upbeat U.S. bank earnings and, on the margins, the ceasefire between Israel and Hamas will also help support market sentiment on Thursday.

But it’s the UK and especially the U.S. inflation news that will drive markets more, and the rapid slide in bond yields and jump in stocks should pave the way for a positive day in Asia on Thursday.

These numbers may not ultimately alter the Fed’s direction or even pace of rate cuts this year. But they do take the heat off policymakers and buy them more time to assess their next steps.

For investors, they were instant triggers to reverse some of the bond selling that had snowballed in recent weeks and which had started to bleed into equity markets. Yields across the U.S. Treasury curve posted their biggest one-day declines since Nov. 25, and rates traders brought forward the next expected Fed rate cut to June from September.

Curiously, however, the impact on the dollar was muted. It fell sharply against the yen, but barely budged against the euro. Perhaps country-specific factors are playing a greater role in setting exchange rates right now rather than solely U.S. yields and rate expectations.

That may be the case in Asia, where policy and politics are spicing up local markets. Indonesia’s rupiah sank to its lowest in more than six months and the country’s stocks leaped on Wednesday after the central bank delivered a surprise rate cut.

Not one of the 30 analysts polled by Reuters expected the move.

The Bank of Korea delivers its latest decision on Thursday, and it could not be at a more volatile time for the country, after impeached President Yoon Suk Yeol was arrested on Wednesday and questioned for hours by investigators in relation to a criminal insurrection probe.

The BoK is expected to cut its base rate by 25 basis points to 2.75%, according to 27 out of 34 economists polled by Reuters, with the remaining seven forecasting no change.

Given the tense domestic political situation and in light of the cooler-than-expected U.S. inflation data, could the BoK surprise markets with a 50 bps cut to try and boost growth and loosen financial conditions? 

Bank Indonesia’s shock move shows that even unanimous consensus forecasts are not always the one-way bet they might seem.

Here are key developments that could provide more direction to markets on Thursday:

– South Korea interest rate decision

– South Korea fallout from President Yoon’s arrest

– Australia unemployment (December)