China tightens amid signs of recovery in Japan and the US

Chinese authorities are no longer waiting to tighten policy. Bloomberg reports:

An unexpected shift by China’s central bank to restrain lending may foreshadow higher interest rates and a relaxation in the nation’s currency peg against the dollar.

The People’s Bank of China yesterday raised the proportion of deposits that banks must set aside as reserves by 50 basis points starting Jan. 18. Economists hadn’t anticipated the move until at least April, the median of 11 forecasts in a Bloomberg News survey showed last week.

That was not the only signal for higher interest rates in China on Tuesday. From AFP/CNA:

China's central bank on Tuesday raised the interest rate on its one-year treasury bills, which analysts said was an attempt to rein in continued aggressive lending by the nation's banks...

The central bank on Tuesday sold 20 billion yuan worth of one-year bills at a yield of 1.8434, a rise of eight basis points and the first hike since August.

A global economy that is clearly on a recovery path has apparently reduced Chinese policy-makers' concerns about policy tightening. Bloomberg reports improved confidence and a bigger current account surplus in Japan.

Confidence among Japanese merchants rose for the first time in three months in December, rebounding from the previous month’s record drop.

The Economy Watchers index, a survey of barbers, taxi drivers and others who deal with consumers, climbed to 35.4 from 33.9 in November, the Cabinet Office said today in Tokyo...

Other reports today added to evidence that the recovery is relying on demand from abroad as spending slumps at home. Exports fell the least in 14 months in November, helping the current-account surplus expand to 1.1 trillion yen, the Finance Ministry said. Meanwhile bank lending declined for the first time in four years in December as companies pared expenditure, Bank of Japan figures showed.

Unlike Japan, US economic recovery is often accompanied by a bigger trade deficit and this time is proving no exception. From Bloomberg on Tuesday:

The trade deficit in the U.S. widened in November more than anticipated as imports climbed faster than exports, pointing to a rebound in global demand that is fueling growth.

The gap expanded 9.7 percent to $36.4 billion, the highest level since January, from a revised $33.2 billion in October, Commerce Department data showed today in Washington. Imports increased 2.6 percent, reflecting a jump in oil prices, while exports rose to the highest level in a year.