FirstFT: US abandons push for anti-whaling in Indo-Pacific pact

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Good morning. The Biden administration has dropped efforts to pressure Japan to include anti-whaling language in its signature Indo-Pacific trade pact after fierce opposition from Tokyo and concern from some US officials.

The US trade representative had been pushing Japan to accept anti-whaling language in the Indo-Pacific Economic Framework, a trade deal the administration is negotiating with 13 Indo-Pacific nations. But USTR, an agency led by Katherine Tai, has reversed course because of the opposition, according to three people familiar with the move.

The FT reported last week that Tokyo had strenuously objected to including anti-whaling language in IPEF. One senior Japanese official said Tokyo was prepared to abandon IPEF unless the US backed down, which would have dealt a blow to Washington and a deal it hopes will provide an economic counterweight to China.

“IPEF is not the place to address concerns about whaling, so its removal from the agenda would be a triumph of diplomatic common sense,” said Christopher Johnstone, a Japan expert at the CSIS think-tank and former senior White House and Pentagon official. Read the full story.

Here’s what else I’m keeping tabs on today and over the weekend:

Summits: US president Joe Biden hosts Japanese prime minister Fumio Kishida and South Korean president Yoon Suk Yeol at Camp David today. Biden is set to announce a landmark trilateral agreement that will help Washington and its Asian allies boost deterrence against North Korea and China.
Economic data: Malaysia publishes second-quarter GDP figures. Economists expect the data to show growth slowing in the quarter that ended in June. (New Straits Times)
Sport: England and Spain meet in the Women’s World Cup final on Sunday in Sydney.

How well did you keep up with the news this week? Take our quiz.

Five more top stories

1. Foreign investors have dumped Chinese stocks and bonds after losing confidence in Beijing’s promises of more help to shore up the wobbling economy. The FT’s calculations show that investors have almost completely reversed Rmb54bn ($7.4bn) in net purchases of Chinese equities that followed a July 24 pledge from the politburo of top Communist party leaders to increase policy support. Here’s more analysis.

2. A former Google researcher who co-authored a paper that kick-started the generative AI revolution has joined forces with an ex-colleague to found a Tokyo-based artificial intelligence start-up. Welshman Llion Jones, who left the US tech giant this month, has since set up Sakana AI alongside David Ha, the former head of Google’s AI research arm in Japan. Here’s why the founders picked Japan for the company’s headquarters.

3. Iran is grappling with the unintended consequences of ultra-cheap petrol. Heavy state subsidies ensure that Iranian prices start at just $0.03 a litre, but a widening gap between supply — which is limited by domestic refining capacity — and rising demand has forced the Iranian authorities to tap its strategic reserves and import petrol for the first time in a decade. Read more on the government’s dilemma.

4. Wirecard’s byzantine fraud scandal has gripped courts in Munich and Singapore, three years after the collapse of the German payments company. The legal cases underline the challenges for national law enforcement agencies trying to get to grips with a complex, global fraud that involved one of Germany’s most celebrated start-ups and an opaque network of companies. Here’s our in-depth look at the cases.

5. Yields on long-term US government debt on Thursday neared their highest level since 2007 as investors increased bets that the Federal Reserve would successfully avoid a recession while curbing inflation through higher interest rates. Read the latest Markets Briefing.

The Big Read

Devastating floods have ravaged northern China. Wildfires have ripped through Canada, southern Europe and, in recent days, the Hawaiian island of Maui. The disastrous effects of climate change can first be measured in the thousands of lives lost — but also economic value. What will happen when businesses and investors realise they have vastly underpriced climate risks?

We’re also reading . . .

On the Hollywood picket line: Blazing sun and walled off sidewalks test the will of striking actors and writers in Los Angeles.
Generative AI: Hype is huge around the technology, but some uncomfortable truths are also being raised, writes John Thornhill.
War in Ukraine: A negotiated outcome remains elusive, writes Domitilla Sagramoso, but this could change if neither side gains the military advantage and a cold winter stalemate sets in.

Chart of the day

Will the rest of the world feel China’s deflation pain? For now, economists say there is little reason for concern. Neil Shearing, chief economist of Capital Economics, said the rise in core inflation from 0.4 per cent in June to 0.8 per cent in July demonstrated the lack of entrenched deflation in China.