What We're Watching: Bankman-Fried in cuffs, China after "zero," Peru's next vote, Japan's proposed tax hike
FTX’s Sam Bankman-Fried in cuffs
Sam Bankman-Fried, the shaggy-haired founder of FTX known colloquially as SBF, was arrested Monday night at his apartment in the Bahamas. FTX, the once booming crypto exchange, imploded last month after investors grew worried about the firm’s financial standing, leading to massive withdrawals. Unable to pay customers out, SBF had been funneling investors’ funds to a crypto hedge fund, while Bankman-Fried had also used billions of dollars to fund risky wagers. SBF, who ultimately declared bankruptcy last month, has recently been compared to infamous con artists like Bernie Madoff. On Tuesday, US federal prosecutors are set to release the indictment, which includes a host of financial crimes, including wire fraud and money laundering. What’s more, SBF’s arrest came the night before he was due to testify to the US Congress about the collapse of his $32 billion empire. It's unclear whether the former crypto whiz will fight extradition efforts.
China after “zero”: how bad will it get?
Just days after China relaxed some of the world’s most draconian COVID rules in response to widespread anti-lockdown protests, authorities are holding their breath as signs of an infection wave grow. Having eased testing requirements, loosened quarantine restrictions, and scrapped a government COVID tracking app, officials say visits to health clinics have now skyrocketed. For three years, President Xi Jinping has tried to show the world that his authoritarian COVID approach was more effective and humane than the repeated cycles of infection and death that have swept across the Western democracies since 2020. But the downside is that few people in China have natural immunity to the disease, and with vaccination rates relatively low — particularly among the vulnerable elderly who are under-vaccinated — he could soon face precisely the wave he wants to avoid. The rest of the planet has a direct economic stake in this as well, particularly if the world’s second largest economy, already laid low by lockdowns, now catches a COVID crisis of its own.
Peru to hold early elections… but not that early
Interim president Dina Boluarte has pledged to hold early general elections following deadly clashes between police and supporters of her predecessor, Pedro Castillo, who was ousted last week after attempting to dissolve Congress. Boluarte, who was the left-populist Castillo’s vice president, said she would aim to hold the vote in April 2024, two years ahead of schedule. It’s unclear whether that will placate Castillo’s mainly rural and indigenous supporters, who want a fresh vote as soon as possible, and who are demanding the former president’s release from police custody. Meanwhile, the country’s fractious and unloved Congress is living up to its do-nothing-in-a-crisis reputation: at a weekend meeting, members ended up beating the crap out of each other rather than solving any of the issues facing their country. Boluarte is now Peru’s 6th president in as many years.
Kishida’s tax hike plan irks his own party
Japan’s Prime Minister Fumio Kishida is once again facing backlash after announcing plans to raise taxes in a bid to pay for Japan’s growing defense budget. (Japanese media infer the increase will be to corporate taxes, since Kishida implied that individuals facing high inflation should not be burdened.) Kishida, who replaced Liberal Democratic Party leader Yoshihide Suga as PM in 2021, has long called for a revision of Japan’s pacifist constitution and now plans to boost the country’s defense budget to 2% of GDP – up from 1%– within 5 years. However, in order to pull this off, Kishida will have to find an additional $29 billion – one quarter of which he plans to get from corporate tax hikes. But members of his own conservative LDP have criticized this approach, saying that raising taxes undermines key parts of the government’s economic agenda aimed at raising wages and boosting growth. Kishida, who has the lowest approval rating of any G7 leader (23%), would be tossed out if enough members of the ruling coalition backed a no-confidence motion in the lower chamber. For now, that’s extremely unlikely, but Kishida will have his work cut out for him in uniting his party, particularly as Tokyo contends with continuing political fallout from high inflation and a weak yen.
Correction: Our Signal newsletter incorrectly stated that Kishida replaced Abe. His correct predecessor is Yoshihide Suga.