By Walter Bianchi and Rodrigo Campos

BUENOS AIRES/NEW YORK (Reuters) - Argentina and the International Monetary Fund (IMF) have a $44 billion dilemma, with the two sides set to meet for crunch talks to revamp the country's huge, wobbling debt deal, key to avoiding default on billions in looming debt payments.

The South American country, a serial defaulter that has struggled for years with inflation and currency crises, struck a $57 billion loan deal with the IMF in 2018, which failed and was replaced last year with a new $44 billion program.

But with net foreign currency reserves estimated to be in negative territory, hit by a major drought that sunk the key soy and corn harvests, Argentina is at risk again of missing debt repayments, with $2.7 billion due to the fund this month alone.

Economy Minister Sergio Massa is expected in Washington as early as this week to try to unlock talks to accelerate IMF disbursements and ease economic targets attached to the deal, with investors and traders watching closely.

"The fund knows that Argentina is a problem, it is its main debtor, but it seems to me that the negotiation has stagnated. One does not see significant progress," said Ricardo Delgado of Argentine financial services firm Analytica.

In a sign of potential holds-ups, an economy ministry source said on Friday that Massa's trip, previously briefed to happen in the next few days, could be delayed depending on how virtual talks progressed.

"Until everything is sealed, no one travels. When everything is ready, they'll travel to put things on paper. And when everything is written, Massa will travel," the source said.

On the streets of Buenos Aires pressure is rising. Inflation has hit 114%, hurting salaries and spending power, reserves have tumbled and one-in-four people is in poverty, with many blaming - not for the first time - austerity linked to the IMF.

"We must change these economic policies, we must break with the dependence on the IMF," said Hugo Godoy, a union leader marching on Friday in Buenos Aires as part of protests against the government's handling of the economy and austerity.

"Some 43% of Argentines live below the poverty line and 4.5 million, 10% of the population, suffer from hunger," he said.

'DAMAGE CONTROL'

The government is hoping to bring forward over $10 billion in IMF disbursements scheduled for this year, though is reluctant to agree to tough austerity measures with an eye on October general elections where it faces likely defeat.

"Investors are paying real attention to signs from the IMF negotiations," said economist Gustavo Ber.

"Receiving fresh funds - or at least rescheduling disbursements and payments - would be crucial to reduce exchange and financial tensions at this stage."

Meanwhile Argentina has been rolling over local debt to push back peso-denominated repayments, has extended a currency swap line with China, and faces a wall of obligations with private foreign creditors next year.

The local debt exchanges and hopes of progress with the IMF have nudged up Argentina's dollar-denominated bonds from high-20 cents on the dollar in May to mid-30 cents now, though they remain mired in distressed territory.

And many worry that even sped-up IMF payouts won't solve Argentina's problems for long.

"Frontloading disbursements could be a 'damage control' solution until the end of the current government's term in December," the Institute of International Finance, a Washington-based banking trade group, said in a report.

Argentina got a hint of good news this week with monthly inflation cooling in May for the first time in half a year and coming in below analyst expectations, though it was still an eye-watering 7.8% for the month.

"Inflation continues to be very high and affects the entire economic scenario, but the fact that it has eased somewhat with respect to April helps to remove some pressure," an Argentine banker said, asking not to be named.

"It is like the sick patient with a fever that has gone down slightly. But the patient is still sick and still has a fever."

SEOUL (Reuters) - South Korea's central bank said on Monday that upward risks to core inflation were "a little high" amid strong consumption and employment trends, raising the prospect of higher inflation lasting longer than expected.

"While there is high uncertainty regarding global energy prices, domestic and global economic growth and public price hikes over the future inflation path, upward risks are assessed to be a little high when it comes to the outlook on core inflation," the Bank of Korea (BOK) said in its biannual review of inflation conditions.

"If consumption and employment continue their robust trends, spill-over effects from accumulated cost increase pressures on core inflation may last longer than expected," it added.

The BOK said in the report that core inflation, which remained higher than headline inflation in recent months, was also easing at a much slower pace than in past comparable periods because of sticky service prices.

South Korea's consumer inflation slowed to a 19-month low of 3.3% in May, but core inflation remained elevated at 3.9%, staying above the headline figure for the second consecutive month.

Consumer inflation is expected to ease toward its 2% medium-term target level by mid-2023, mostly due to high base effects, before rebounding to about 3% near the end of the year, the BOK said in the report. The trend of a slower easing of core inflation is forecast to continue through the middle of this year, it added.

Compared with Canada and Australia, whose central banks recently resumed tightening interest rates after some pauses, South Korea's housing and labour markets showed less upward price pressures, the BOK report also noted.

The BOK expects core prices will rise 3.3% this year, it said last month when it raised a February estimate of 3.0%. Overall consumer prices are expected to rise 3.5%.

The central bank held interest rates steady last month for a third straight meeting, but it also flagged it might not be done tightening.

Investing.com-- Goldman Sachs (NYSE:GS) slashed its economic growth forecasts for China on Sunday, stating that current levels of stimulus from the government will provide less support for the economy than previously thought.

The investment bank cut its forecast for 2023 gross domestic product (GDP) to 5.4% from 6%, joining a growing list of major banks that have cut their bets on a Chinese economic recovery this year.

The bank said  in a note released on Sunday that the country’s ongoing stimulus was incapable of generating a strong “growth impulse," and would result in a slower recovery despite the lifting of anti-COVID measures earlier this year.

Goldman Sachs also slashed its outlook for second quarter GDP to quarter-on-quarter growth of 1% from 4.9%, but forecast an improvement in the second half of the year on potentially more stimulus measures.

The move follows similar annual GDP target cuts from several major banks including UBS Group AG (NYSE:UBS), Nomura Holdings Inc (TYO:8604), Bank of America (NYSE:BAC) and JPMorgan (NYSE:JPM) last week, who also cited a slower-than-expected recovery from the COVID-19 pandemic and an insufficient degree of stimulus measures from Beijing.

But Goldman Sachs and other brokerages still hold a 2023 GDP target that is higher than the 5% forecast by the Chinese government, which was viewed as modest. 

The Chinese economy grew 3% in 2022, one of its worst GDP prints on record. Growth had then rebounded in the first quarter of 2023, surging to 4.5% as the country scaled back three years of strict COVID-related restrictions. 

But this rebound now appears to be running out of steam, as shown by a string of weaker-than-expected economic readings over the past two months. 

China’s manufacturing sector- a major economic driver- is grappling with worsening local and international demand, while the property market has failed to rebound from a three-year downturn. 

This spurred a series of interest rate cuts by the People’s Bank of China over the past week, with a cut in its benchmark loan prime rate now expected on Tuesday.

By Stella Qiu

SYDNEY (Reuters) - Asian shares started cautiously on Monday after their best weekly run in five months, as investors looked ahead to China's rate decision and U.S. Federal Reserve Chair Jerome Powell's testimonies for clues on the rate path ahead.

S&P 500 futures rose 0.1% early in Asia while Nasdaq futures firmed 0.3%. Cash U.S. Treasuries were untraded owing to the Juneteenth holiday, while futures were up a fraction with little liquidity.

In Asia, Japan's Nikkei fell 0.5%, having clinched a fresh three-decade top on Friday, buoyed by the Bank of Japan's (BOJ) decision to leave its ultra-easy policy setting unchanged, which has sent the yen to a 7-month low against the U.S. dollar.

MSCI's broadest index of Asia-Pacific shares outside Japan was 0.1% lower, after hitting a four-month high on Friday and finishing up 3% for the week, the best since January.

In China, market hope for more forceful stimulus is growing after the cabinet met on Friday to discuss measures to spur economic growth. Also, the People's Bank of China is widely expected to cut its benchmark loan prime interest rates on Tuesday, following a similar reduction in medium-term policy loans last week.

Morgan Stanley (NYSE:MS)'s chief China economist Robin Xing expects an imminent stimulus package given second-quarter gross domestic product (GDP) growth is tracking at 0%, lagging the government's target of around 5% for the year.

"This requires more policy easing to stabilise investment – the key drag to 2Q GDP growth - and prevent weakness from spreading to household sentiment and services," said Xing.

After a busy central bank week as the stock market cheered the Fed's decision to skip a rate hike in June, investors are looking to a number of Fed speakers this week, with Powell set to deliver congressional testimonies on Wednesday and Thursday.

"Fed Chair Powell gives House and Senate testimony with focus on whether the July FOMC (Federal Open Market Committee) meeting is truly 'live', and if the Fed dot plot of two more hikes is a true base case depending on the data or more 'aspirational'," said Ray Attrill, head of foreign exchange strategy at National Australia Bank (OTC:NABZY).

Markets are pricing in a 70% probability of the Fed hiking by a quarter point in July before holding steady for the remainder of the year, though officials have sounded hawkish and the dot plot indicates two more hikes..

The dollar index was little changed against major peers early on Monday, after falling 1.2% the previous week, the most in five months.

The yen was undermined by a dovish BOJ, touching a seven-month low of 141.90 per dollar, while the hawkish the European Central Bank, which hiked by a quarter point last week, aided the euro to hover close to a five-week top at $1.094.

Oil prices declined early on Monday. U.S. crude futures fell 0.7% to 71.24 per barrel, while Brent crude was down 0.8% at $76.98 per barrel.

Gold prices were flat at $1,956.84 per ounce.

JERUSALEM (Reuters) -U.S. chipmaker Intel Corp (NASDAQ:INTC) will spend $25 billion on a new factory in Israel, Prime Minister Benjamin Netanyahu said on Sunday, calling it the largest-ever international investment in the country.

The factory in Kiryat Gat is due to open in 2027, to operate through 2035 at least and to employ thousands of people, Israel's Finance Ministry said. Under the deal Intel will pay a 7.5% tax rate, up from the current 5%, the ministry added.

During its almost five decades of operations in Israel, Intel has grown to become the country's largest privately held employer and exporter and a leader of the local electronics and information industry, according to the company's website.

In 2017, Intel bought Israel-based Mobileye Global Inc, which develops and deploys advanced driver-assistance systems, for $15 billion. Intel took Mobileye public last year.

Announcing the deal in televised remarks to his cabinet, Netanyahu called it "a tremendous achievement for the Israeli economy - 90 billion shekels ($25 billion) - the largest investment ever by an international company in Israel".

In a statement, Intel said its Israel operations had "played a crucial role" in the company's global success.

"Our intention to expand manufacturing capacity in Israel is driven by our commitment to meeting future manufacturing needs ... and we appreciate the continued support of the Israeli government," it said.

By Essi Lehto

HELSINKI (Reuters) - Finland's conservative National Coalition (NCP), winner of April's parliamentary election, has reached agreement to form a majority government with the eurosceptic, anti-immigration Finns Party and two smaller groups, its leader said on Thursday.

"All issues have been resolved and the papers are ready," said NCP leader Petteri Orpo, a fiscal conservative set to become Finland's next prime minister, referring to the government program.

By getting the NCP, the nationalist Finns, minority-language Swedish People's Party and the Christian Democrats to agree on a common platform, Orpo shifts Finnish politics to the right and sends left-wing Prime Minister Sanna Marin into opposition.

During 11-week talks over how to govern Finland during the coming four years the Finns and the Swedish People's Party had struggled to agree on immigration, climate policy and public finances, but reached a compromise in the end.

Orpo's government is expected to curb the fiscal deficit by cutting unemployment and welfare benefits, and to tighten immigration and loosen environmental commitments.

Each policy area was subject to tough negotiations, however it was not immediately clear how strong each measure would be.

Orpo has wanted to cut taxes and sell off stakes in some government-controlled companies, and said his government's policy programme would be presented on Friday. He declined to elaborate on any details.

The NCP won 48 seats in the April 2 election, ahead of the Finns with 46, while outgoing Prime Minister Marin's Social Democrats came third with 43 elected members of the 200-seat parliament.

To secure a majority, Orpo included the Swedish People's Party, which holds nine seats, and the Christian Democrats with five, bringing the total support to 108.

By Georgina Lee

HONG KONG (Reuters) - Hong Kong interbank rates rose across all tenors on Friday, with the overnight interbank offered rate rising the most, climbing to the highest in four weeks.

The overnight Hong Kong interbank offered rate (Hibor) jumped 63.5 basis points (bps) to 4.88%. One-week Hibor rose 62 bps to 4.92%, highest in nearly 16 years.

One-month Hibor, the benchmark used in pricing residential mortgage loans, rose 21.8 bps to 4.97%, the highest since December 2022.

Hong Kong listed companies' demand for Hong Kong dollars for dividend payments peaks in the three months to August and this could send interbank rates higher, Hong Kong Monetary Authority (HKMA) Chief Executive Eddie Yue said in an article published on the HKMA website on Wednesday.

TOKYO (Reuters) -Japan will give Toyota up to $841 million in subsidies for the automaker's investment in domestic production of batteries used in electric vehicles (EVs), Industry Minister Yasutoshi Nishimura said on Friday.

Toyota this week laid out a sweeping plan for new technology and a radical redesign of factories, sending the clearest signal yet of its intention to capture a larger share of the fast-growing market for battery EVs, where it has been far outsold by rivals such as Tesla (NASDAQ:TSLA).

"As the international competition for storage batteries is intensifying, competition for capital investment is also becoming more intense," Nishimura told reporters at a media conference.

"Large-scale investments by Toyota group and so on will hopefully lead to a significant strengthening of our country's supply chain for storage batteries," he said.

There were no further details about the investment that Toyota could provide beyond those already disclosed by the ministry, a company spokesperson said.

The government said mass production of the batteries was expected to start in stages from October 2026 onwards.

Japan has designated batteries for energy storage, including car batteries, as important under an economic security law and has earmarked 331.6 billion yen in its second supplementary budget to support their supply and development, the Ministry of Economy, Trade and Industry (METI) said.

The government will shoulder up to 117.8 billion yen ($841 million) yen, or just over a third of about 330 billion yen in investments including for development of next-generation solid-state batteries and lithium iron phosphate batteries, METI said.

It said the subsidy will be provided to Toyota and three companies with which it is working on battery development, including Toyota Industries (OTC:TYIDF).

The investment will bring annual production capacity in Japan to 45 gigawatt hours (GWh), Nishimura said, adding the government seeks to achieve domestic output capacity of 150 GWh by 2030.

Japan's No.2 automaker Honda Motor and battery maker GS Yuasa in April announced the building of a new plant that would target an annual production capacity of at least 20 gigawatt hours (GWh).

($1 = 140.0700 yen)

By Ankur Banerjee

SINGAPORE (Reuters) - Asian shares rose to a near four-month high on Friday as resilient U.S. economic data stoked expectations that the Federal Reserve is near the end of its rate-hike campaign, with investor focus switching to the Bank of Japan's policy meeting.

MSCI's broadest index of Asia-Pacific shares outside Japan was 0.31% higher and on course for 2.5% gain in the week, its best weekly performance since January. The index rose as high as 534.16, its highest since mid-February.

Japan's Nikkei was down 0.79%, easing away from a fresh 33-year high it touched on Thursday, while Australia's resource-heavy S&P/ASX 200 index rose 0.40%.

The BOJ rounds up a central bank heavy week, with broad expectations that the central bank will stick with its ultra-loose monetary policy even as inflation ticks higher.

Markets will focus on whether BOJ Governor Kazuo Ueda will offer a stronger warning on the risk of an inflation overshoot at his post-meeting news conference.

"Economic conditions are telling the BoJ that its ultra-easy policy has passed its used-by date, yet given what Ueda has been saying, the consensus view is that the BoJ will stand pat, said Rodrigo Catril, senior FX strategist at National Australia Bank (OTC:NABZY).

"That said, if the BoJ wanted to surprise the market, today would be a good day."

China's stock markets got a boost this week after the central bank cut the borrowing cost of its medium-term policy loans for the first time in 10 months to aid a shaky economic recovery, with investors hoping more stimulus is on the horizon.

On Friday, China's benchmark CSI 300 Index was 0.3% higher while Hong Kong's Hang Seng Index gained 0.4%.

The S&P 500 and Nasdaq surged on Thursday to close at their highest in 14 months after data showed U.S. retail sales unexpectedly rose in May, while U.S. jobless claims came in higher than expected.

"If U.S. labour markets are finally starting to soften, this lends some credibility to the Fed’s decision to pause," said Ryan Brandham, head of global capital markets, North America at Validus Risk Management.

The slew of data helped firm up bets that the Fed would not follow through with more rate hikes as the central bank hinted on Wednesday when it left interest rates unchanged.

Markets are now pricing in 67% chance of the U.S. central bank raising its interest rate by 25 basis points next month, according to CME FedWatch tool.

The European Central Bank on Thursday left the door open to more rate hikes as it flagged risks from rising wages and revised up its inflation projections. The ECB also raised interest rates by 25 bps taking its policy rate to 3.5%, a level not seen since 2001.

"(ECB President) Lagarde insisted that there was more ground to cover, but the overall tone of the press conference suggested that there might not be a whole lot more to do, despite the upgrade to the inflation forecast," strategists from NatWest Markets said in a note.

In the currency market, the euro was at $1.0941, hovering close to one-month high it touched on Thursday after the ECB decision. [/FRX]

The dollar index, which measures the U.S. currency against six major peers, was at 102.13, drifting near a one-month low.

The Japanese yen strengthened 0.18% to 140.04 per dollar, but was not far from the seven month low of 141.50 it hit on Thursday.

Oil prices eased, taking a pause from the previous session when futures gained steeply on optimism around higher energy demand from top crude importer China.

U.S. West Texas Intermediate crude fell 0.13% to $70.53 per barrel and Brent was at $75.54, down 0.17% on the day. [O/R]

Spot gold added 0.1% to $1,958.99 an ounce. U.S. gold futures % to $1,957.80 an ounce.

By Leika Kihara

TOKYO (Reuters) - The Bank of Japan is widely expected to maintain ultra-easy monetary policy on Friday despite stronger-than-expected inflation, as it focuses on supporting a fragile economic recovery amid a sharp slowdown in global growth.

The central bank is also likely to keep intact a pledge to "patiently" sustain massive stimulus to ensure Japan sustainably achieves its 2% inflation target accompanied by wage hikes.

With price rises showing signs of broadening, however, markets are focusing on whether BOJ Governor Kazuo Ueda will offer a stronger warning on the risk of an inflation overshoot at his post-meeting news conference.

The BOJ review comes after the Federal Reserve's decision on Wednesday to pause interest rate hikes as it closely watches the lagged economic impact of past monetary tightening.

At the two-day meeting ending on Friday, the BOJ is widely expected to maintain its -0.1% short-term interest rate target and a 0% cap on the 10-year bond yield set under its yield curve control (YCC) policy.

While the central bank may warn about risks to the global outlook, it will likely stick to its view Japan's economy is headed for a moderate recovery thanks to a post-pandemic pickup in consumption, sources have told Reuters.

Japan's core consumer inflation hit 3.4% in April, staying above the BOJ's target for over a year, keeping alive market expectations the bank will phase out YCC sometime this year.

Ueda has repeatedly brushed aside the chance of a near-term YCC tweak, arguing that the recent, cost-push inflation will slow back below the BOJ's target later this year.

But he also said the BOJ will "act swiftly" if its inflation projections prove wrong, and pointed to signs that corporate price-setting behaviour was starting to change.

With companies offering the largest pay hikes in three decades, the BOJ is also dropping hints that Japan's prolonged era of wage stagnation may be ending.

In an academic paper issued in May, the BOJ said inflation and wage growth could accelerate abruptly once costs exceed a certain threshold - and that once wages begin to rise, the trend could persist.

Many BOJ officials, however, prefer to stand pat for now to scrutinise global economic developments and corporate earnings, for clues on whether wages will keeping rising next year.

Japan's economy is making a delayed recovery from the pandemic and expanded an annualised 2.7% in the first quarter, with solid corporate and household spending moderating the blow from soft exports.