Friday, September 9, 2011

Japan economy weaker than estimated in second quarter


Devastated Kesennuma city in Miyagi prefecture The earthquake and tsunami caused widespread damage to Japan's north-east coast

Japan quake

Japan's economy contracted more severely in the second quarter than was initially estimated, revised government data has shown.
The economy shrank at an annual rate of 2.1% during the period, compared with the 1.3% drop reported previously.
The decline came as companies cut back spending due to concerns about a slowing global economy and a rising yen.
The data raised fresh concerns about the health of Japan's economy.
"As capital spending is unlikely to grow as strongly as previously thought, a rebound in gross domestic product in July-September may be smaller than initially thought, although gradual recovery is still expected," said Yuichi Kodama of Meiji Yasuda Life Insurance in Tokyo.
Global concerns
Japan's economy is currently in recession and has contracted for three quarters.
Growth in the country was hit hard by the earthquake and tsunami early this year which caused widespread damage to infrastructure and the supply chain, resulting in many factories suspending or curbing production.

“Start Quote

Very few companies are thinking about investing in Japan. They are focussing intensely on overseas expansion”
Martin SchulzFujitsu Research Institute
To make matters worse, just as the economy was showing signs of recovery, fears of a slowdown in the global economy started to gather pace.
"The pace of Japan's economic recovery has apparently slowed since around August due to heightened uncertainty about the global economy," said Mr Kodama.
Analysts said that a slowdown in the global economy is likely to dent demand for Japan's exports and that has resulted in companies cutting back their spending.
Data out on Friday showed that overall investment by businesses fell by 0.9% in the three months to the end of June, compared with a 0.2% rise estimated earlier.
This follows data released by the Ministry of Finance last week, which showed that capital expenditure by companies, investment in plants and machinery, had dropped by 7.8% in the second quarter from a year earlier.
Yen factor
At the same time, Japanese firms have also been hit by a strengthening yen.
Uncertainty about global economic growth has seen investors turn to traditional havens such as the yen, sending the Japanese currency to record highs.
Analysts said this was making the recovery process even tougher for firms.
"This is what frustrates companies so much," Martin Schulz of Fujitsu Research Institute told the BBC.
"They have fixed the supply chains and production lines, but they are unable to sell their goods as a strong yen is making them more expensive," he added.
Analysts said that not only was the strong yen hurting exports, it was also deterring companies from expanding their businesses in Japan.
"Very few companies are thinking about investing in Japan. They are focusing intensely on overseas expansion" Mr Schulz said.
He explained that a due to the strong currency, Japanese firms were in a position to make overseas acquisitions for a cheaper price.
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US jobs plan: Barack Obama unveils $450bn package


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Mr Obama said an "American Jobs Act" would create new jobs for construction workers, teachers and the long-term unemployed

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US President Barack Obama has unveiled a $450bn (£282bn) package of tax cuts and spending plans aimed at creating jobs and bolstering the economy.
He wants to fund huge construction projects, schools and services, while giving tax cuts to workers and small businesses to boost recruitment.
Mr Obama told a joint session of Congress that politicians needed to act quickly to pass the package.
Republican congressman John Boehner said the plans "merit consideration".
"We hope he gives serious consideration to our ideas as well," said Mr Boehner, the speaker of the House of Representatives.
The Republicans control the House, and have derailed many of Mr Obama's legislative proposals. Mr Boehner's support is likely to be crucial if the measures are to be approved.
Some of Mr Obama's opponents have already dismissed the jobs plan as a crude attempt to boost his flagging popularity in the run-up to next year's presidential election.
Some 9.1% of Americans are currently out of work, and the issue is expected to dominate the election campaign.

Analysis

image of Mark MardellMark MardellBBC North America editor
This was not of course a new President Obama, but it was a style of speech I have never heard him make before.
Fired up, yes, but using plain language. The call, if not the response, of a preacher. The chorus line: "You should pass this jobs plan right away."
There was a fair amount of hefty, meaty detail and this speech was shorn of some of the soaring rhetoric of the past. But it was still fiery and feisty.
What he is suggesting is pretty big. More than $450bn according to White House sources. It is designed to put him in a situation where any outcome is a win.
In the unlikely event the Republicans go for this, he has the policy he wants. If they don't, he campaigns against them, portraying them as against job creation, against the American people.
The BBC's North America editor Mark Mardell says the president has set a trap for the Republicans - either they back his proposals, or he will campaign against what he will portray as a Washington elite happy to cut taxes for their rich friends but not for ordinary people.
'Political grandstanding'
In his speech, Mr Obama urged Congress to "stop the political circus" and said everything in the jobs plan was based on principles already supported by Republicans and Democrats.
"The purpose of the American Jobs Act is simple: to put more people back to work and more money in the pockets of those who are working," he said.
"It will create more jobs for construction workers, more jobs for teachers, more jobs for veterans, and more jobs for the long-term unemployed."
The president has yet to give details on how the plans would be funded, but he hinted that the money could be found in spending cuts and promised to release more details on 19 September.
The centrepiece of the jobs plan is to expand a cut in the Federal Insurance Contributions tax, a levy paid by employers and workers to fund social security and healthcare for retirees.
Congress approved a cut in the tax for workers last year, from 6.2% to 4.2%. But that measure was due to expire in December.
Mr Obama wants to continue that cut next year, lower the tax even further to 3.1% for workers, and extend a similar cut to companies, at a cost of $240bn.

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Here in California we feel pretty cool towards construction projects - they do generate money, but not necessarily for the right people ”
Bruno Vieri
Another core proposal is to provide $85bn aid to local and state governments.
The money would be spent on helping to keep teachers and emergency services workers in jobs, modernising schools, refurbishing vacant homes and helping young people into work.
Other proposals include:
  • $50bn for infrastructure projects, including a plan to upgrade the country's airports
  • $49bn for a one-year extension of benefits for the long-term unemployed, and $8bn in tax relief
  • tax breaks for firms taking on new employees
  • measures to broaden home ownership by making low-interest mortgages more widely available
The president wants to submit the bill to Congress next week.
Some Republicans have suggested they would be willing to support at least part of the plan, but others have already indicated their opposition.
Representative Paul Broun of Georgia, one of the Republicans who chose not to attend the speech, tweeted: "This is obviously political grandstanding and class warfare."
The two parties clashed all summer over plans to sort out the country's debt levels, which prompted a historic US government credit downgrade.
The political battles on Capitol Hill have seen the president's approval slump, but ratings for Congress have been even lower.
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IMF chief Lagarde urges global action as G7 meet


Christine Lagarde: "Strong fiscal consolidation is essential to restore debt sustainability"

International Monetary Fund chief Christine Lagarde has urged "bold action" on the faltering world economy, ahead of a meeting of the G7 group of leading economies.
The G7 is meeting in Marseille to consider a "coordinated response".
The two-day meeting comes as the Organisation for Economic Co-operation and Development predicted a global slowdown this year.
Europe is also struggling with a sovereign debt crisis.
"The key message I wish to convey today is that countries must act now - and act boldly - to steer their economies through this dangerous new phase of the recovery," Ms Lagarde said in London, before flying to the G7 meeting.
She also praised President Barack Obama's new $450bn (£282bn) jobs plan to try to boost the world's largest economy.
"All this is happening at a time when the scope for policy action is considerably narrower than when the crisis first erupted," she said. "But while the policy options may be fewer, there is a path to recovery."
'Credible' plans
Speaking at the same event in London before leaving for the G7 talks, Chancellor George Osborne vowed to stick to the UK's deficit reduction plan - which has so far helped the UK avoid the kind of bond market turmoil seen in the eurozone.
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Chancellor George Osborne: "The plan is the rock of stability upon which our recovery is built"
"It is the rock of stability on which our economy is built," he said.
The IMF chief praised the UK's plans - with several caveats.
"Since the summer, the outlook has become more subdued - including in the rest of Europe and the United States, the UK's major trading partners. So risk levels are rising," she said.
"The policy stance remains appropriate, but this heightened risk means a heightened readiness to respond - particularly if it looks like the economy is headed for a prolonged period of weak growth and high unemployment."
In response, Labour's Ed Balls again argued for temporary tax cuts to help kick-start the economy.
"While George Osborne insists there can never be a change of course and we must plough on regardless, Christine Lagarde rightly warns ministers will need to act if slow growth and high unemployment continues," the shadow chancellor said.
Rocky road ahead
No communique will be issued after the talks in Marseille, according to French Finance Minister Francois Baroin.
Earlier, Japanese Finance Minister Jun Azumi said he would explain his nation's intervention to stem the increase in its currency, which has hurt its exporters.
"Japan's economy has been steadily recovering, but I'm concerned that it is showing some signs of downturn due to the yen's rise," Mr Azumi said.
"I want to share the view that it would be bad for the world economy if Japan's economy faces downturn."
The OECD predicts the G7 economies will grow by just 0.2% in the last three months of the year.
The group also expects 0.3% growth in the UK in the fourth quarter, but said the economy could contract by as much as 1%.
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Saturday, September 3, 2011

Why Employers Are Slow to Fill Jobs: Business Class


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Asian Stocks Pare Monthly Slump on U.S. Economic Data Before Jobs Report


Asian stocks rose this week, with a regional benchmark index paring the biggest monthly slump since May 2010, as exporters and commodity producers climbed on optimism the U.S. and Chinese economies are recovering.
Li & Fung Ltd. (494), a supplier of toys and clothes to Wal-Mart Stores Inc., jumped 4.9 percent in Hong Kong after U.S. reports showing higher factory orders and consumer spending tempered concern that an economic recovery is faltering. Jiangxi Copper Co. advanced 10 percent as Chinese manufacturing expanded. Stocks fell Sept. 2 ahead of a U.S. jobs report that showed employment growth stagnated in August, paring the MSCI Asia Pacific Index’s greatest weekly gain since March.
“Concern about the health of the U.S. economy was near the top of the laundry list of worries for investors,” said Prasad Patkar, who helps manage the equivalent of $1.1 billion at Platypus Asset Management Ltd. in Sydney. “If the data keeps reinforcing the idea that a new recession is unlikely, markets could rally strongly this quarter. The latest manufacturing data confirms thatChina’s economy was never headed for a hard landing.”
The MSCI Asia Pacific Index rose 3.2 percent this week to 124.16, extending last week’s 0.7 percent advance. The gauge tumbled 14 percent in the previous four weeks as equity indexes inAustralia, Hong Kong and Shanghai entered so-called bear markets, tumbling at least 20 percent from their peaks. The stocks rout was fueled by concern Europe’s debt crisis is worsening and after a U.S. credit rating downgrade by Standard & Poor’s.
S&P 500, Stoxx 600
Stocks in the Asian benchmark are valued at about 12.2 times estimated earnings on average, compared with 11.7 times for the S&P 500 and 9.7 times for the Stoxx 600.
Japan’s Nikkei 225 (NKY) Stock Average gained 1.7 percent this week and South Korea’s Kospi Index (KOSPI) jumped 5 percent. Australia’s S&P/ASX 200 Index advanced 1 percent in Sydney.
Hong Kong’s Hang Seng Index (HSI) surged 3.2 percent. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong climbed 3.5 percent after a report showed the nation’s manufacturing expanded at a faster pace in August. Chinese manufacturing increased from a 29-month low, indicating that the economy is withstanding attempts to cool prices.
China’s government has raised interest rates five times since the start of 2010 and boosted reserve requirements for banks to help control inflation. Stabilizing prices is the country’s top priority and the government doesn’t plan to alter the direction of economic policies, Premier Wen Jiabao said in an article that appeared Sept. 1 on the website of the Communist Party’s Qiushi magazine.

Economic Growth

China stock indexes may rise less than earlier estimated this year, Credit Suisse Group AG analysts wrote in a report this week, citing slower economic and corporate earnings growth. The Hang Seng China Enterprises Index estimate was lowered to 13,000 from 15,000.
Asian stocks climbed this week after reports showed U.S. consumer spending and car sales increased, while business activity and factory orders expanded at a faster pace than economists forecast. That bolstered gains after Federal Reserve Chairman Ben S. Bernanke said Aug. 26 that the nation’s central bank has more means to prop up growth if required.
The MSCI Asia Pacific index pared gains on Sept. 2 ahead of a report that showed the U.S. jobless rate remained at 9.1 percent, and after UBS AG lowered its year-end target for the MSCI Asia Pacific Index Excluding Japan Index by 13 percent. The bank said equities remain “broadly out of favor” amid signs global economic growth is slowing.
U.S. Revenue
Li & Fung, which gets about 65 percent of its revenue in the U.S., gained 4.9 percent to HK$13.84 in Hong Kong this week. Cathay Pacific Airways Ltd. (293), Asia’s largest international carrier, rose 3.7 percent to HK$15.74.
James Hardie Industries SE (JHX), a building materials supplier that gets almost 68 percent of sales from the U.S., gained 4.9 percent to A$6.03 in Sydney. Honda climbed 2.5 percent to 2,507 yen in Tokyo, and South Korean exporter Samsung Electronics Co. jumped 5.9 percent to 769,000 won.
Mining and energy stocks advanced as New York-traded crude oil climbed 1.3 percent in the week, while the London Metal Index of prices for six metals, including copper and aluminum, advanced 0.4 percent.
Rio Tinto Group added 4.2 percent to A$72.05 in Sydney and BHP Billiton Ltd. (BHP), the world’s No. 1 mining company and Australia’s biggest oil producer, rose 1 percent to A$39.04. In Hong Kong, Jiangxi Copper Co., China’s No. 1 producer of the metal, gained 10 percent to HK$21.95 and Chinese oil explorer Cnooc Ltd. (883) surged 7.2 percent to HK$15.44.

Coal Producer

Among other Asian stocks that rose this week, China Shenhua Energy Co., a unit of the country’s largest coal producer, advanced 2.7 percent to HK$34.75 after reporting higher profit.Shimao Property Holdings Ltd. (813), a China-based developer, advanced 14 percent to HK$8.55 after first-half net income increased 57 percent from a year earlier.
Fanuc Corp. (6954), a maker of industrial robots, gained 2.5 percent to 12,570 yen in Tokyo after JPMorgan Chase & Co, named the company its “top pick” among Japanese machinery manufacturers whose earning may benefit from growth in emerging markets. Komatsu Ltd. (6301), which counts China as its biggest market, increased 5.1 percent to 2,086 yen after the investment bank gave it a new “overweight” rating.
Belle International Holdings Ltd. (1880), China’s largest retailer of women’s shoes, climbed 5.2 percent to HK$16.22 in Hong Kong on optimism the mainland’s economy is withstanding anti- inflation measures after a Chinese manufacturing index climbed to 50.9 in August from 50.7 in July. Tencent Holdings Ltd. (700), the nation’s biggest Internet company by revenue, advanced 6.8 percent to HK$187.30.
“The manufacturing data will remove concerns the slowdown in economic growth will be dramatic,” said Li Jun, a strategist at Central China Securities Co. in Shanghai. “The economic slowdown will be moderate this year and that will provide support for stocks.”
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