December 3, 2023

I.M.F. Warns of ‘Middle-Income Trap’ in Asia

SINGAPORE — Asia needs to guard against asset bubbles, and its emerging economies must improve government institutions and liberalize rigid labor and product markets to encourage development, the International Monetary Fund said Monday.

“Emerging Asia is potentially susceptible to the ‘middle-income trap,’ a phenomenon whereby economies risk stagnation at middle-income levels and fail to graduate into the ranks of advanced economies,” the I.M.F. said in its Regional Economic Outlook report for Asia and the Pacific.

Economies in Asia “are less exposed to the risk of a sustained growth slowdown” than those in other regions, the international funding agency added. “However, their relative performance is weaker on institutions.”

The I.M.F.’s warning comes at time when Asia looks set to lead a global economic recovery.

“While the external risk of severe economic fallout from an acute euro area crisis has diminished, regional risks are coming into clearer focus,” the I.M.F. said. “These include some ongoing buildup of financial imbalances and rising asset prices.”

The I.M.F. is monitoring credit ratios and output levels in Asia closely, as conditions cold worsen very quickly, Anoop Singh, the fund’s director for the Asia-Pacific region, said at a news briefing in Singapore. He said the regional authorities needed to respond early and decisively to potential overheating.

The I.M.F., which recently cut its 2013 and 2014 growth forecasts for greater China, India, Singapore and South Korea but raised its outlooks for Malaysia and the Philippines, sounded generally positive about near-term prospects.

“Growth in Asia is likely pick up gradually in the course of 2013, to about 5.75 percent, on strengthening external demand and continued robust domestic demand,” the report said.

China, Indonesia, India and the Philippines need to improve their economic institutions, while India, the Philippines and Thailand are also exposed to a larger risk of a growth slowdown stemming from subpar infrastructure, the report said.

China and Malaysia are the highest-ranked developing Asian countries on an I.M.F. chart measuring institutional strength, while India, Indonesia and the Philippines are at the bottom. The I.M.F. defined institutional strength as demonstrating higher political stability, better bureaucratic capability, fewer conflicts and less corruption.

For many developing Asian economies, there remains ample room for easing stringent regulations on products and in some cases labor markets, the fund said.

The I.M.F. also said that various statistical approaches indicated that growth rates had slowed in China and India. For China, growth appears to have peaked at about 11 percent in 2006-7, while India’s growth is now about 6 percent to 7 percent, compared with about 8 percent before the financial crisis. “By contrast, trend growth for most Asean countries seems to have remained stable or to have increased somewhat, with the notable exception of Vietnam,” the fund said. Asean is the acronym for the 10-member Association of Southeast Asian Nations.

Mr. Singh, the fund’s regional director, said that the I.M.F. appreciated Japanese efforts to stimulate its economy, and that quantitative easing — in which a central bank buys assets like bonds with newly created money to help growth — was just part of a package of measures that included cutting debt and structural overhauls like increasing women’s participation in the work force.

“In Japan, we have welcomed the measures taken,” he said. “It’s because they are focused on addressing the deflation that has affected Japan for the last 10 to 15 years. As Japan moves back to sustainable positive growth, it’s going to help the region and the global economy, and that is the most important.”

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Corporate Profits Soar as Worker Income Limps

That gulf helps explain why stock markets are thriving even as the economy is barely growing and unemployment remains stubbornly high.

With millions still out of work, companies face little pressure to raise salaries, while productivity gains allow them to increase sales without adding workers.

“So far in this recovery, corporations have captured an unusually high share of the income gains,” said Ethan Harris, co-head of global economics at Bank of America Merrill Lynch. “The U.S. corporate sector is in a lot better health than the overall economy. And until we get a full recovery in the labor market, this will persist.”

The result has been a golden age for corporate profits, especially among multinational giants that are also benefiting from faster growth in emerging economies like China and India.

These factors, along with the Federal Reserve’s efforts to keep interest rates ultralow and encourage investors to put more money into riskier assets, prompted traders to send the Dow past 14,000 to within 75 points of a record high last week.

While buoyant earnings are rewarded by investors and make American companies more competitive globally, they have not translated into additional jobs at home.

Other recent positive economic developments, like a healthier housing sector and growth in orders for machinery and some other durable goods, have also encouraged Wall Street but similarly failed to improve the employment picture. Unemployment, after steadily declining for three years, has been stuck at just below 8 percent since last September.

With $85 billion in automatic cuts taking effect between now and Sept. 30 as part of the so-called federal budget sequestration, some experts warn that economic growth will be reduced by at least half a percentage point. But although experts estimate that sequestration could cost the country about 700,000 jobs, Wall Street does not expect the cuts to substantially reduce corporate profits — or seriously threaten the recent rally in the stock markets.

“It’s minimal,” said Savita Subramanian, head of United States equity and quantitative strategy at Bank of America Merrill Lynch. Over all, the sequester could reduce earnings at the biggest companies by just over 1 percent, she said, adding, “the market wants more austerity.”

As a percentage of national income, corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950, while the portion of income that went to employees was 61.7 percent, near its lowest point since 1966. In recent years, the shift has accelerated during the slow recovery that followed the financial crisis and ensuing recession of 2008 and 2009, said Dean Maki, chief United States economist at Barclays.

Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation.

“There hasn’t been a period in the last 50 years where these trends have been so pronounced,” Mr. Maki said.

At the individual corporate level, though, the budget sequestration could result in large job cuts as companies move to protect their bottom lines, said Louis R. Chenevert, the chief executive of United Technologies. Depending on how long the budget tightening lasts, the job cuts at his company could total anywhere from several hundred to several thousand, he said.

“If I don’t have the business, at some point you’ve got to adjust the work force,” he said. “You always try to find solutions, but you get to a point where it’s inevitable.”

The path charted by United Technologies, an industrial giant based in Hartford that is one of 30 companies in the Dow, underscores why corporate profits and share prices continue to rise in a lackluster economy and a stagnant job market. Simply put, United Technologies does not need as many workers as it once did to churn out higher sales and profits.

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DealBook: Rothschild Loses Fight for Control of Indonesian Mining Giant

Nathaniel Rothschild is heir to one of Europe’s banking families.Will Oliver/Agence France-Presse — Getty ImagesNathaniel Rothschild is heir to one of Europe’s banking families.

LONDON — The battle for control over the mining company Bumi reached a climax on Thursday as shareholders voted against a major board change proposed by the British financier Nathaniel Rothschild.

The decision signifies the end of a feud that lasted months between Mr. Rothschild, heir to one of Europe’s banking families, and the Indonesian Bakrie family dynasty for control of coal mining assets across the Southeast Asian country.

In an acrimonious battle that had become increasingly personal, Mr. Rothschild, 41, had proposed replacing 12 of Bumi’s 14 board members, including its chief executive and chairman.

The British financier planned to name his own management team, including himself, in an effort to return to Bumi’s board, from which he resigned last year.

After a two-hour shareholder meeting on Thursday, held on the grounds of the military barracks of Britain’s oldest regiment in central London, Bumi’s investors, which included major institutional shareholders as well as retail investors, rejected a majority of Mr. Rothschild’s proposed board changes.

“Is there a future for this company?” Robin Renwick, Bumi’s nonexecutive director, asked the gathered shareholders. “We have all heard a lot of doom and gloom. Absolutely, there is a future.”

The failure to replace Bumi’s board is a major setback for Mr. Rothschild, the former co-chairman of the hedge fund Atticus Capital, who co-founded Bumi in 2010 through a $3 billion deal with the Bakrie family that created the mining giant, which is listed in London.

Since the original deal was announced, little has gone right for the company. The global economic slowdown has slashed demand for coal, particularly in fast-growing emerging economies, and Bumi’s boardroom infighting has been mirrored by a 60 percent fall in the company’s share price over the last three years.

Samin Tan is to step down as chairman of Bumi.Will Oliver/Agence France-Presse — Getty ImagesSamin Tan is to step down as chairman of Bumi.

Last year, the mining company announced an investigation into allegations of financial misconduct involving around $500 million at Bumi’s Indonesian subsidiaries. The move was quickly followed by an offer by the Bakries to acquire all of the company’s mining assets for roughly $1.2 billion.

As part of the continuing board intrigue, the Indonesia family sold a stake in Bumi late last year to Samin Tan, a fellow Indonesian mining mogul, for $1 billion. The deal helped the Bakries to repay loans owed to a consortium of banks led by Credit Suisse.

During the shareholder meeting on Thursday, Mr. Rothschild repeatedly called on Mr. Tan, who will step down as Bumi’s chairman, to answer shareholders’ questions. Despite the demands, most of the talking was left to the company’s other board members.

Talking to reporters at the sidelines of the meeting, the British financier, who was accompanied to the event by his mother, said his motivation was not directed specifically at his former Indonesian partners, but was aimed at improving the company’s stock price.

“It’s not personal,” Mr. Rothschild said before the results of the shareholder vote were announced. “The board has an enormous amount to do to win back the support of minority shareholders.”

With the British financier’s proposal rejected, Bumi said it would now focus on divesting itself of coal assets to the Bakrie Group, the family’s conglomerate, as well as on developing its remaining mining resources.

Aburizal Bakrie heads the Indonesian family behind Bumi.Adek Berry/Agence France-Presse — Getty ImagesAburizal Bakrie heads the Indonesian family behind Bumi.

The result is a personal loss for Mr. Rothschild, whose hopes of securing victory were dealt a blow this week when a major Indonesian investor connected to the Bakries sold shares worth 10 percent of Bumi’s total stock to the Indonesian media mogul Hary Tanoesoedibjo and two hedge funds.

The share sale followed a ruling by British authorities that capped the voting rights of some of Bumi’s majority Indonesian shareholders. Analysts say that by selling shares to the new investors, who were expected to vote against Mr. Rothschild’s proposals, the Bakrie family increased its chances of successfully opposing the boardroom changes.

Mr. Rothschild said on Thursday that he would retain his minority stake in Bumi.

The battle for control of Bumi could have wider implications. Aburizal Bakrie, who heads the Indonesian family, is a candidate in the country’s presidential elections next year. A potential rival for the office is Prabowo Subianto, the brother of Indonesian billionaire Hashim Djojohadikusumo, who backed Mr. Rothschild’s proposed board changes and would have joined Bumi’s board if the British financier had won shareholder backing.

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Group of 20 Pledges to Let Markets Set Currency Values

MOSCOW — In a concerted move to quiet fears of a so-called currency war, finance officials from the world’s largest industrial and emerging economies expressed their commitment on Saturday to “market-determined exchange rate systems and exchange rate flexibility.”

In a statement issued at the conclusion of a conference here of the Group of 20, the finance ministers from the Group of 20 promised: “We will refrain from competitive devaluation. We will not target our exchange rates for competitive purposes.”

In its statement, the group also vowed to “take necessary collective actions” to discourage corporate tax evasion, particularly by preventing companies from shifting profits to avoid tax obligations. For instance, a number of big American companies, including Apple and Starbucks, have come under scrutiny recently for seeking out the friendliest tax jurisdictions.

Over all, the statement largely echoed one last week by seven top industrial nations pledging to let market exchange rates determine the value of their currencies. Currency devaluation can be used to gain competitive advantage because it makes a country’s exports cheaper.

“We all agreed on the fact that we refuse to enter any currency war,” the French finance minister, Pierre Moscovici, told reporters at the conference, which was held in a meeting center just a short walk from the Kremlin and Red Square.

In the statement on Saturday, the Group of 20 pointedly avoided any criticism of Japan, where stimulus programs backed by Prime Minister Shinzo Abe have kept interest rates near zero and flooded the economy with money — leading to a roughly 15 percent drop in the value of the yen against the dollar over the last three months.

The Japanese policies, which have reduced the cost of Japanese products around the world, were the primary cause of fears of a currency war.

In essence, the Group of 20 expressed a view that loose monetary policy, including steps that weaken currency values, are acceptable when used to stimulate domestic growth but should not be used to benefit in global trade.

Critics of that view say that it amounts to a distinction without a difference because loose monetary policies stimulate growth and bolster exports at the same time.

The United States has also used a loose monetary approach to aid in the economic recovery, in the form of “quantitative easing” by which the Federal Reserve buys tens of billions of dollars in bonds each month.

The chairman of the Federal Reserve, Ben S. Bernanke, who attended the conference in Moscow, gave brief remarks on Friday indicating support for Japan’s efforts.

Faster-growing, developing countries like Brazil and China have expressed concerns about the loose monetary policies of more established economies like Japan and the United States. The money created by policies like the Fed’s quantitative easing can prove destabilizing as it enters faster-growing economies.

The Group of 20 acknowledged this concern in its statement, saying: “Monetary policy should be directed toward domestic price stability and continuing to support economic recovery according to the respective mandates. We commit to monitor and minimize the negative spillovers on other countries of policies implemented for domestic purposes.”

As the three-day conference drew to a close, participants did not reach any new agreement on debt-cutting targets. Efforts to reach such a pact will continue at the annual Group of 20 summit meeting to be attended by President Obama and other world leaders in St. Petersburg in September.

But while the debt agreement was elusive, the Group of 20 leaders reiterated efforts to work together, promising to “resist all forms of protections and keep our markets open.”

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DealBook: Swiss Bank Julius Baer to Buy Bank of America Unit

Boris Collardi, chief of the Swiss bank Juluis Baer.Arnd Wiegmann/ReutersBoris Collardi, chief of the Swiss bank Juluis Baer.

LONDON — The Swiss bank Julius Baer agreed on Monday to buy the private banking operations outside the United States of Bank of America Merrill Lynch, in a deal that will increase the European firm’s assets under management by 40 percent.

The acquisition is the latest consolidation move in the private banking industry, as firms look to bolster their operations to gain access to the new markets of emerging economies.

As part of this effort, Julius Baer will pay about $882 million for the American bank’s international wealth management business outside of the United States. The sale does not include Bank of America’s joint venture in Japan, Mitsubishi UFJ Merrill Lynch PB Securities

In total, the division has about $84 billion of assets under management.

As part of the deal, Bank of America will be given about $246 million of Julius Baer stock, giving the American bank a 3 percent stake in the Swiss firm.

Even so, Bank of America has been shedding overseas holdings, in large part to raise capital. In November, it recorded a gain of $1.8 billion after taxes on the sale of its stake in China Construction Bank. And it sold its credit card business in Canada.

For Julius Baer, the acquisition will increase the bank’s assets under management to about $258 billion. Under the terms of the deal, the Swiss firm will oversee up to an additional $74 billion of assets, which primarily come from wealthy clients in developing economies.

“This acquisition brings us a major step forward in our growth strategy and will considerably strengthen Julius Baer’s leading position in global private banking by adding a new dimension not only to growth markets but also to Europe,” the company’s chief executive, Boris Collardi, said in a statement.

Despite the bank’s large increase in assets under management, investors reacted negatively to the news. Shares in Julius Baer fell 7.4 percent by the close of trading in Zurich on Monday.

The shareholder response came after the Swiss bank said it would finance the acquisition through existing cash reserves and a $770 million rights offering. The bank said it would raise an additional $257 million for potential future acquisitions and $206 million through hybrid bonds.

The firm also canceled a previously announced $510 million share buyback.

Julius Baer said costs related to the acquisition would total about $320 million, and Bank of America Merrill Lynch would assume about $125 million of costs connected to the deal.

The deal is one of a number of acquisitions by Julius Baer in recent years. In 2009, it bought the private banking unit of the Dutch firm ING for approximately $500 million.

The deal is expected to close by early 2013. Perella Weinberg advised Julius Baer on the acquisition.

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DealBook: Iran Inquiry Is Abrupt Reversal for Standard Chartered

Jf/Bloomberg NewsPeter Sands, chief executive of Standard Chartered.

6:07 p.m. | Updated

LONDON — Long a golden child among global banks, the British bank Standard Chartered now wears a somewhat tarnished crown.

The bank’s investors were rattled by accusations that it had schemed with the Iranian government to hide $250 billion in money transfers over nearly a decade. On Tuesday, shares of Standard Chartered fell as much as 25 percent — their sharpest one-day decline in more than two decades — before recovering to end London trading down 16 percent.

The accusations upset a widely held view of Standard Chartered as a banking success story, thanks to its large operations in emerging markets in Asia and elsewhere.

Unlike other European financial institutions hit by the Continent’s debt crisis, Standard Chartered, a London-based bank with roots that date to 1853, continued to report rising profits. Last week, the bank said its net profit for the first half of the year rose 11.3 percent, to $2.86 billion. Around 90 percent of the profit came from developing economies.

Central to Standard Chartered’s business is its ability to facilitate trade between emerging economies and developed countries by clearing transactions in New York City. That ability came under threat on Monday when New York State’s top banking regulator, the Department of Financial Services, said it had grounds to revoke the bank’s license in the state. The bank must appear before the state’s banking superintendent on Aug. 15 to explain why that should not happen.

Standard Chartered’s New York office, which has been licensed since 1976, primarily operates a dollar-clearing business, moving roughly $190 billion a day. It also does corporate lending, trade finance, foreign exchange trading and wire transfer services, among other business.

The regulator has accused the bank of masking more than 60,000 transactions for Iranian banks and corporations, pocketing millions of dollars in fees.

Senior management at the bank used the New York branch “as a front for prohibited dealings with Iran — dealings that indisputably helped sustain a global threat to peace and stability,” the regulator said.

The accusations cast a shadow over Peter Sands, the bank’s chief executive, who was the company’s financial director from 2002 to 2006. Mr. Sands had been mentioned as a potential future head of the rival British bank Barclays.

Standard Chartered has gone on the defensive, rejecting the New York regulator’s portrayal of the facts. The bank said that 99.9 percent of the transactions related to Iran complied with regulations.

The bank’s “review of its Iranian payments also did not identify a single payment on behalf of any party that was designated at the time by the U.S. government as a terrorist entity or organization,” it said in a statement.

Penalties connected to the money laundering case may cost Standard Chartered around $1.5 billion, according to Cormac Leech, a banking analyst with Liberum Capital in London.

Mr. Leech said the firm also could lose an additional $1 billion from a cutback in business operations connected to Iran, as well as $3 billion in market value if some of the bank’s senior executives, including Mr. Sands, are forced to resign.

However, analysts said on Tuesday that loss of the bank’s ability to operate in the United States was unlikely because authorities had focused their attention on monetary fines.

Still, the damage to Standard Chartered’s reputation and the continuing investigations into the bank’s activities with Libya, Myanmar and Sudan may weigh on earnings in the short term, according to Chintan Joshi, a banking analyst with Nomura in London.

The money laundering accusations come at a broadly difficult time for British banks.

Barclays agreed to a $450 million settlement with American and British officials in June after some of its traders and senior executives were found to have altered the London interbank offered rate, or Libor, for financial gain.

HSBC apologized last month for not cracking down soon enough on money laundering activities in the United States. David Bagley, the head of compliance for HSBC since 2002, resigned last month because of the scandal.

Analysts said Standard Chartered’s emphasis on emerging markets would help to limit the long-term effects of the allegations.

Last week, the bank said it planned to open more branches in countries with fast-growing economies, like China and India, as it exploits a decline in its competitors’ trading activity. Standard Chartered also reported double-digit growth in its wholesale and consumer banking divisions during the first six months of the year.

Before the money laundering accusations were made public, shares of the bank outperformed other financial institutions. Over the last 12 months, Standard Chartered’s stock rose 10.4 percent, compared with a 12.8 percent drop in the Stoxx Europe 600 Banks index.

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DealBook: Companies Born in Europe, but Based on the Planet

Alex Ljung, co-founder of SoundCloudMustafah Abdulaziz for The New York Times Alex Ljung, the co-founder of the audio-sharing Web service SoundCloud in Berlin, splits his time between Germany and the United States.

LONDON — When Alex Ljung, a multilingual entrepreneur, co-founded the audio-sharing Web service SoundCloud in Stockholm in 2007, he knew the company needed an international expansion strategy right away. The company didn’t have a big domestic market or access to a large pool of world-class developers.

A few months after the company was started, Mr. Ljung and his business partner, Eric Wahlforss, moved to Berlin to be closer to many of the region’s largest markets and tap into the city’s booming start-up community. Earlier this year, he started breaking into the American market, securing $50 million of financing from Kleiner Perkins Caufield Byers, the Silicon Valley venture capital giant, and other firms.

Mr. Ljung, who was born in London and grew up in Sweden, now splits his time between Germany and the United States.

“It was obvious that our business had to be global from the start,” he said. “We’re more like citizens of the Internet than citizens of a country.”

With Europe’s market spread across more than 50 countries and the Continent’s economy struggling under the weight of its debt crisis, local start-ups are forced to become global from the outset. As international markets, particularly fast-growing emerging economies, become ever more important to start-ups’ growth, European entrepreneurs are hoping their experience in foreign markets will help them compete with more-established and better-financed American rivals.

“An international mind-set is baked into the DNA of Europeans,” said Saul Klein, a partner of the Geneva-based venture capital firm Index Ventures, which has backed some well-known European start-ups, including Skype and the Internet radio station “Great entrepreneurs can come from anywhere. Even start-ups from small countries can compete on the global stage.”

While Silicon Valley continues to dominate the venture capital industry, other cities like London, Paris and Berlin are attracting large numbers of investors and start-ups in the technology industry and other sectors like financial services and fashion. The east end of London, which has become home to the city’s young entrepreneurs, recorded a 40 percent rise in start-ups last year, according to British government statistics.

The young companies in big European capitals are able to draw upon a global, multilingual work force accustomed to moving between different languages and cultures. Well-educated graduates are also more willing to work for fledging businesses, since large companies aren’t aggressively hiring in the current economic malaise. Since 2008, Criteo, a French company that helps businesses market to consumers online, has grown from 20 employees to a 500-person staff comprising more than 15 nationalities in its 15 offices around the world.

“We’ve become a global company,” said Jean-Baptiste Rudelle, a co-founder of Criteo, who has moved to the West Coast to run the company’s operations in the United States. “We are still a European company, but with an international footprint.”

The new generation of European start-ups still faces a tough slog in the region’s current economic environment. The volatile capital markets make it hard for new companies to go public, and many large businesses are reluctant to spend their large cash reserves to acquire start-ups.

Venture capitalists also have reduced their investments. Start-ups based in Europe raised a combined 762 million euros, or $958 million, through fund-raising in the first quarter of the year, a 41 percent drop from the same period last year, according to data from Dow Jones VentureSource, which tracks the venture capital industry. Fund-raising for start-ups in the United States fell 18 percent over the same period.

Despite the economic weakness, Kristjan Hiiemaa, the founder of the e-commerce software company Erply, continues to push ahead. Started in Talinn, Estonia, in 2009, the company now has offices in London and New York, and expects to more than double its client base to 100,000 customers by the end of the year. Erply counts a number of Fortune 500 companies, including eBay’s PayPal and the cosmetics company Elizabeth Arden, as clients.

“In New York or Chicago, no one cares that we’re from Estonia,” said Mr. Hiiemaa, who takes chocolates from his home country to help break the ice. “We have an international team and our clients are all around the world.”

The ability to win new business in far-flung places is likely to become more important as start-ups focus on growth in emerging markets. Western countries still attract the majority of entrepreneurs’ attention. But analysts say the rise of a free-spending middle class in countries like China and Brazil is forcing companies to develop strategies before local competitors, which often mimic the Western start-ups’ business ideas, beat them to market.

To compete in these developing economies, start-ups must be willing to quickly alter their businesses in line with the local cultures and languages. After successfully expanding into new markets and navigating the complexities of winning over foreign customers, European start-ups like SoundCloud and Erply think they’re well placed to take advantage.

“The appeal of products has become international from the get-go,” said Danny Rimer, a Silicon Valley-based partner at Index Ventures, which has invested in both the companies. “Europe’s advantage is that companies already know how to adapt to new countries.”

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Japan October Exports Disappoint as Yen, Global Slowdown

Although Japan’s economy expanded 1.5 percent in the previous quarter, rebounding from recession triggered by March earthquake and subsequent nuclear crisis, it is expected to slow sharply in October-December. Severe floods in Thailand, a major manufacturing base for many Japanese exporters, are expected to add to global headwinds faced by the world’s third-biggest economy.

Exports fell 3.7 percent last month from a year earlier, far more than a 0.3 percent dip forecast by economists and the data follows the central bank’s warning that government debt woes in Europe were already hurting Japan and emerging economies.

The October fall follows a 2.3 percent rise in September and was the biggest drop since a 10.3 percent fall in May, with shipments of semiconductors and other electronic goods falling due to strength in the yen.

“The global slowdown stemming from Europe’s debt crisis, sluggish IT-related demand and the yen’s rise which is driving production abroad were among the factors behind the decline,” a finance ministry official said.

He added that the impact of Thai flooding may further hurt Japan’s exports in the coming months.

Thai-bound exports fell 5.1 percent, the first annual decline in three months.

The Bank of Japan held fire last week after easing policy by boosting its asset buying scheme in October, but economists say signs of more weakness may put it under pressure to loosen monetary reins further.

“Exports will likely continue to fall for the next few months,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“There is a chance that the BOJ will adopt further easing steps within this fiscal year. It is not yet a real crisis situation but the impact from Europe’s debt woes is gradually affecting other economic regions.”

One of the triggers of the October 27 monetary easing was the yen’s rally to record highs against the dollar driven by investors shifting funds away from Europe and other riskier markets into highly liquid and relatively stable Japanese debt.

Some BOJ board members have argued that purchases of government bonds with short maturities worked to stabilize the foreign exchange market, BOJ minutes showed on Monday.

Just days after the central bank move, the finance ministry ordered its biggest ever single-day intervention, selling an estimated 7.7 trillion yen on October 31.


Exports to China, Japan’s largest trading partner, slumped an annual 7.7 percent, posting their biggest decline since May.

Shipments to the United States fell 2.3 percent, while those to European Union dropped 2.9 percent, down for the first time in five months and bringing Japan’s trade surplus with the region to its smallest since 1979 for the month of October.

Imports were up 17.9 percent in October from a year earlier, against an expected 15.2 percent gain, bringing the trade balance to a deficit of 273.8 billion yen ($3.6 billion). That marked the first deficit in two months and compared with a median forecast of a 39.9 billion yen surplus.

Japan’s trade balance has swung to a deficit a few times since the March disaster as exports slumped due to damaged supply chains while imports continued to increase on rising demand for crude oil and natural gas to make up for a loss of nuclear energy as well as higher oil prices.

(Additional reporting by Rie Ishiguro; Editing by Joseph Radford and Tomasz Janowski)

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Asian Stocks Rally

The Nikkei 225 index in Japan, which closed at its weakest level since April 2009 on Tuesday, recouped some of the previous session’s losses with a rise of 2 percent by the early afternoon.

In South Korea, the Kospi rallied 3.4 percent. The benchmark index in Taiwan was 2.2 percent higher, while in Hong Kong, the Hang Seng advanced 1.2 percent.

In Australia, the S. P./ASX 200 gained 2.2 percent, after second-quarter growth data showed that the economy had expanded at the surprisingly strong pace of 1.4 percent compared to the same period a year earlier.

Unexpectedly solid services sector data from the United States, released Tuesday, helped stocks on Wall Street pare early losses as investors returned from the Labor Day holiday.

The Dow Jones industrial average dropped 0.9 percent, and the Standard Poor’s 500 index ended down a modest 0.7 percent.

S. P. 500 futures were up 0.5 percent during the Asian morning on Wednesday.

Still, analysts caution that investors will stay nervous, and markets volatile, as the euro zone debt crisis plays out and concerns about the pace of growth in the United States and Europe linger.

HSBC on Wednesday hammered home the point that global economic fundamentals are now significantly weaker than before.

The bank’s team of economists lowered their growth forecasts for this year and next, with particularly marked revisions for the developed world. They forecast that developed economies will expand just 1.3 percent this year, down from a previous projection of 1.8 percent.

Growth in emerging economies will likely hit 6.2 percent, rather than 6.3 percent, they said.

“The developed world has succumbed to economic permafrost,” the team, headed by the global economist Stephen King, wrote in its report. “The message is simple: despite massive policy stimulus, healthy economic recovery is now but a distant dream.”

In the currency markets, the Swiss franc was hovering around 1.20 to the euro after the Swiss national bank on Tuesday surprised investors by saying it would seek to cap the Swiss franc’s value at around that level — a move designed to cushion Swiss exporters from the impact of the currency’s strong rise in recent months.

The Japanese yen, which likewise has risen strongly amid the global turmoil, on Wednesday weakened slightly. By early afternoon, it was trading at 77.24 yen to the dollar. That was about 1 yen weaker than earlier this week — but still much stronger than at the start of this year, when $1 bought about 82 yen.

The price of gold fell, trading at around $1,842 an ounce.

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U.S. and Chinese Officials Named to I.M.F. Posts

David A. Lipton, a White House economic adviser, will become the fund’s senior deputy managing director in September, after the previously announced retirement of John Lipsky. The United States, which owns a controlling share of the fund, maintained its historic insistence that an American should fill the position, just as a European has always headed the fund.

But Ms. Lagarde also bowed to the future by naming a Chinese economist, Zhu Min, to a newly created position as the fourth deputy managing director. Mr. Zhu’s elevation follows a campaign promise by Ms. Lagarde to increase the role of China and other emerging economies in managing the fund. The other two deputy directors, who will remain in place, come from Egypt and Japan.

“These appointments are part of a grand bargain that allowed Europe to retain its hold on the top job,” said Eswar S. Prasad, a professor of trade policy at Cornell University who worked at the fund for 17 years. “This may be one of the few instances where the three largest economic powers — China, Europe and the U.S. — found their short-term interests closely aligned.”

Mr. Zhu is a member of an elite group of Chinese economists who blossomed intellectually in the 1980s, exchanging market-oriented ideas at frequent social meetings in Beijing and Shanghai, and then scattered to rise through the ranks of various Chinese bureaucracies. An early graduate of Fudan University after Chinese universities reopened after the Cultural Revolution, Mr. Zhu came to the United States to earn a doctorate in economics at Johns Hopkins University.

He worked in Washington as an economist at the World Bank from 1990 to 1996, then returned home to become an executive at the Bank of China. He played a central role in reorganizing the company’s operations so it could be listed on the Hong Kong stock market in 2002. He moved to the People’s Bank of China as a deputy governor in October 2009.

The fund’s previous managing director, Dominique Strauss-Kahn, named Mr. Zhu to the newly created position of special adviser to the managing director in February 2010.

In announcing the appointment, which still requires the formality of approval by the fund’s executive board, Ms. Lagarde said Mr. Zhu would aid “in strengthening the fund’s understanding of Asia and emerging markets more generally.”

Mr. Lipton is the senior director for international economic affairs for the National Economic Council and the National Security Council.

After completing a doctorate in economics at Harvard in 1982, Mr. Lipton worked as an economist at the fund for eight years. He joined the Clinton administration in 1993, rising to the position of under secretary for international affairs.

In between Democratic administrations, Mr. Lipton worked at Citigroup and at the hedge fund Moore Capital Management.

Mr. Lipton’s selection was dictated by the Obama administration. The United States created the fund after World War II to provide a lender of last resort for troubled governments, and America still controls 16.77 percent of the voting shares, an effective veto because 85 percent of the votes are needed for big decisions.

Those decisions now are mostly focused on Europe, where the fund has pledged billions of dollars to prop up Greece. The fund also is a main stage on which the United States and China compete for international support for their economic policies.

“David’s greatest strengths are his creativity and drive to solve things definitively,” the Treasury secretary, Timothy F. Geithner, said in a statement.

Mr. Lipsky, a former chief economist at JPMorgan Chase, will complete his five-year term in August. He briefly took charge of the fund after the sudden resignation of Mr. Strauss-Kahn, who faces charges of sexually assaulting a New York hotel maid.

Keith Bradsher contributed reporting from Baton Rouge, La.

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