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Japanese Government More Optimistic on Recovery

May 20, 2013 by Leave a Comment

HONG KONG — The Japanese government struck a more confident note on the economy’s prospects Monday, and a survey showed that manufacturing sentiment had turned positive for the first time in a year — the latest sign that Prime Minister Shinzo Abe’s policies were taking hold.

In its latest monthly assessment of economic activity, the cabinet said the economy was “picking up slowly.” The wording represented an upgrade from the report of the previous month, when the government spoke of recent signs of a pickup but also commented that weaknesses remained in some areas.

At the same time, a monthly poll measuring sentiment in the manufacturing sector, published by Reuters, jumped 11 points to plus-7 in May — the highest reading since September 2011 and the first reading above zero in a year. Readings above zero show that optimistic responses outnumber pessimistic responses.

Since taking office in December, Mr. Abe has pursued a three-pronged strategy for resuscitating growth in the Japanese economy, the world’s third-largest economy, after those of the United States and China.

The first two of the so-called “arrows” with which he is fighting economic malaise — major spending programs and monetary policy that has effectively flooded the economy with cheap money — have already helped weaken the yen and set off a remarkable rally in the Japanese stock market. The Nikkei 225 index climbed another 1.5 percent Monday, increasing its gains since the start of 2013 to nearly 48 percent. The weaker yen, meanwhile, has meant a windfall for exporters.

The policies helped bring about “a V-shaped recovery,” Akira Amari, the minister in charge of economic revitalization, said in a televised news briefing Monday.

Data released last week, showing that the economy had grown at an annualized pace of 3.5 percent in the first quarter of this year, more than analysts had expected, provided one of the first indications that Mr. Abe’s policies were bearing fruit.

Solid earnings outlooks from Japanese companies in recent weeks also have underlined the positive effects of the weaker yen. The yen has dropped about 30 percent against the U.S. dollar since November 2012, helping to improve the international competitiveness of Japanese corporations.

At the same time, however, many analysts have cautioned that the “third arrow” — structural overhauls to make the economy more competitive — will be needed if the turnaround is to be sustainable over the long term.

Mr. Amari, speaking Monday morning, acknowledged that more work needed to be done. Corporate capital expenditure, for example, remained in negative territory, he said. He added that the government would focus on creating a pro-business environment that would swiftly increase spending.

Meanwhile, the Japanese central bank, whose announcement April 4 that it would aggressively buy longer-term bonds as part of a major bid to combat crippling deflation, is expected to hold off on any more stimulus action at its next policy meeting this week.

Hiroko Tabuchi contributed reporting from Tokyo.

Article source: http://www.nytimes.com/2013/05/21/business/global/japanese-government-more-optimistic-on-recovery.html?partner=rss&emc=rss

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Dollar Breaches 100 Yen

May 9, 2013 by Leave a Comment

The United States dollar broke through the important 100-yen level on Thursday for the first time in four years, seeming to illustrate progress in the Japanese authorities’ new efforts to lift the economy out of deflation.

After years of Japan’s struggling to turn its faltering economy around, Prime Minister Shinzo Abe has made beating deflation a central point of his economic policy since taking office in late December.

Last month, the Bank of Japan announced a decisive break with its earlier policies. Instead of focusing on keeping overnight interest rates close to zero – which seemed to be having little effect in reviving growth – the central bank aimed to double the amount of money in circulation, seeking to produce annual inflation of about 2 percent.

That policy now seems to be bearing fruit as money pouring into the economy weakens the yen against the dollar and other world currencies. The yen’s move is germinating inflation in an economy that has long been moribund, in the process delivering a competitive boost to the country’s big exporters.

The Japanese government is not overtly targeting a lower yen rate – something that could raise tensions with other exporting nations like the United States. And while the lower yen is good for Japan’s exporters, it may be less good news for United States’ exporting companies.

Nevertheless, the promise to drastically change Japan’s economic policy and end the long, debilitating era of deflation has caused the dollar to rally for much of this year, and on Thursday it finally broke through the 100-yen level.

By midafternoon in New York, the dollar was valued at 100.53 yen.

The efforts by the Bank of Japan to continue to flood the economy with liquidity is likely to keep downward pressure on the yen in the coming months. The central bank is following an asset purchase program to inflate the economy by aggressively buying longer-term bonds and doubling its government bond holdings in two years.

The depreciation of the yen may be a step in the right direction as the authorities try to fuel some growth. However, Japan still faces many stiff challenges until it breaks out of its period of deflation. It has an aging and shrinking population and cumbersome regulations that make the economy inefficient, and it is not clear that monetary policy alone can end stubborn deflation in Japan.

As he has tried to put a new focus on reviving the economy, Mr. Abe fought with the central bank’s former leaders over setting the 2 percent inflation goal. Mr. Abe’s pressure in the end led to the resignation of the bank’s previous governor, the moderate Masaaki Shirakawa. His departure led to the appointment of Haruhiko Kuroda, who shares Mr. Abe’s economic philosophy.

As it pursues its new policy, the Bank of Japan is buying longer-term government bonds, lengthening the average maturity of its holdings to seven years from three years and expanding Japan’s monetary base to 270 trillion yen by March 2015.

In this way, the bank will buy about 7 trillion yen in bonds each month, equivalent to over 1 percent of its gross domestic product. That is almost twice the bond purchases of the United States Federal Reserve Bank.

Article source: http://www.nytimes.com/2013/05/10/business/dollar-breaches-100-yen.html?partner=rss&emc=rss

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Japan Delays Naming New Leader for Central Bank

February 19, 2013 by Leave a Comment

TOKYO — The Japanese government said Tuesday that it would delay nominating a central bank governor by a week, fanning talk of friction between the prime minister and the finance minister over who should run a Bank of Japan charged with reigniting the economy.

Economics Minister Akira Amari said the government would not nominate the governor or the two deputy governors until after Prime Minister Shinzo Abe returned from a trip to the United States that runs from Thursday to Sunday.

Mr. Abe has demanded aggressive action from a new governor, who is scheduled to be appointed by the end of March, prompting expectations that he would favor a candidate willing to undertake radical policies to lift Japan out of years of deflation.

Some government officials are concerned, however, that a governor promoting radical policies could upset financial markets.

“There’s probably some disagreement between Aso and Abe,” said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management, referring to Finance Minister Taro Aso.

Mr. Abe said Monday that he would make an announcement “soon.”

Mr. Amari, the economics minister, told a news conference after a cabinet meeting, “After Prime Minister Shinzo Abe returns, we will lay the groundwork to reach an agreement with opposition parties within this month.”

The approval of Parliament — including the upper house, where Mr. Abe lacks a majority, is needed by the government’s nominee.

The delay is also partly the result of a parliamentary rule, set by the governing and opposition parties five years ago, that once the name of a nominee is leaked to the news media, the candidate will be automatically disqualified. The rule makes it difficult to float names among different political groups to build a consensus.

Mr. Abe led the Liberal Democratic Party back to power in December with promises of aggressive monetary and fiscal stimulus to lift an economy that has stagnated for years. Japan is in its fourth recession since 2000.

His demands have caused the yen to slump more than 15 percent against the dollar since the election campaign in November, causing worries about competitive currency devaluations. The Nikkei 225-stock average has rallied more than 30 percent over the same period on hopes that the weaker currency would bolster exporters’ earnings.

The prime minister reiterated Monday that he wanted the new central bank governor to pursue bold monetary easing, in which the bank buys assets like government bonds to free up money in the private sector. The candidate will replace Masaaki Shirakawa, who is retiring at the end of a five-year term.

Mr. Abe’s push for looser monetary policy prompted the central bank in January to take its boldest action to date, doubling its inflation target to 2 percent and agreeing to an “open ended” asset-buying program, beginning next year.

Mr. Abe’s short list for the bank’s governor is said to include Haruhiko Kuroda, Japan’s former point man on currency, who now heads the Asian Development Bank; and Kazumasa Iwata, a former government economist and deputy governor of the Bank of Japan.

Mr. Kuroda has been a vocal critic of policies under Mr. Shirakawa, while Mr. Iwata has repeatedly called for the central bank to consider buying foreign bonds to curb the strength of the yen, a measure that Mr. Abe has also said should be an option.

Others say the leading candidate is Toshiro Muto, a former top official in the finance ministry and deputy central bank governor. Analysts say Mr. Muto would promote more aggressive policies than Mr. Shirakawa but refrain from the more radical measures advocated by some other candidates.

“I get the sense that Aso wants Toshiro Muto and that Abe prefers Kazumasa Iwata,” said Hiroaki Muto, the senior economist at Sumitomo Mitsui Asset Management. “Then there’s the matter of dealing with opposition parties. Either one or the other will be appointed B.O.J. governor. There could be some disappointment because at this point the only way to surprise investors is by taking unconventional policy steps.”

In the upper house of Parliament, Mr. Abe would need votes of the opposition Democratic Party of Japan, or a combination of votes from other smaller parties, to get a nominee’s approval.

Article source: http://www.nytimes.com/2013/02/20/business/global/japan-delays-naming-new-leader-for-central-bank.html?partner=rss&emc=rss

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Japan to Ease Restrictions on U.S. Beef

January 28, 2013 by Leave a Comment

TOKYO — Japan is set to ease a decade-old restriction on U.S. beef this week, finally allowing American ranchers and meatpackers to move past the mad cow scare and regain full access to what was once their most lucrative market.

A Japanese government council that oversees food and drug safety cleared a change in import regulations on Monday that would permit imports of meat from U.S. cattle aged 30 months or younger, rather than the current 20 months, according to materials distributed at the council’s meeting in Tokyo.

The change is set to take effect on Feb. 1 for U.S. beef processed after that date, and shipments could start arriving in Japan in mid-February, according to the Japanese Ministry of Agriculture. Bans remain on parts of cattle considered to carry a higher risk of transmitting the disease.

Japan will also allow imports of meat from cows aged 30 months or younger from France and the Netherlands. Japan currently has total bans on beef imports from those countries after mad cow scares there.

Japan, the world’s largest net importer of food, slapped a ban on U.S. beef in 2003 after bovine spongiform encephalopathy, an illness more commonly known as mad cow disease, was found in a single cow in Washington State. Humans are thought to catch the disease’s fatal human variant, Creutzfeldt-Jakob disease, by eating meat, including the brain and spinal cord, from contaminated carcasses.

Japan eased the ban in 2006 but only for meat from cattle 20 months or younger, an age limit American exporters said had no scientific basis. Japanese officials argued that the incidence of the disease was higher in older animals.

Japanese beef producers have found dozens of cases of mad cow disease in their cattle herds. The Japanese authorities say they test all market-bound cattle for mad cow disease.

Tokyo has demanded that U.S. meatpackers also test all export-bound cows for the disease, but the beef industry has balked at what would be a prohibitively expensive measure. Some experts also doubt the efficacy of such tests.

Japan’s restrictions have been painful for American exporters. In 2003, Japan was the largest market for American beef, with exports of $1.4 billion. After the ban was eased, American beef exports to Japan recovered only to about a sixth of that level.

The U.S. beef industry has long urged the American government to do more to urge Japan to relax its restrictions. In 2010, President Barack Obama sent Tom Vilsack, the agriculture secretary, to Tokyo to press the government to accept incremental steps to revive the beef trade, including gradually raising its age restriction.

Japan started discussing easing the age limit in late 2011. The move cleared its final hurdle Monday, when the food and drug safety council agreed with a government-appointed expert panel that the measure “posed little or no risk” to public health.

Article source: http://www.nytimes.com/2013/01/29/business/global/japan-to-ease-restrictions-on-us-beef.html?partner=rss&emc=rss

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Japan’s Credit Rating Cut by Moody’s

August 25, 2011 by Leave a Comment

TOKYO — Moody’s, the credit ratings agency, lowered Japan’s credit rating by one notch on Wednesday, warning that frequent changes in administration, weak prospects for economic growth and its recent natural and nuclear disasters made it difficult for the government to pare down its huge debt.

Hours after the downgrade, the government announced a $100 billion credit facility to help the Japanese economy ride out a spike in the yen in recent weeks amid the global market turmoil, which has battered Japan’s export-led economy.

“Taking into account that there is a lopsided rise in the yen, I felt that swift measures were needed,” Yoshihiko Noda, the finance minister, told reporters.

Moody’s Investors Service lowered Japan’s grade by one step to Aa3, the fourth-highest rating, the company said in a statement.

The downgrade brings Moody’s rating for Japan in line with Standard Poor’s, which lowered the country’s grade by one notch to AA-minus in January, the fourth highest on its scale. Moody’s had put Japan on review for a downgrade in May.

The action comes after a round of downgrades by major ratings agencies of sovereign debt, and amid concern that the debt crisis in Europe could escalate. On Aug. 5, S. P. cut the sovereign debt rating of the United States for the first time in the country’s history.

Markets in Tokyo largely shrugged off the downgrade, the latest in a line of many.

Trust in Japanese government debt “remains unwavering,” Japan’s finance minister, Yoshihiko Noda, told reporters after the downgrade.

Still, the move, a week before the country’s ruling party is to select a new prime minister, could put additional pressure on the incoming administration to balance budgets. The government financing of the recovery from the March 11 earthquake, tsunami and subsequent nuclear crisis is expected to reach as high as 10 trillion yen ($130 billion).

Even before the disasters, Japan’s debt was expected to soar to almost 220 percent of its gross domestic product next year, according to the Organization for Economic Cooperation and Development, which would rank it as the largest debt-to-G.D.P. ratio in the world. Japan, however, has long been able to borrow at low nominal rates because of unwavering appetite by domestic investors for government debt.

Moody’s said that it was worried by  large budget deficits and the buildup of  government debt. Frequent change in  leadership had prevented the government from pursuing long-term fiscal reform, the agency said, while the recent  disasters had delayed recovery. Meanwhile, weak prospects for economic  growth were also hampering efforts to  curb the country’s debt burden, the  agency said.

Deflation and sluggish growth has  long weighed on Japan’s economy, eroding the country’s tax base and forcing  the government to issue debt to finance  its budget. Meanwhile, spending on  pensions and social welfare has soared  as the country’s population ages.

The global economic crisis further  darkened Japan’s economic outlook, as  has the recent tsunami and nuclear accident. Global market turmoil in recent  weeks has also wreaked havoc with the  Japanese economy, driving up the value  of the yen and hurting its export-led  economy.

The credit facility unveiled on Wednesday aims to spur Japanese spending on corporate acquisitions and resources overseas, according to a statement released by the Finance Ministry.

By spending yen for dollars and other currencies, the ministry hopes that the currency will weaken somewhat. A strong yen hurts Japanese exporters because it makes their goods less competitive and erodes the value of their overseas earnings when repatriated into yen. 

The ministry also said it would step up monitoring of currency markets by asking financial institutions to report on positions held by their currency dealers.

Prime Minister Naoto Kan, meanwhile, is expected to step down by the end of the month amid criticism of his  handling of the response to the disasters, making way for Japan’s fifth  prime minister in six years.

Mr. Noda, the finance minister, is  among a field of candidates to replace  Mr. Kan. He has supported more aggressive steps, including raising taxes,  to tackle the country’s debt. Debate  over Japan’s finances has been sidelined by the country’s recovery and reconstruction needs, however.

This article has been revised to reflect the following correction:

Correction: August 25, 2011

An article on Wednesday about a downgrade of Japan’s credit rating by the ratings agency Moody’s Investors Service misstated Japan’s grade from another agency, Standard Poor’s. It is AA–, not AA. (A grade of AA– is S. P.’s fourth-highest, equivalent to the AA3 rating announced by Moody’s.)

Article source: http://feeds.nytimes.com/click.phdo?i=f82d2f89526d1948621eae07564946ad

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Asian Stocks Lose Early Gains

August 24, 2011 by Leave a Comment

Markets in Japan, which is beset by feeble growth, political infighting, a strong currency and high government debt, initially barely blinked at Moody’s action, which was announced early on Wednesday.

In fact, the move came as little surprise, given the country’s economic challenges and the fact that Standard Poor’s had announced a similar downgrade in January.

But after rising in early trading, the Nikkei 225 index was 0.2 percent lower by the lunchtime break in Tokyo. The yen was little changed, trading at about 76.75 yen per U.S. dollar.

Moody’s move takes the rating to Aa3, from Aa2, with the ratings agency citing “large budget deficits and the build-up in Japanese government debt since the 2009 global recession” for its downgrade.

“Over the past five years, frequent changes in administrations have prevented the government from implementing long-term economic and fiscal strategies into effective and durable policies,” Moody’s wrote in a statement.

The March 11 earthquake and tsunami and the subsequent nuclear disaster have delayed a recovery from the 2009 global recession and have aggravated deflationary conditions, Moody’s wrote, adding that “prospects for economic growth are weak, making it more difficult for the government to achieve deficit reduction targets.”

Elsewhere in the Asia-Pacific region, stocks were mixed. The key index in Australia was flat and New Zealand gained 0.5 percent, and the Shanghai composite index was 0.2 percent higher by midmorning.

Elsewhere, however, the markets slipped, ignoring the firm rally in the U.S. markets during the previous day. Analysts cautioned that the lingering uncertainties about the U.S. economy and European debt woes remain in place and are likely to produce more volatility in coming months.

The Straits Times index in Singapore and the Taiex in Taiwan were 0.8 percent and 1 percent lower, respectively, by midmorning. The Kospi in South Korea fell 1.3 percent, and in Hong Kong, the Hang Seng retreated 1.1 percent.

On Wall Street on Tuesday, the Dow Jones industrial average finished nearly 3 percent higher and the Standard Poor’s 500 rallied 3.4 percent, with investors apparently seeking out buying opportunities before Federal Reserve’s annual symposium in Jackson Hole, Wyoming, on Friday.

Investors also harbored hopes that the Fed chairman, Ben S. Bernanke, would announce fresh Federal Reserve support for the U.S. economy at the event.

Futures on the S. P. 500 were down 0.7 percent during the Asian morning, signaling that Wall Street may give up some of Tuesday’s gains when trading resumes Wednesday.

Gold, which had sagged sharply on Tuesday, climbed again Wednesday morning — a reflection that the precious metal’s appeal as a relative haven amid times of uncertainty remained undiminished.

Gold was trading at $1,852 an ounce by midmorning in Asia, up from about $1,830 earlier in the day.

Article source: http://www.nytimes.com/2011/08/25/business/daily-stock-market-activity.html?partner=rss&emc=rss

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Japan Proposes Aggressive Recovery Plan

July 29, 2011 by Leave a Comment

The Japanese government is desperate to pull the economy out of a recession stemming from the March 11 earthquake and tsunami as well as the problems related to the Fukushima nuclear plant. The catastrophes damaged factories, disrupted supply chains, caused a crippling power shortage and curtailed consumer spending.

But the government has also been pressed to show that it will be able to finance such a plan. After years of stimulus spending, Japan’s public debt is already twice the size of its $5 trillion economy.

Addressing the nation Friday, Prime Minister Naoto Kan said that the government would find the money to support a robust reconstruction drive.

“This plan takes us beyond immediate recovery to the next stage, full-scale reconstruction,” Mr. Kan said, adding: “We will also fulfill the responsibility to secure funds.”

Japan is still reeling from the sheer extent of the damage unfurled by its recent earthquake, tsunami and subsequent nuclear crisis. At the end of June, damage from the quake and tsunami alone had already reached $210 billion, according to estimates by Munich Re, a German reinsurance company.

That makes the events of March 11 the world’s costliest disaster, surpassing Hurricane Katrina, which caused about $125 billion in economic damage, according to Munich Re.

The government is also contributing to some of the billions of dollars of compensation to be paid out to victims of the accident at the Fukushima Daiichi Nuclear Power Plant, owned by Tokyo Electric Power.

According to the government plan released Friday, new spending will include money for new roads and ports, support for farming and fisheries in the region and help for small- and medium-size companies.

In particular, the plan said it would provide incentives for companies to rebuild their factories in the Tohoku region, a bid to stem a stream of companies that are moving their operations overseas. In helping to rebuild towns and villages along Tohoku’s ravaged coast, in northeast Japan, the government will work to support the region’s aging population, providing public housing to those who are unable to rebuild their homes, the plan said.

To help pay for the outlays, the government said it would issue special reconstruction bonds, raise taxes, cut spending and could even sell its prized stake in two former state-run corporations.

The plan would require reconstruction bonds and extra tax revenue of up to 10 trillion yen, the government has suggested, though it did not include that figure in the final plan. It also did not specify which taxes might be raised.

To secure further financing, the government will also consider selling shares in the phone company NTT and Japan Tobacco, Tatsuo Hirano, the minister in charge of reconstruction, told reporters. The Japanese government owns 37 percent of NTT, a stake worth 2.1 trillion yen, and 50 percent of Japan Tobacco, worth 1.7 trillion yen.

Mr. Kan, whose ratings have nosedived over his handling of the disaster response so far, may not be around to see much of the plan in action, however. The leader survived a vote of no confidence in June only after offering a vague suggestion that he might resign.

Article source: http://www.nytimes.com/2011/07/30/business/global/japan-proposes-aggressive-recovery-plan.html?partner=rss&emc=rss

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