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A sales tax hike last quarter drove Japan's economy into its biggest contraction since the March 2011 earthquake and tsunami, Cabinet Office data showed on Wednesday (13 August), keeping policymakers under pressure to expand fiscal and monetary stimulus should recovery falter again.The April 1 sales tax hike took a heavy toll on household spending, shrinking the world's third-largest economy by an annualised 6.8 per cent from April through June, and wiping out growth of 6.1 per cent seen in January-March as consumers went on a shopping spree to avoid the higher tax.The median market forecast was for a 7.1 per cent drop.Seeing the slump as temporary, however, the Bank of Japan remains publicly convinced the economy is on course for a moderate recovery and has no plans to expand stimulus any time soon.The soft data, though, could compel the central bank into trimming its rosy fiscal year economic projections when it reviews them in October.If third quarter growth proves weak the BOJ may also come under pressure to add stimulus - particularly before Prime Minister Shinzo Abe decides later this year whether to implement a second sales tax hike from 8 to 10 per cent in October next year, analysts say."Should the next quarter be weaker than expected, there's the chance that the BOJ will be called on to do some more easing - and how the BOJ responds then will be another point to watch," said Yuichi Kodama, an economist at Meiji Yasuda Life Insurance.Economics Minister Akira Amari signalled the government's readiness to compile an extra budget later this year should growth in the third-quarter stay weak, although any fiscal stimulus would probably not be big enough to have a major impact on the economy, given Japan's dire government finances."At the moment I don't feel the need (to prepare an extra stimulus) but we will take necessary steps as appropriate depending on economic developments from now on. Appropriate steps mean every possible measure," he told reporters after the data was published.On a quarter-to-quarter basis, Japan's economy shrank 1.7 per cent in the second quarter, less than a median forecast for a 1.8 per cent fall.The second-quarter contraction was the biggest decline since the first quarter of 2011, when the devastating earthquake and tsunami in March disrupted factory production and chilled household spending.Fiscal Stimulus ForthcomingPrivate consumption, which makes up about 60 per cent of the economy, fell 5.0 per cent in the quarter, more than the 4.3 per cent drop forecast by markets. Capital expenditure also slumped 2.5 per cent, a worrying sign for policymakers counting on companies to support recovery by increasing their spending.External demand added 1.1 percentage points to GDP, after shaving 0.2 point off first-quarter growth, but was mostly due to a fall in imports. Exports fell 0.4 per cent in the second quarter, underscoring how much the failure of exports to rebound is weighing on the economy.Many analysts expect a pick-up in July-September as the tax hike impact fades, with some projecting an annualised expansion of around 3 per cent to 5 per cent. A tightening job market is gradually pushing up wages and big firms have boosted summer bonus payments, which augurs well for consumption.Still, a majority of economists project growth for the current fiscal year, which began in April, to fall well short of last month's BOJ projection for a 1.0 per cent expansion.BOJ Governor Kuroda has repeatedly stated he would not be surprised to see a contraction in April-June economic activity, and that there was no need to offer additional stimulus as growth is set to rebound in July-September.Some analysts pointed to a rise in inventories in the second-quarter GDP data as a sign that companies, having underestimated the tax hike effect, added excess inventory and will scale back production in coming months."The positive contribution from inventories is a risk factor for the future. This means we need stronger domestic demand growth in July-September to achieve a rebound strong enough to justify a second rise in the sales tax," said Masayuki Kichikawa, chief Japan economist at Bank of America Merrill Lynch."I think there is a 70 to 80 per cent chance Abe will raise the sales tax again with another fiscal stimulus package," he said.Government officials have already signalled privately that they are ready to compile an extra budget toward the year-end to shore up the economy, scraping leftover money from the previous fiscal year's budget.They remain silent on the possible size of the stimulus and when the budget would be compiled, all of which depends on economic performance this quarter.Under its "quantitative and qualitative easing" policy put in place last April, the BOJ now buys 70 per cent of new government bonds issued in markets, as well as risky assets, to reflate the moribund economy.(Reuters)
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In a frontal attack on the Narendra Modi government, Congress President Sonia Gandhi on Wednesday (13 August) said there has been an "alarming increase" in communal incidents since it came to power and asked partymen to resist its "authoritarian and sectarian" tendencies."It is our task to play the role of a vigilant Opposition, to stand up for the values and policies of the Indian National Congress, and to resist the authoritarian and sectarian tendencies of the new government as it tries to get its way in Parliament."This we have begun to do, I believe, with increasing effectiveness," Gandhi said addressing the second meeting of the Congress Parliamentary Party in the new Lok Sabha.Stepping up her attack on the BJP on communalism, she alleged that since the BJP has come to power there has been an alarming increase in number of incidents of communal violence."We have had hundreds of incidents of communal violence and rioting in Uttar Pradesh, in Maharashtra and a number of other States. In addition, there have been other subtle but pernicious signals of intolerance," Gandhi said telling the partymen "our work is cut out for us."She acknowledged that "It has been a challenging time" for the Congress party.But at the same time, she noted "the process of rebuilding and restoring the confidence of the public in the Congress Party has begun.""We have been reduced in numbers to an all time low in the Lok Sabha. But we have not been reduced in spirit," Gandhi said telling the partymen that the work of Congress is in Parliament, in public forums across the country, in our media and in the streets and homes of ordinary Indians everywhere.With Congress still not getting the post of Leader of Opposition in Lok Sabha apparently weighing on her mind Gandhi said, "but Parliament is not the only forum available to us.If each of us has to be an effective Congressman and woman, we must also work to maintain and strengthen the grassroot connections to the voters that has brought us here." Gandhi also accused the Modi goverment of "stealing" the ideas of UPA and "borrowing" its programmes as it has "nothing new to offer"."The lesson of these ten weeks is that the BJP has nothing new to offer the country. They attacked us without principles and they are now governing us without policies.Well, they are welcome to steal our ideas. They are welcome to borrow our programmes."Imitation is the sincerest form of flattery. Let them even continue to blame us for their own failures, as they have been doing," she said.Attacking the government over issues including price rise and unemployment, the Congress President said,"Prices are rising across the nation, hurting the ordinary housewife, the college student, the worker, and particularly the unemployed and deprived. break-page-break"How long will they be able to blame UPA government for your inability to control or improve the economy? Such excuses have a short shelf life."Gandhi said that the new government also tried to prevent a discussion on Gaza in Parliament and then ended up voting at the United Nations Human Rights Council just as the UPA would have."They have also, finally, seen the wisdom of our Government?s initiative in trying to reach a land boundary agreement with Bangladesh which, you will recollect, they had refused to support last year."Touching on the incidents of rape she said that women, too, have much to be concerned about, judging by the evidence of BJP rule so far."Violence against women is rampant, and increasing.I do not need to repeat to you the growing number of rapes, sexual assaults and even killings of women that have occurred on the BJP?s watch," Gandhi said.The Congress President also flagged the "atrocious behaviour of some BJP legislators and the unacceptable views expressed by others in complete disregard of our time-honoured secular traditions and constitutional propriety"."Let us be clear. There is a great deal of concern throughout the country, particularly among women and minorities, the poor, about whether the BJP and its sister organisations mean to work for all of India?s communities, or whether they seek to profit from dividing the nation on sectarian lines."In my mind, I have no doubt about the answer... The moment BJP betrays the ideals on which this nation was built, the moment they pursue politics of division and hatred, the moment they try to behave dictatorially inside or outside this temple of Indian democracy ? the moment they do any of these things, we will stand up and fight them," she said."This is the tendency we must resist with all our strength. Our work is cut out for us. As we leave this Parliament and prepare to return to our constituencies, let us take the message to our voters that the Congress Party stands resolutely with the people of India.Gandhi said her party will continue to defend the defenceless. "We will continue to work to empower the powerless. We will continue to give voice to the hopes and fears and needs of the voiceless," she said.(PTI)
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Underlining his government's resolve to fight graft which has "ruined" the country, Prime Minister Narendra Modi on Tuesday (12 August) expressed his willingness to take along people from various parties who have been fighting corruption."Corruption is troubling us. People are angry. I assure that we will fight corruption and work with all those against graft. Corruption has ruined the country. I promise that we will fight against corruption with full might," he said addressing a rally here at polo ground.Modi said the government is willing to take along all anti-corruption forces, political parties and its leaders and honest officer in its fight to end graft."There are also honest officers. We will work with them too. If we win the fight against corruption we will win battle against poverty," he said after inaugurating Nimoo Bazgo hydro-electric project and Leh-Kargil-Srinagar transmission system.Dressed in traditional Ladakhi attire, Modi said government will do its best to bring a 'kesar' (saffron) revolution in Jammu and Kashmir giving impetus to its production."We need to bring a saffron revolution that is giving impetus to kesar. Special attention should be placed to farmers," he said. "We have put Leh at the focus of our solar energy initiatives. We have to connect every corner of the country through power, rail, road and telecommunication," Modi said.The Prime Minister said development must be such that it positively transforms the lives of the common people.He said three Ps - Prakash (solar light), Prayawaran (environment) and Paryatan (tourism) are the assets of Jammu and Kashmir and all efforts would be taken for their development."We have kept Ladakh at the centre of our solar energy policy. Now you will not live on borrowed power. You will live on your own solar powered electricity," he said.He said government is planning special projects including large-scale organic farming for the development of all Himalayan states including."I am fortunate to have worked for the party organisation in Jammu and Kashmir. I used to visit the state often. I know the problems people face and most importantly I know the strength of this land," he said.Modi said there was was a time when PMs never visited this state and he has come here two times already as Ladakh's affection draws him here.(PTI)
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The rupee was trading at 60.14/15 versus Monday's (23 June) close of 60.20/21, tracking gains in the offshore Nifty futures but month-end dollar demand for the greenback from importers is expected to limit any sharper rise.The rupee is expected to hold in a 60.00 to 60.30 range during the session and a broad 59.50 to 60.50 range until the federal budget due on July 10.Asian currencies trading mixed compared with the dollar.Traders will monitor the domestic share market for clues on the direction of foreign fund flows.(Reuters)
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The rupee is trading at 61.16/17 after closing at 61.19/20 on Monday.The pair touched 61.74 on Friday, its highest since March 5.Asian currencies are trading mixed-to-positive versus the dollar.The dollar index up 0.08 per cent; sluggish, as focus remains on geopolitical tensions.The Nifty is up 0.5 per cent, heading for a second consecutive winning session.(Reuters)
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It's 10 o'clock in the morning and a dozen workers are uprooting coffee plants, piling them in the corner of a field at M.G. Bopanna's plantation in Karnataka where they lie ready to be burned.The plants are bursting with green cherries but inside their hard bark lurk destructive white stem borer beetles. The bushes have to be destroyed to prevent the tiny winged creature from threatening Bopanna's entire crop of arabica coffee.The beetle, which bores through plants' bark and feeds on their stems, is thriving this year due to unusually warm weather and scant rains in arabica growing areas in India, the world's sixth biggest coffee producer.If the hot spell continues and the pest continues to spread, India's coffee crop could fall to its lowest in 17 years when the harvest starts in October, pushing up global prices that are already rallying due to drought in top exporter Brazil.The damage caused by the beetles is so severe that Bopanna has hired an excavator to uproot affected bushes on his 63 acre plantation at the hill station in the tropical forest of the Western Ghats, west of high-tech hub Bangalore."Every time we think we have uprooted all the infected plants, then after a few weeks we find more," says Bopanna, 69, who has tended the plantation bought by his father for nearly four decades."Earlier whenever there was an outbreak, we used to uproot five to 10 plants per acre. This year I have uprooted more than 200 plants per acre," he said.There is no effective pesticide to control white stem borers, so the state-run Coffee Board advises farmers to uproot and burn infested plants to limit their spread."You may take all precautions, but if your neighbour is lethargic then white stem borers will fly from your neighbour's plantation," said N. Bose Mandanna, a grower from Madikeri who has removed all affected plants from his 34 acre plantation, five kilometres west of Bopanna's field.Scant RainIn most years heavy rainfalls and low temperatures restrict the spread of the white stem borer. But this year Karnataka Kodagu and Chikmagalur districts, which account for two-third of India's total coffee production, have received half the usual rainfall since the start of monsoon season on June 1.The state-run weather department said earlier this month that rainfall in July and August is expected to remain below average."The pest infestation will rise quickly if rainfall remains subdued in the next few weeks," says Mandanna, a fourth-generation arabica coffee planter.India's arabica coffee production could drop as much as 20 percent in the 2014/15 season to 60,000-70,000 tonnes, said a spokesman at Ruchi Soya, a coffee exporter.That would pull down India's total coffee output, three quarters of which is exported, to 260,000 tonnes, the lowest level since 1997/98, estimates Ruchi Soya.Italy, Germany and Belgium are the main buyers of Indian coffee and usually pay a premium for it over global prices. Starbucks, J.M. Smucker Co and Kraft Foods Group are leading buyers of arabica.Arabica To RobustaBopanna and other farmers are replacing affected plants with new seedlings, cultivating instead a robusta variety that is cheaper than arabica but resistant to white-stem borer."I would love to have an entire coffee plantation with arabica, but I have to consider earnings as well. How I would pay workers if the pest damages my entire arabica crop?" asks Bopanna, who is planning to convert 16 acres to robusta this year.Arabica coffee is typically roasted and ground for brewing and can range widely in quality, with some reaching the highest levels. Robusta, on the other hand, is more bitter and either processed into instant coffee or added to a roasted blend to reduce the cost.India, which started coffee cultivation in 1670 with seven smuggled beans, produced mainly arabica until a few decades ago. Now arabica accounts for just one third of India's total output compared to 82 percent in 1950.That share will fall further unless the Coffee Board develops new arabica varieties that can withstand white stem borer, says Marvin Rodrigues, former chairman of the Karnataka Planters' Association."Farmers can't absorb shocks of white stem borer," said Rodrigues said."It is not hurting just one year's income; it is squeezing four year's earnings."Coffee seedlings start flowering and produce cherries only after four to five years, meaning the impact of this year's pest infestation will persist in India's arabica production for at least that long.Besides, arabica is also a labour-intensive crop at a time when wages are rising quickly due to labour shortages yet yields around half the cherries of robusta."Though robusta prices are lower than arabica, it is economical to have robusta. You can recover at least input cost even during bad year," said Sundaram Ramasamy, executive director at Amrutha Coffee.For Bopanna though, this year's crop will be costly."Hopes of a bumper crop flourished with widespread flowering in March, but white stem borer ruined those expectations," he said."I was expecting a crop of 15 tonnes, now harvesting 10 tonnes seems difficult."(Reuters)
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Industrial production in India probably expanded for a third consecutive month in June driven mainly by solid growth in infrastructure output, a Reuters poll showed.Factory output in June likely rose 5.4 per cent from a year earlier, faster than the 4.7 per cent growth in May, according to a poll of 27 economists."India's core sector growth touched 7.3 per cent year on year in June supported by a significant pick-up in electricity, cement and coal production", said Rupa Rege Nitsure, chief economist at Bank of Baroda.The infrastructure sector accounts for almost 40 per cent of India's industrial output.If confirmed, this would be the strongest expansion in industrial production in 19 months, welcome news for the newly-elected government led by Prime Minister Narendra Modi.Economists in the poll also predicted that July inflation would be almost unchanged from a month earlier even as weak monsoon rains and political turmoil in Iraq were expected to push food and fuel prices up significantly.Wholesale price inflation likely eased to 5.10 per cent from 5.43 per cent the month before, while consumer price inflation, the key indicator adopted by the Reserve Bank of India to measure price rises since April, probably gathered pace to 7.40 per cent from 7.31 per cent in June.The mixed inflation data will plausibly see the RBI maintaining status quo on rates for longer.Governor Raghuram Rajan last week kept policy rates unchanged saying "upside risks to the target of ensuring CPI inflation at or below 8 percent by January 2015 remain" and underlined his resolve to lower inflation to 6 per cent by 2016."Food inflation will go up quite materially due to scant rains," said Ashutosh Datar, economist at IIFL Institutional Equities.However, he pointed to elevated inflation data from last year to argue that statistically, despite a rise in food prices in 2014, wholesale price inflation readings will probably dip a little.Similarly, the pick-up in industrial production could be on account of a weak monsoon that facilitated higher factory activity, Datar added, cautioning that the better numbers did not reflect an underlying pick-up in activity."The uptick in production is because of seasonality. In June there was very little rainfall which allowed for higher coal production, higher construction activity...and led to higher electricity production. We should not extrapolate a 5-6 percent IIP growth for the next few months."(Reuters)
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US President Barack Obama said he was willing to consider broader use of military strikes in Iraq to beat back Islamist militants, but Iraqi political leaders must first figure out a way to work with each other, the New York Times reported.In a wide-ranging interview conducted on Friday (8 August), Obama also expressed regrets over not doing more to help Libya, pessimism about prospects for Middle East peace, concerns that Russia could invade Ukraine, and frustration that fellow economic superpower China has not stepped up to help.Obama on Thursday authorized the US military to conduct targeted strikes on Islamic State fighters in northern Iraq, a limited operation designed to prevent what he called a potential "genocide" of a religious sect and also protect American officials working in the country.But in the interview with Times columnist Thomas Friedman, Obama said the United States may eventually do more to help Iraq repel the militant group, which seeks to control its own state."We're not going to let them create some caliphate through Syria and Iraq," Obama said in the interview, excerpts of which the Times posted on its website late on Friday."But we can only do that if we know that we have got partners on the ground who are capable of filling the void," he said.He praised officials from Iraq's semi-autonomous Kurdish region for being "functional" and "tolerant of other sects and religions" and said the United States wanted to help."But, more broadly, what I've indicated is that I don't want to be in the business of being the Iraqi air force," he said.Obama has faced growing criticism for being too reluctant to intervene in thorny foreign policy issues which have piled up under his watch.He quipped that he sometimes wished the United States was more like China: a superpower that no one expects to intervene."They are free riders, and they've been free riders for the last 30 years, and it's worked really well for them," Obama said.He told the Times that he regretted his government did not do more to help rebuild Libya after NATO-led air strikes in 2011 that toppled Muammar Gaddafi. The nation has been wracked by fighting and chaos."So that's a lesson that I now apply every time I ask the question, 'Should we intervene militarily?'" Obama said. "Do we have an answer the day after?"Obama's administration has also been trying to encourage ceasefires in Gaza between Israel and the Palestinians, and applying economic sanctions against Russia to try to get Moscow to stop supporting separatists in eastern Ukraine.He expressed doubts about whether Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas could come to the kind of longer term peace deal that former Egyptian President Anwar Sadat was able to broker, and that former Israeli prime ministers Menachem Begin and Yitzhak Rabin accepted."In some ways Bibi's too strong, in some ways Abbas is too weak to bring them together and make the kind of bold decisions that a Sadat or a Begin or a Rabin were willing to make," Obama said.Obama said he feared that Russian President Vladimir Putin would not back down from eastern Ukraine, where Moscow has supported separatists."He could invade," Obama said.(Reuters)
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India has offered to significantly increase an order for US attack helicopters, Indian officials said, as US Defense Secretary Chuck Hagel began a visit to New Delhi on Thursday aimed at boosting defence and strategic ties.The Apache gunships and a deal for Chinook helicopters, both built by Boeing, will top the agenda in Hagel's talks on Friday (08 August) with the new administration led by Prime Minister Narendra Modi.India has offered a follow-on order of 39 AH-64D Apache helicopters in addition to the 22 now being negotiated, a Defence Ministry official said. The sides have been wrangling over the price of the gunships, however, with the initial deal having been estimated to be worth $1.4 billion.The two countries have rapidly expanded military and business ties in recent years, despite discord over issues such as intellectual property rights and market access.Washington is keen to step up cooperation across the board, seeing India as a strategic partner in the face of an increasingly powerful and assertive China.According to defence research firm IHS Jane's, India was the top foreign buyer of US arms last year. An Apache deal would be the first big military contract since Modi's government took office in May.Hagel's trip follows one by US Secretary of State John Kerry last week and is part of the build-up to talks between Modi and President Barack Obama in Washington in September.Hagel's talks will also cover military exercises and co-production and co-development of armaments and the renewal of a 10-year defence cooperation agreement that runs until 2015.Hagel said the purpose of his visit went beyond arms sales."Our interests are varied and common - stability, security, economics, possibilities, freedom," he said en route to India. "I'll be there, working, yes, our specific issues, but it's larger ... than that.""We Need Partners"Hagel said Asia-Pacific was a region of great opportunities, but also of challenges. "We need partners. We need relationships. That's the kind of world we live in, and that's the kind of world that we're going to be living in."Speaking to reporters on his plane, Hagel was asked about India's apparent reluctance to be seen as a full US ally and he replied that Washington was "mindful" of India's tradition as a independent, non-aligned state."We're not trying to change that," he said. "But...we have common interests, and...we think there's more potential to build on those common interests."US officials say there is the potential for billions of dollars of new arms sales in the next few years and hope Modi can overcome bureaucratic obstacles that have held up some.Last month, India's cabinet cleared a proposal to allow 49 per cent foreign participation in the defence industry, up from a current cap of 26 per cent.Hagel said he would be looking at whether there would be the potential to go beyond 49 per cent something US defence firms want before allowing technology transfers India craves.The initial batch of Apache helicopters is meant to replace the Indian Air Force's ageing fleet of Soviet-era aircraft and will be armed with Hellfire and Stinger missiles.The Indian Army has separately requested a fleet of at least 39 of these attack aircraft, some of which will be deployed as part of a new mountain division it is raising along the disputed border with China, an army official said."The point is we are looking at 60 to 70 pieces eventually, so the expectation is the vendor will factor that in, in the price negotiations," said the defence ministry official, who asked not to be identified in line with ministry policy.US defence sales to India have grown from the low hundreds of millions of dollars in the decade to 2008 to more than $9 billion since that year.(Reuters)
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Oil prices rose in Asia on Friday (8 August) after US President Barack Obama said he had authorised air strikes against Sunni extremist militants in key crude producer Iraq.US benchmark West Texas Intermediate for September delivery rose 35 cents to USD 97.69 while Brent for September gained 67 cents to USD 106.11 in mid-morning trade.Obama in an address yesterday said he ordered the air strikes to prevent "genocide" by the so-called Islamic State fighters against the besieged Yazidi minority in Iraq's north."I therefore authorized targeted air strikes if necessary to help forces in Iraq as they fight to break the siege and protect the civilians trapped there," Obama said.He did not say whether air strikes have already been carried out.Desmond Chua, market analyst at CMC Markets in Singapore, said the development could add "significant risk premium to oil prices" as dealers worry about potential supply disruptions."The announcement certainly edges up the geopolitical concerns about Iraq and the Middle East region, and comes as a bit of a surprise to investors," Chua told AFP.Islamic State insurgents now control large swathes of Iraq's north and west. The sweeping offensive that began on June 9, preventing Baghdad from exporting oil via a pipeline to Turkey and by road to Jordan.Iraq's oil ministry on July 24 said crude exports totalled 2.42 million barrels per day in June, falling far short of a budgeted projection of 3.4 million bpd.As the number-two producer in the OPEC cartel, Iraq's 11 per cent of proven world reserves plays a key role on world markets and prices after violence disrupted oil exports from Syria and Libya.The dip in exports adds to the woes of Iraq, which is heavily dependent on oil revenues while spending more on military equipment to battle the Islamic State group. (Agencies)
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