Japan, GCC to launch strategic ministerial dialogue

Japanese Prime Minister Shinzo Abe and his counterpart of Bahrain, Khalifa bin Salman Al Khalifa, agreed Saturday to hold a strategic ministerial dialogue between Japan and the Gulf Cooperation Council at an early date.

The strategic dialogue will bring together the Japanese foreign ministers and ministerial officials of the GCC countries. Bahrain currently dispatches an official to serve as the secretary-general of the six-nation GCC.At his meeting in Manama, the capital of Bahrain, Khalifa informed Abe of his country's decision to lift the restrictions on food imports from Japan that have been in place since the March 2011 earthquake and tsunami.

Source: NewsOnJapan

Abe visits gas-rich Qatar

Japanese Prime Minister Shinzo Abe discussed strengthening cooperation with gas-rich Qatar as he met emir Sheikh Tamim al-Thani in Doha on Wednesday as part of a regional tour.

The two leaders agreed to strengthen cooperation in the political and security fields, they said in a joint statement.

Abe's tour of the Gulf is seen as his latest push to promote nuclear technology exports.

And the Japanese government says Qatar and Kuwait have shown an interest in nuclear safety, out of concerns that neighbouring countries plan to build nuclear plants.

In May, Japan signed a nuclear cooperation deal with another Gulf state, the United Arab Emirates, during a similar visit by Abe.

A day later, he visited Turkey and signed a long-awaited deal to build a sprawling nuclear power plant on the country's Black Sea coast, in a milestone for the Japanese nuclear industry.

Opinions mixed over Japan sales tax hike

Opinions were mixed on the second day of a government hearing on Japan's two-stage sales tax hike plan as Prime Minister Shinzo Abe and his administration ask experts for their views on how to balance economic growth and fiscal rehabilitation.

Nine experts took part in the second session on Tuesday, including Yale University Prof. Koichi Hamada, a special adviser to Mr. Abe, as well as Tokyo University Prof. Takatoshi Ito, Credit Suisse Chief Japan Economist Hiromichi Shirakawa and Mitsumaru Kumagai, chief economist at the Daiwa Research Institute.

Economy minister Akira Amari, who briefed reporters after the meeting, said five participants indicated that the government should go ahead with the current plan, while four others suggested alternatives to avoid the negative impact the tax hike might have on the economy.

"Those who were in favor of the current plan cited the importance of maintaining confidence in the nation's finances, the necessity of avoiding market risks from not implementing the tax hikes, securing social security resources and investing in the future," he said.

Mr. Hamada suggested Tokyo should delay the two-stage tax hike by one year, or possibly take an incremental approach of an annual 1 percentage point increase starting next year. But Mr. Amari also said Mr. Hamada voiced support in the idea of cutting the corporate tax rate to cover the negative impact a sales tax hike may have on the economy. Mr. Amari added that he himself believed tax breaks had the effect of improving corporations' growth potential in the face of a slumping economy.

Source: NewsOnJapan

Japan's population drops for 4th straight year

Japan's population under its resident registry network system fell 266,004, or 0.21 pct, from a year before to 126,393,679, excluding foreign residents, as of the end of March 2013, down for the fourth straight year, the internal affairs ministry said Wednesday.

The drop renewed the previous year's record decline of 263,727.

The natural population decline, or the number of deaths over that of births, stood at a record high of 226,118.

The country's total population came to 128,373,879, including 1,980,200 foreign residents who became newly subject to the registration system following a reform of the system in July 2012.

Source: JiJi Press

Nissan plans to sell self-driving cars by 2020

Officials at Japanese automaker Nissan have announced plans to put self-driving cars on the market by 2020.

The firm became the first manufacturer in Japan to announce such a timeframe.

Nissan officials unveiled the prototype of a self-driving car at an event in California on Tuesday.

The firm's engineers equipped an electric vehicle with 5 cameras that can recognize information such as road signs.

They also added devices that measure the distance between the car and obstacles near it using lasers and ultrasonic technologies.

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China joins global combat tax evasion efforts

China on Tuesday signed the multilateral convention on mutual administrative assistance in tax matters to boost its participation in global efforts to combat tax avoidance and evasion by cooperating with other states in the assessment and collection of taxes.

Wang Jun, Administrator of the State Administration of Taxation of China, signed the convention on behalf of the Chinese government, in the presence of Angel Gurria, Secretary-General of the OECD, at the headquarters of the OECD in Paris.

By signing the Convention, China became the 56th signatory to the multilateral agreement designed to facilitate international cooperation among tax authorities to improve their ability to tackle tax evasion and avoidance and ensure full implementation of their national tax laws, while respecting the fundamental rights of taxpayers.

"This is the first multilateral tax instrument that has ever been signed by China," Chinese Administer Wang Jun told the audience at the signing ceremony.

He said the signing of the convention is of significance as it comes at a time when China has begun economic transition, marking a new step in opening-up and reform in tax matters.

Hailing China's participation in the convention, OECD chief Gurria said: "Today's signing is both timely and important. The G20 has endorsed automatic exchange of information as the new global standard. This also represents another significant step in the strengthening of collaboration between China and the OECD."

He added the convention provided the ideal instrument "to swiftly implement automatic exchange, and to do so with a wide range of partners."

Developed by the OECD and the Council of Europe in 1988, the convention on mutual administrative assistance in tax matters is the most comprehensive multilateral instrument available for tax cooperation and exchange of information.

China to deepen tax reforms

Tax systems concerning business turnover, consumption, resources and property will continue to be reformed in order to promote economic development, China's Financial Minister Lou Jiwei said on Wednesday.

The country will widen its pilot scheme of replacing turnover tax with value-added tax (VAT) to sectors including railway transportation, postal services and telecommunications, Lou said at the ongoing bimonthly session of the National People's Congress Standing Committee, which started on Monday and ends on Friday.

Started in January last year, the trials have benefited 1.34 million enterprises and helped save businesses 50 billion yuan (8.1 billion U.S. dollars) in the first half of 2013 in 12 provinces and municipalities. From Aug. 1, VAT reforms will expand nationwide to further reduce tax burdens on businesses.

VAT refers to a tax levied on the difference between a commodity's price before taxes and its cost of production, while turnover tax refers to a levy on a business's gross revenues.

Since Aug. 1, China has suspended VAT and turnover tax for businesses with monthly revenues below 2 million yuan, benefiting more than 6 million small and micro enterprises, according to Lou.

The expansion of the trials nationwide is expected to bring structural changes to the entire tax system and bolster economic reform, said Bai Jingming, deputy director of the financial sciences institute under the Financial Ministry.

China will also impose its consumption tax on goods that could cause severe environmental pollution and over-exploitation of resources. The tax will also be applicable to more luxury goods, Lou said.

It could help curb over-consumption of unhealthy goods including alcohol and cigarettes and promote energy conservation, said Zhang Bin, who is in charge of revenue research with the Chinese Academy of Social Sciences.

He suggested applying the taxation to high-end entertainment in addition to luxury goods.

Experts also warned that taxation could increase the price of taxed goods, leading to transfer of taxes to consumers and consumption abroad to evade high taxes domestically.

As part of efforts to enhance the efficiency of energy usage, China will extend resource tax to coal based on prices instead of sales volume, Lou said. The current tax covers crude oil and natural gas.

It was expected that the tax adjustment will drive the coal industry to enhance technologies, curb overcapacity and protect the environment.

The government is also mulling whether to expand property tax trials currently in place in Shanghai and Chongqing municipalities, Lou said.

The trial imposition of the tax is part of China's efforts to cool its property market in response to public concerns over runaway housing prices.

Source: Xinhua

Christine Legard: IMF do not suggest a rush to exit easy money policy

We need to work better together to understand more fully the impact of these unconventional monetary policies local and global and how that affects the path of exit. And, above all, we must use the time wisely and not waste the space provided by unconventional policies. Global policymakers—all policymakers, within countries and across countries have a responsibility to take the full range of actions needed to restore stability and growth, and to reduce imbalances.

Where do we stand with UMP today?

Let me say it up front: I do not suggest a rush to exit. UMP is still needed in all places it is being used, albeit longer for some than for others. In Europe, for example, there is a good deal more mileage to be gained from UMP. In Japan too, exit is very likely some way off.

The day will come when this period of exceptionally loose monetary policy, both conventional and unconventional, must end,in line with economic recovery and its impact on inflation. We need to plan for that day, especially since we do not know exactly when it comes.

One thing we can say for certain: the path to exit will and should depend on the pace of recovery, the latter mitigating the potential downsides of the former.

Together, we need to keep an eye on both financial stability and growth, watch whether the benefits of UMP are subject to diminishing returns, and analyze whether the financial side-effects get worse over time.

Just as with entry, exit will take us into uncharted territory.

So, the Fund and policymakers need to start thinking about what exit will eventually look like. That includes the implications for global economic and financial stability: the whole system, not just one part of it. This is an issue that the Fund has been watching and will continue to watch closely. It is, after all, the IMF’s raison d'être.

Federal Reserve Shouldn’t Ignore Emerging Market Crisis

  According to an article published today in the Wall Street Journal:
"Broadly, the thinking seems to be that emerging market economies brought their problems on themselves. By keeping their currencies undervalued in the aftermath of the global financial meltdown of 2008, even as their own economies performed robustly, they triggered massive hot-money inflows. The scale of these inflows is reflected in very large current-account deficits. The International Monetary Fund forecasts that Brazil will have a shortfall equivalent to 2.4% of GDP this year, after running surpluses before the financial crisis. Indonesia has swung to a deficit of 3.3% of GDP this year from a surplus of 2.7% in 2006. India’s deficit is seen at 5% of GDP, South Africa’s at 6.4% and Turkey’s at a whopping 6.8%.
Policymakers in these economies are just as quick to blame developed market central bankers for their woes. There was very little they could do in the face of the massive flood of liquidity pumped into financial markets by the European Central Bank, Bank of Japan, Bank of England and, especially, the Federal Reserve. Little, that is, short of allowing their currencies to appreciate so high and so fast, or tightening domestic fiscal or monetary policy so hard, that their economies would have been driven into a severe
downturn.

Wherever the responsibility for the recent mania for emerging markets happens to fall–on these countries or on developed economy central bankers–the end result was credit booms driven by hot-money inflows.

The problem with hot money is that as fast as it flows in one direction, the current can be even stronger in the other. As the1997 Asian crisis showed. Then too, hot money made for booming economies until investors got cold feet. The consequent crisis was crippling to a number of economies across the region.

But the pain didn’t end there. The 1997 Asian crisis was followed by the 1998 Russian crisis and together they combined to cause the spectacular collapse of Long-Term Capital Management.

What are the chances that some major developed-country bank, hedge fund or other financial institution is exposed to emerging markets in ways that perhaps even its risk officers aren’t completely aware of–be it through derivatives or counterparty deals with emerging market institutions that are themselves suffering serious problems. After all, that was one of the big lessons of 2008: no one’s really quite sure what their full exposures are until the dust settles".

  

Oil Adds To Emerging Market Problems

According to an article published today by the Wall Street Journal:
"By late June, the price of West Texas Intermediate was at $93 a barrel from just below $86 in April. It’s now hovering around $110 a barrel.
That the dollar price of oil is going up as many of emerging countries currencies are close to regular historic lows against the dollar, makes the local currency effects of the recent Syria-driven rises that much worse.
The rising panic is palpable. Losses on some of these currencies are accelerating away. The Indian rupee was at 54 against the dollar in May, was at 61 at the start of this month and has now breached 68.

The result is likely to be stagflation as the Indian industry reacts to climbing prices and rising interest rates with belt tightening and desperate efforts to preserve margins by marking up their own prices.

What’s more, the degree to which India’s boom was sustained by credit expansion will also determine how much interest rates cause default rates to rise.

And India isn’t alone. Turkey, Brazil, South Africa and Indonesia are all suffering similar(albeit not quite as immediately severe problems. With most of these countries dependent on imported energy, the rising oil prices will tend to push them towards stagflation as well''.

U.S. July Pending Home Sales Slip. National Association of Realtors Press Release

Pending home sales were down in July, with higher mortgage interest rates slowing the market, according to the National Association of Realtors.

The Pending Home Sales Index ,* a forward-looking indicator based on contract signings, declined 1.3 percent to 109.5 in July from 110.9 in June, but is 6.7 percent above July 2012 when it was 102.6; the data reflect contracts but not closings.  Pending sales have stayed above year-ago levels for the past 27 months.

Lawrence Yun, NAR chief economist, said there is an uneven pattern around the country.  “The modest decline in sales is not yet concerning, and contract activity remains elevated, with the South and Midwest showing no measurable slowdown.  However, higher mortgage interest rates and rising home prices are impacting monthly contract activity in the high-cost regions of the Northeast and the West,” he said.  “More homes clearly need to be built in the West to relieve price pressure, or the region could soon face pronounced affordability problems.”

The PHSI in the Northeast fell 6.5 percent to 81.5 in July but is 3.3 percent higher than a year ago.  In the Midwest the index slipped 1.0 percent to 113.2 in July but is 14.5 percent above July 2012.  Pending home sales in the South rose 2.6 percent to an index of 121.5 in July and are 7.7 percent higher than a year ago.  The index in the West fell 4.9 percent in July to 108.6, and is 0.4 percent below July 2012.

NAR projects existing-home sales to increase 10 percent for all of 2013, totaling about 5.1 million, and reach approximately 5.2 million next year.  With ongoing supply imbalances, the national median existing-home price is expected to grow nearly 11 percent this year, and moderate to a gain of 5 to 6 percent in 2014, with rising construction taking some of the pressure off of home prices.

Possible U.S. military strike in Syria pounds emerging markets assets

Emerging stocks,bonds and currencies took another hammering on Wednesday as mounting expectations of Western action against Syria pushed up oil prices and drove investors to seek shelter in dollar assets.
The Turkish lira and the Indian rupee  already under heavy pressure due to their large current account deficits and an imminent rollback in U.S. money printing - were at the forefront of selling, with both hitting new record lows as oil prices surged to six-month highs above $117 a barrel.
The higher cost of oil and the depreciation of their currencies, will make it even more difficult for the two energy importers to contain their current account gaps.
The Syrian crisis has aggravated a selloff in emerging market assets that was triggered by expectations the U.S. Federal Reserve will start scaling back its massive stimulus program, as soon as next month.

Losses on emerging currencies come as investors stampede to exit emerging stocks and bonds, raising concerns of a vicious circle that will induce more and more investors to sell out.

Dubai's stockmarket dived 7.5 percent at one point, after a 7 percent slide on Tuesday, although it later recovered.

Stocks in the Philippines tumbled as much as 6 percent, while Indonesian and Thai bourses fell 2.5-3 percent as Asian currencies suffered fierce selling, with the Indonesian rupiah touching a new four-year low.

Foreign investors sold $1 billion of Indian shares in the eight sessions through Tuesday while dumping almost $3 billion in debt over 13 successive sessions. Indonesia has seen equity outflows of $1.3 billion in the past seven sessions.

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