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Japan sales tax hike masks bigger problem of welfare spending

Prime Minister Shinzo Abe is poised to raise Japan's sales tax, but this bruising political decision leaves unresolved the bigger and much more complicated task of curbing runaway social-welfare spending.

The tax hike, Japan's first serious move in nearly two decades to rein in the worst debt burden in the developed world, looks like the easy part.

Attention has focused on the sales tax increase - still not formally decided - which is hugely politically sensitive in Japan after the last rise, in 1997, was widely blamed for tipping the economy into recession.

But any improvement in government revenue from the tax increase will be dwarfed by expenditures, where a rapidly ageing society and generous public services are blowing an ever-bigger hole in the budget.

"There is no real progress on containing welfare spending, so even if you raise the sales tax, the country's finances won't improve," said Norio Miyagawa, senior economist at Mizuho Securities Research & Consulting.

"We know what needs to be done. But the government is pushing back important decisions."

With the most rapidly aging society in the world - a quarter of the population is already over 65 - welfare is the biggest and fastest-growing category of spending. The shrinking workforce is crimping payments into the welfare system while the boom in the number of retirees swells government payouts.

The government has taken some steps, such as raising the retirement age - decided before Abe took office in December. But there is scant progress to show on such contentious issues as cutting benefits to the wealthy, adjusting pension payouts to prices or getting local governments to bear more of the burden.

Source: Reuters

Canada agrees to export shale gas to Japan

Japanese Prime Minister Shinzo Abe and Canadian Prime Minister Stephen Harper agreed Tuesday that Canada will start exports of shale gas to Japan, making it the second country after the United States to provide the natural resource to Japan.

During the summit talks held in Ottawa, Abe and Harper also decided to enable the Self-Defense Forces and the Canadian military to provide logistics support to each other when they engage in international humanitarian assistance such as U.N. peacekeeping operations, and in relief efforts, a Japanese government official said.The agreement, when formally signed, will become the third of its kind for Japan after the United States and Australia, the latest in a series of defense cooperation that the prime minister is hoping to promote with other countries.
The Japanese prime minister is on a visit to Canada on the first leg of his tour that takes him to the United States to attend a U.N. General Assembly meeting.
As the crisis in Syria has been a major topic at the General Assembly, both leaders confirmed that they support a U.S.-Russian deal to eliminate chemical weapons in Syria, and Abe explained Tokyo's determination to provide humanitarian aid to Syrian refugees.

NewsOnJapan

Draghi: «Ripresa lenta, Bce interverrà»

"I dati sulla fiducia sostengono la visione secondo cui l’attività economica della zona euro dovrebbe continuare la sua lenta ripresa nell’attuale trimestre, nonostante la produzione debole a luglio». Parole e pensieri del presidente della Bce, Mario Draghi, al Parlamento Ue. Che ha confermato come «la politica monetaria resterà accomodante per tutto il tempo necessario»

Il miglioramento significativo della capitalizzazione delle banche dall’estate 2012 non si è ancora tradotto in credito più elevato».

Nel «medio e lungo termine le attese per l’inflazione continuano a stare fermamente ancorate, in linea con la stabilità dei prezzi», ha detto il presidente della Bce che «si attende che l’outlook per lo sviluppo dei prezzi sia ancora ampiamente bilanciato sul medio termine».

Bassi tassi di interesse nel lungo termine comportano dei rischi che abbiamo visto nel passato e noi siamo molto sensibili ai rischi che possono esserci per la stabilità finanziaria derivanti da un livello molto, molto basso dei tassi. Finora, però, c’è una evidenza molto limitata che sia il caso» dice Draghi all’Europarlamento spiegando perché la politica monetaria della Bce resterà accomodante «per un esteso periodo di tempo».

I dati sulla fiducia sostengono la visione secondo cui l’attività economica della zona euro dovrebbe continuare la sua lenta ripresa nell’attuale trimestre, nonostante la produzione debole a luglio». Parole e pensieri del presidente della Bce, Mario Draghi, al Parlamento Ue. Che ha confermato come «la politica monetaria resterà accomodante per tutto il tempo necessario.

Il miglioramento significativo della capitalizzazione delle banche dall’estate 2012 non si è ancora tradotto in credito più elevato».

Nel «medio e lungo termine le attese per l’inflazione continuano a stare fermamente ancorate, in linea con la stabilità dei prezzi», ha detto il presidente della Bce che «si attende che l’outlook per lo sviluppo dei prezzi sia ancora ampiamente bilanciato sul medio termine».

«Bassi tassi di interesse nel lungo termine comportano dei rischi che abbiamo visto nel passato e noi siamo molto sensibili ai rischi che possono esserci per la stabilità finanziaria derivanti da un livello molto, molto basso dei tassi. Finora, però, c’è una evidenza molto limitata che sia il caso» dice Draghi all’Europarlamento spiegando perché la politica monetaria della Bce resterà accomodante «per un esteso periodo di tempo».

Corriere della Sera

J.P. Morgan Offers $3 Billion to End Mortgage Probes

In an article published in the Wall Street Journal of today:
"J.P. Morgan has offered to pay about $3 billion as it seeks to settle criminal and civil investigations by federal and state prosecutors into its mortgage-backed-securities activities, according to a person familiar with the discussions.
A settlement on residential mortgage-backed securities would solve one of the bank's biggest legal problems. The largest U.S. bank by assets faces at least seven Justice Department probes, on matters ranging from energy trading to its hiring practices in China.
The offer from the bank shows that its top executives and board are weighing the time and effort needed to fight, as well as the impact on the bank's reputation and employee morale, according to people familiar with the bank's strategy. At the same time, they are wary of agreeing to settlement terms that could open them up to additional private litigation, the people said.
The mortgage-backed-securities talks are fluid and a settlement is far from certain, according to people familiar with the matter. Government lawyers could decide the dollar value offered by J.P. Morgan isn't enough for the number of cases it wants to resolve. And there could still be disagreements over what sort of admissions, if any, the bank would make as part of such a deal".

Telecom Italia diventa spagnola

"Accordo di Telefonica con Generali, Mediobanca e Intesa Sanpaolo per salire dal 46 al 66% di Telco che controlla il 22,4% di Telecom Italia e nomina la maggioranza dei membri del consiglio di amministrazione.
Telefonica in una prima fase sottoscriverà, come detto, un aumento di capitale per complessivi 323 milioni di euro a 1,09 euro per azione. Telefonica salirà quindi al 66% di Telco dopo l'aumento di capitale da 323 milioni e realizzerà un secondo aumento di capitale da 117 milioni, dopo l'ok dell'Antitrust in Brasile e Argentina, per arrivare al 70% della holding. Telefonica potrà successivamente acquistare il 100% di Telco. Al momento però, in attesa delle autorizzazioni delle Autorità Antitrust dei vari Paesi, Telefonica manterrà i diritti di voto al 46% esprimendo, come ora, il 50% dei membri del consiglio di amministrazione della quota di Telco.
In un comunicato gli spagnoli di Telefonica hanno evidenziato come l’aumento di capitale di Telco «porta stabilitá» nell’azionariato e mantiene «l’indipendenza» di Telecom Italia. Telefonica «ribadisce il suo impegno a contribuire allo sviluppo di Telecom Italia sul suo mercato interno con le sinergie e la condivisione delle migliori pratiche».

Corriere della Sera

California Geology is a challange in Monterrey Shale

According to an article published today in the Wall Street Journal:

"California's Monterey Shale formation is estimated to hold as much as two-thirds of the recoverable onshore shale-oil reserves in the U.S.'s lower 48 states, but there's a catch: It is proving very hard to get.

Formed by upheaval of the earth, the Monterey holds an estimated 15.4 billion barrels of recoverable shale oil, or as much as five times the amount in North Dakota's booming Bakken Field, according to 2011 estimates by the Department of Energy. The problem is, the same forces that helped stockpile the oil have tucked it into layers of rock seemingly as impenetrable as another limiting factor: California's famously rigid regulatory climate.

California has become one of the U.S.'s top oil-producing states over the past century, largely by tapping into the easier-to-get oil that has seeped out of the Monterey beneath places like Bakersfield and Los Angeles County. But with production in general decline since the 1980s, producers are trying a smorgasbord of techniques—called enhanced oil recovery in industry parlance—in an effort to tap into the mother lode.

So far, there have been no production breakthroughs".

Besides there is a strong oppossition by the enviromentalists,because of their concern of its impact of e.g. fracking which lowers the quality of water.

Other technologies are also strongly opposed by critics and environmetalists.

Mohammed A. El-Erian : US. Monthly Labor Data and True meaning of all labor Indicators

Among the labor indicators. ''Despite the data’s richness, only two indicators consistently attract widespread attention: net monthly job creation (which amounted to 169,000 in August) and the unemployment rate (7.3% in August, the lowest since December 2008). Together they point to a gradual and steady improvement in overall labor-market conditions''says Mohammed El-Erian

But if we look to all labor indicators of the U.S. Bureau of Labor Statistics(BLR)

"The figure for monthly job creation, for example, is distorted by the growing importance of part-time employment, and it fails to convey the reality of stagnant earnings. Meanwhile, the headline unemployment rate does not reflect the growing number of Americans who have left the work force – a phenomenon vividly reflected by the decline in the labor participation rate to just 63.2%, a 35-year low" he adds.

"Consider the statistics on the duration of unemployment. After all, the longer one is unemployed, the harder it is to find a full-time job at a decent wage.

In August, the BLS classified 4.3 million Americans as long-term unemployed, or 37.9% of the total unemployed – a worrisome figure, given that the global financial crisis was five years ago. And, remember, this number excludes all the discouraged Americans who are no longer looking for a job. In fact, the more comprehensive employment/population ratio stands at only 58.6%.

So while net job creation will continue and the unemployment rate will maintain its downward trajectory – both highly welcome – the labor market’s evolution risks fueling rather than countering already-significant income and wealth inequalities, as well as poverty. 

Yes, the headline numbers will continue to signal overall improvement in the labor market. The urgent task now is to ensure that lasting progress is not undermined by the worrisome compositional trends that the BLS’s report highlights month after month".

Source: Mohammed A. El-Erian

             ProjectSyndicate

Battered Goldcorp no herd mentality,not ruling out New Takeovers.

Goldcorp Inc is not ruling out new takeovers and might even take a look at the big, capital-intensive gold-mining projects most likely to alarm investors, Chief Executive Chuck Jeannes told Reuters on Monday, outlining a stance that puts the company at odds with many of its competitors.

A drop in precious metal prices and a spike in costs is weighing on cash flow at Goldcorp, as with other gold producers, but the company has largely avoided the excesses of the last round of mining deals, maintaining a relatively strong balance sheet.

"Growth isn't a dirty word - a lot of the peer companies are acting like it is," Jeannes said. He said Goldcorp's primary focus is on building three existing projects that will boost gold production over the next five years, but added that the company is also looking for new opportunities.

"Perhaps if our peers are not looking at things, that gives us a better opportunity," he said.

 Goldcorp has had some operational problems at its Peñasquito mine in Mexico, and in 2012 permitting issues forced it to suspend its El Morro project in Chile. But the Vancouver-based company has surpassed Barrick's market capitalization, even though it produces less gold.

Jeannes acknowledged that investors are wary of projects with big capital requirements, but he said Goldcorp is looking for quality assets that offer good returns, and it considers cost, size, mine life and location in its assessments.

Source: Reuters

China's smartphone shipments to exceed 450 million in 2014: IDC

The world's biggest smartphone market China will likely ship in more than 450 million devices in 2014, at least a quarter more than this year, research firm IDC said.

DC said the increase will be driven by the government's issuance of 4G licences and expectations that China Mobile Ltd, the world's biggest wireless operator, would carry iPhones by then.

China a market dominated by Samsung Electronics Co Ltd and Lenovo Group Ltd, is expected to ship 120 million 4G-enabled smartphones to meet consumer demand for Internet connectivity.

Smartphone shipments are expected to reach 360 million this year, IDC said.

In the second quarter, Samsung and Lenovo maintained their lead in China with market shares of 18.5 percent and 9.8 percent respectively, while China Wireless Technologies Ltd's Coolpad moved up a notch from the previous quarter to rank No.3.

"Affected by the sluggish sales of iPhone 5, Apple's market share has declined dramatically, but its performance is expected to remarkably improve with the launch of the new iPhone," James Yan, an IDC analyst, said in a statement.

Source:  Reuters

Will Japan would be up to the Challenge of 2020 Olympics

Olympics have a way of benchmarking a country's development. In 1964, the country worked at a feverish pace to build the elevated highways, five-star hotels, and bullet train system that we today associate with modern Tokyo.

The entire population focused on putting their best foot forward to host the world. There undeniably will be the same sense of purpose for 2020. If March 2011 marked the country and people's lowest point after the devastation of the tsunami, earthquake, and nuclear meltdown at Fukushima, the opening ceremony of the 2020 Games will be the country's calling to show its full recovery to itself and to the world. That is what Olympics do. They compel countries to fulfill not just their athletic potential, but also their national aspirations in the compressed time period it takes to prepare for the games. In the countdown to 2020, there will be many questions about whether Japan will be prepared to host the spectacle that the Olympics have become. After all, they are not planning to spend the $40 billion that the Chinese spent in 2008 to host in Beijing. The same questions abounded in 1964, but Japanese meticulousness answered them all. Every stadium was operating. Every signboard was painted. Every piece of scaffolding was removed. Even a wholesale refitting of every hotel with imported bed frames to accommodate Western-sized bodies was completed on schedule (Japanese bed makers did not produce the larger size). The bigger question is whether Japan as a nation will be ready. Will so-called "Abenomics," which has created growth thus far through monetary easing, have successfully laid the groundwork for the structural and regulatory reforms essential to put the economy on a healthy footing? Will the radiation leakages at the Fukushima-Daiichi nuclear complex have been permanently stopped? Will tensions with China over historical and territorial issues have inflamed further or been resolved peacefully? Will Japanese society have accepted the need to remedy its labor shortage with integration of women and immigrants in the workforce?

Source: NewsOnJapan

Robots May Revolutionize China's Electronics Manufacturing

Olympics have a way of benchmarking a country's development. In 1964, the country worked at a feverish pace to build the elevated highways, five-star hotels, and bullet train system that we today associate with modern Tokyo.

The entire population focused on putting their best foot forward to host the world. There undeniably will be the same sense of purpose for 2020. If March 2011 marked the country and people's lowest point after the devastation of the tsunami, earthquake, and nuclear meltdown at Fukushima, the opening ceremony of the 2020 Games will be the country's calling to show its full recovery to itself and to the world. That is what Olympics do. They compel countries to fulfill not just their athletic potential, but also their national aspirations in the compressed time period it takes to prepare for the games. In the countdown to 2020, there will be many questions about whether Japan will be prepared to host the spectacle that the Olympics have become. After all, they are not planning to spend the $40 billion that the Chinese spent in 2008 to host in Beijing. The same questions abounded in 1964, but Japanese meticulousness answered them all. Every stadium was operating. Every signboard was painted. Every piece of scaffolding was removed. Even a wholesale refitting of every hotel with imported bed frames to accommodate Western-sized bodies was completed on schedule (Japanese bed makers did not produce the larger size). The bigger question is whether Japan as a nation will be ready. Will so-called "Abenomics," which has created growth thus far through monetary easing, have successfully laid the groundwork for the structural and regulatory reforms essential to put the economy on a healthy footing? Will the radiation leakages at the Fukushima-Daiichi nuclear complex have been permanently stopped? Will tensions with China over historical and territorial issues have inflamed further or been resolved peacefully? Will Japanese society have accepted the need to remedy its labor shortage with integration of women and immigrants in the workforce?

Source:NewsOnJapan

Japan's green energy revolution

Japan took the last of its 50 once-vital nuclear power stations offline last Monday. But despite having one of the hottest summers on record, Japan has had no power rationing or blackouts this year. How did they do it? Put simply, the country cut back.

"Japan's nuclear reactors have mostly been replaced by post-catastrophe efficiency gains which reduced [energy] consumption by around 15-20%," says Kevin Meyerson, a retired American businessman and now an energy conservationist living in Japan. "For example, offices throughout Japan have replaced high-consumption lighting with newly developed-in-Japan low-power LED lights, cutting office electricity consumption up to 40%."Such conservation has made Japan's vulnerable nuclear power plants redundant for the time being. Cutting energy demand by 10% across the board in Japan has eliminated the need for about 14 nuclear reactors, according to government figures.
Leading the charge to unplug are major corporations like Komatsu, the world's second-largest construction equipment manufacturer, which has pledged to cut its energy consumption by at least 50% by 2015. They are not alone. In the wake of the Fukushima disaster, public and private conservation efforts have helped keep power demand comfortably in check.

Source: NewsOnJapan

Precious Metals Prices

Gold Price Futures        3 months    US$   1,308.92

Silver Price Futures       3 months    US$       21.44

About China's Ghost Cities reported by Western Press

In article published today in the Wall Street Journal, about the ghost cities in China, that several western media have reported it says that "according to CLSA analyst Nicole Wong, those reports might be missing the forest for the trees—or in this case, missing the people for their timing. Ms. Wong, who recently returned from a tour of 137 projects in three Chinese cities often cited for their ghostly developments, says that the presence of empty apartments is thanks to some unusual quirks of China’s real-estate landscape.

Specifically, she noted at Tuesday’s CLSA Asia-Pacific Markets Investors’ Forum in Hong Kong, new Chinese apartments are typically sold as virtual concrete shells that buyers must outfit, installing everything from showers to flooring to kitchen sinks to make them move-in ready. Accordingly, Ms. Wong notes, many such “ghost” developments take awhile to gain traction—especially as it’s often the sale of the land they’re sitting on that allows the city to fund subsequent facilities and transportation links that will eventually help make them mature neighborhoods"

.When buildings are first completed they are actually not that habitable, so it takes a long time before most people want to move in,” Ms. Wong said.

In a report on her findings, Ms. Wong notes that buildings completed between 2008-11 in Zhengzhou,Ordos and Wenzhou—often cited as instances of an overly frothy property market—have typically seen tenants move in over a three-year period. Among such buildings, Ms. Wong’s survey found an average of 48% take-up in the first 12-18 months, another 19% in the next year, and then yet another 15% in the year after that. Such a delay, she says, can be attributed to the fact that residents need time not only to fully outfit their units, but many also like to wait until their neighbors have done so as well to avoid moving in before the dust clouds and drilling sounds have subsided.

In the case of Henan’s Zhengzhou—frequently dubbed China’s “largest ghost city”—Ms. Wong notes that a number of media portrayals of the city’s newer areas have used photographs taken between 2010-12, before the metro system connecting the district to the city’s more established neighborhoods was completed. On her most recent visit there in August, Ms. Wong said she saw many cars, “hordes of pedestrians” and considerable ground activity in addition to curtains and air-conditioners installed in numerous residential buildings".

Draghi says ECB attentive to lower excess liquidity

Credit volumes are not yet showing the effect of the improvement in banks' funding conditions and the European Central Bank remains committed to keeping interest rates low for as long as necessary, President Mario Draghi said on Monday.

Draghi, who has committed the bank to taking further action if need be to keep market interest rates low, also said it was paying close attention to the lower level of additional funds in the banking system resulting from repayments of emergency funding by banks.

Excess liquidity refers to the level of cash in the system beyond what banks need to cover their day-to-day operations. Excess liquidity is now at 221 billion euros, according to Reuters calculations.

Draghi said that while banks paying back loans they have taken from the ECB, it could also result in higher market rates.

"While repayment of central bank credit is certainly a sign of normalization, the resulting reduction in excess liquidity can reinforce upward pressures on term money market rates," Draghi told the European Parliament in his quarterly testimony.

"We will remain particularly attentive to the implications that these developments may have for the stance of monetary policy."

Source:  BNN