Japan inflation edges up but way below target in August

TOKYO — Prices in Japan edged up modestly in August, according to government data on Friday, as the world's third-largest economy continues its years-long battle with deflation.

Inflation stood at 0.9 percent year-on-year in August, still far below the Bank of Japan's two-percent target, even though slightly higher than 0.8 percent in July and June and 0.7 percent in May.

The latest figure was in line with market consensus.

With fresh food and energy stripped out, prices rose by even less -- just 0.4 percent year-on-year in August, the internal affairs ministry said.

Japan has battled deflation for many years and the central bank's ultra-loose monetary policy appears to be having limited impact.

The Bank of Japan will not raise interest rates "for an extended period of time", its chief said after the latest rate-setting meeting, even as US and European peers tighten monetary policy.

Deflation is bad for the economy partly because the expectation of falling prices discourages spending and dampens growth.

The latest data come a day after Prime Minister Shinzo Abe won comfortable re-election as leader of his ruling party, setting him on course to become Japan's longest-serving premier.

During the election campaign for the vote, Abe said he wanted the economy to strengthen enough to allow the central bank to wind up the current super-loose monetary policy "by the end of" his new three-year term.

Analysts say Abe's re-election means that the government will take active fiscal measures to boost the still-fragile economy along with the central bank.

source: philstar.com

World shares gain as U.S. storm damage seen limited

LONDON - World shares rose modestly while the dollar weakened on Tuesday as the initial impact of a massive storm in the United States looked to have been less severe than feared.

The greenback was also knocked by a resurgent yen after the Bank of Japan disappointed many investors by easing policy less aggressively than had been hoped after a slump in factory output and exports during September.

However, activity was subdued everywhere since U.S. share and bond markets were closed on Tuesday as one of the biggest storms to hit the country, codenamed Sandy, left large areas of New York City without power or public transport.

The FTSEurofirst 300 index of top European shares was up 0.75 percent at 1,101.90 points and, after gains earlier in Asia, the MSCI world equity index had risen 0.3 percent to 328.88 points.

U.S. stock index futures, which kept trading in Europe, edged lower but volumes were very light. .N

Strategists said it was too early to tell what impact the destruction caused by Sandy might have on markets.

"Volumes are very low with Wall Street (closed), which makes today's gains quite fragile, and the potential impact of the storm for the insurance sector, estimated at around $20 billion, has not been priced in yet," said Patrice Perois, trader at Kepler Capital Markets in Paris.

Demand for the dollar and U.S. bonds tends to rise in times of reduced appetite to take on risk, but if widespread damage prompts speculation the U.S. Federal Reserve could ease monetary policy further to shore up the economy, they could fall back.

Across European stock markets' attention was on corporate earnings with results from well known names like Deutsche Bank, Swiss banking giant UBS and oil major BP lifting prices. UBS shares leapt over four percent as it confirmed a plan to cut 10,000 jobs.

Britain's FTSE 100 index was up 0.8 percent, Germany's DAX index up 0.9 percent and Switzerland's SMI index up 0.5 percent.

Modest BOJ move

In currency markets, the yen rose broadly after a new plan from the Bank of Japan to increase its asset purchases by 11 trillion yen ($138 billion) disappointed some market players who had positioned for a more aggressive increase.

"It was a very skeptical response to the BOJ policy meeting, made worse by the fact they have revised lower the growth and inflation outlook," said Jane Foley, senior currency strategist at Rabobank. "That has seen the yen unwind a lot of the softer tone we saw going into this meeting."

The dollar hit a one-week low of 79.28 yen and was down 0.3 percent against a basket of major currencies at 79.67 points.

The weaker dollar helped the European common currency climb 0.4 percent to $1.2958, with lower yields on Spanish and Italian bonds adding to the better mood.

But gains for the euro are still expected to be limited by continuing questions over whether Greece can agree a deal with its creditors, and when Spain might request financial aid.

Spain fell deeper into recession in the third quarter and prices rose sharply in October, according to new data, keeping pressure on the government to take some action as the prospect of further civil unrest grows.

"Spain's economy is suffering terribly, which will continue to hit government revenues, and a modest decline in bond yields will not solve the problem," said Kit Juckes, strategist at Societe Generale.

Prime Minister Mariano Rajoy has maintained an ambivalent stance towards applying for a politically embarrassing rescue that would kickstart an ECB bond-buying programme and ease financing costs.

Investors, too, seem willing to wait; 10-year Spanish bond yields were little changed at 5.66 percent.

German government bonds, the benchmark of European fixed-income markets, were also mostly flat.

Italy was even able to sell 7 billion euros of new five- and 10-year government bonds at its lowest cost since May 2011.

Italian 10-year yields were 3 basis points lower on the day at 4.98 percent, having risen about 25 basis points in the last two weeks.

Oil floats

In oil markets, prices were edging higher as traders awaited news of the damage inflicted by Sandy on refineries and pipelines, although weaker demand from the storm-hit region capped gains.

Brent crude for December rose 13 cents to $109.57 a barrel, recovering from a fall to $108.75 earlier, while U.S. crude for December was up 40 cents at $85.94.

U.S. gasoline futures were little changed at $2.7530 a gallon, after climbing more than 5 cents on Monday on expectations of tighter supply.

"People are just holding back a little bit to see if there's any real damage and impact, and at the moment it's too hard to see," said Bjarne Schieldrop, an analyst at SEB in Oslo.

source: interaksyon.com

Stocks close 0.78% lower

TOKYO — Tokyo shares closed 0.78% lower on Tuesday following losses on Wall Street stoked by political and economic uncertainty in Europe and softer Chinese manufacturing figures.

The Nikkei 225 index at the Tokyo Stock Exchange fell 74.13 points to close at 9,468.04. The broader Topix index of all first-section issues slipped 0.69%, or 5.60 points, to 803.94.

U.S. and European markets fell as Chinese factory output contracted for the sixth straight month, and in the 17-nation eurozone private-sector activity shrank the most in five months.

The Dutch government collapsed Monday after a breakdown on budget talks, a day after French President Nicolas Sarkozy lost a first-round presidential vote to Socialist Francois Hollande, both weighing on markets.

But weakness in the Japanese market would likely be limited ahead of central bank policy meetings in Washington and Tokyo and next week’s public holiday in Japan, said Tatsunori Kawai, chief strategist at kabu.com Securities.

“While many investors are clearly sidelined ahead of both U.S. Fed and BOJ (Bank of Japan) policy announcements (this week), the upcoming Golden Week holiday next week is also going to hold participation levels down for the time being,” he said.

Investors were also looking to Japanese corporate earnings, but markets had largely priced in concerns of soft profits, said Mattia Ciancaleoni, director of equity sales at Citigroup Global Markets Japan.

“Even if companies’ earnings guidance come in weaker-than-expected, markets could remain firm considering many players have hedged their positions with downside protection,” she told Dow Jones Newswires.

source: japantoday.com