May 20 -June 02, 2002

JAPAN'S TRADE GETS A BOOST

Soaring exports to Asia helped push Japan's trade surplus upwards by 26.6% in April compared with the same month last year, the Finance Ministry said.

It was the second straight month the trade surplus has risen.

But the economic picture was clouded by the lowest rise in overall exports for four months, up just 0.3%.

That figure suggests any recovery remains fragile, particularly as the US economy is set to grow at a more moderate pace in the next few months after powering ahead between January and March.

"If the US recovery is weak, Japan will be pushed in the same direction eventually," said Takahiro Nakayama of Morley Fund Management in Tokyo.

Japan's exports have been helped by the fall in the value of its currency, which traded 6.1% lower on average last month than in April 2002.

But this advantage has been disappearing in recent weeks as pessimism about the US economy has dragged the dollar downwards.

But the near-doubling of demand for Japanese goods elswhere in Asia also reflects the region's recovery.

Japanese exports to Asia rocketed up 93.1% as Chinese shoppers rushed to buy Japanese cars and big manufacturers around the region sucked in industrial raw materials.

"The background for the increase in exports of plastics and other materials is the rebound in Asian economies, led by global manufacturers," a Finance Ministry official said.

"Among the largest contributors were car exports to China, up 97.6% over the previous year," he added.

Japan's trade surplus in April totalled 836.7bn yen ($6.7bn).

Total exports grew 1.6% to 4,400.7bn yen from April last year, the month that marked the start of recessions in Japan and the US.

Imports fell 2.9% to 3,564.1bn yen, the ministry said.

BLAIR TAKES ON BUSINESS CRITICS

Prime Minister Tony Blair has tried to fend off criticism from business leaders over the Budget tax rises aimed at improving public services.

In a speech to the Confederation of British Industry (CBI) dinner, Mr Blair defended the decision to put an extra penny on National Insurance contributions.

CBI President Sir Iain Vallance said the Budget had left a "sour taste" in the mouths of Britain's business community.

Company bosses argue extra tax will make their firms less competitive and foreign banks have said the move could drive them abroad.

Sir Iain echoed those fears in his speech, saying the strength of reaction to the Budget stems from anger at five years of "stealth" tax hikes coming to a head.

He said: "Enough is enough. You cannot keep digging your hand into the business till without squandering the UK's advantage as a country in which to do business."

Mr Blair said he was taking such fears "head-on".

He said: "Nobody likes paying taxes.

"Even after the Budget we remain a relatively low taxed economy and one of the best of the world to do business.

"But I was elected to fix our public services, schools and hospitals first, and that is what I intend to do."

The need for extra investment in the National Health Service was now "beyond doubt", he argued.

Using other methods apart from general taxation would hit business harder, Mr Blair told City leaders at the black tie event.

"Social insurance, as in Germany and France, imposes huge costs on employers, as much as £60 per week per employee on top of other costs," he continued.

EURO SOARS AGAINST DOLLAR

The euro has soared to a nine-month high against the dollar amid persistent worries over sluggish corporate profits in the US.

The euro was half a cent up on the day at $0.9249 on Wednesday, having earlier jumped to $0.9276 — a level last seen in September.

Analysts attributed the euro's rise to growing doubts over the strength of the US economic recovery following a recent string of disappointing corporate results.

Fears over a fresh wave of terrorist attacks in the US were also cited as a factor behind the turnaround in the euro's fortunes.

GERMAN RECESSION OVER

Europe's biggest economy has begun expanding again after six months of recession.

Germany's economy grew 0.2% in the first three months of 2002, the Federal Statistic's Office said.

"These are the first indications that the expected upturn has started," the German Finance Ministry said.

Germany's economy shrank 0.3% in the final three months of last year and 0.2% between July and Septemer 2001.

The rise was roughly in line with predictions from Germany's central bank three days ago, which was seized on Chancellor Gerhardt Schroeder — who faces an election in November — as heralding a fall in unemployment.

German trade unions have staged a nationwide series of strikes over pay in recent days.

BANK HINTS AT FUTURE RATE RISE

The MPC: split down the middle on what to do next May's decision by the Bank of England's Monetary Policy Committee (MPC) to leave interest rates unchanged at 4% was unanimous for the third month in a row, the latest minutes of the MPC's meeting have shown.

But despite the 9-0 vote, the minutes also indicated fierce debate about when the next rise should be, with several members wanting a move as soon as possible.

The committee's forecast showed that underlying inflation — leaving out the cost of housing — would creep above the 2.5% target set by the government in the next two years.

While some committee members said raising rates could wait a while, others were keen to start taking action earlier, given the long lag between rate changes and their effect on inflation.

Interest rates are at a 38-year low, following seven cuts last year as the MPC tried to stimulate the UK economy amid the global slowdown.

EU 'FAILS TO HELP SMALL FIRMS

Cross border trade by small and medium sized firms has declined following the introduction of the European Union's single market, according to a new survey.

"The entry costs for doing business abroad are still very high," said Andrew Godfrey, a manager with accounting firm Grant Thornton which carried out the survey.

"The legal system is probably the single biggest barrier [along with language difficulties]."

But the survey also found that most firms thought the single market had boosted competition, and that the introduction of the euro had helped.

Only 42% of the small and medium enterprises surveyed were classified as exporters.

TOTALFINAELF PROFITS FALL

The French energy giant TotalFinaElf has reported a 36% fall in net profits for the first three months of the year.

The world's fourth largest oil company saw its net income slip to 1.42bn euros (£900m; $1.3bn) before exceptional factors, down from 2.2bn euros a year earlier.

GOLD PRICE SOARS ON WAR FEARS

Fears of a military conflict between India and Pakistan have pushed the price of gold to a 27-month high.

The gold price reached $319.60 an ounce on Wednesday, its highest price since it hit $338 in October 1999, as investors sought a safe-haven for their money.

SWEDEN 'NOT READY' FOR EURO

Sweden is not yet ready to join the euro because its currency is too unstable and the central bank not independent enough from the government, the European Commission has said.

"I regret that Sweden is not yet in a position to participate fully in EMU (economic and monetary union)," European Monetary Affairs Commissioner Pedro Solbes said in a statement.

BRUSSELS CALLS FOR GREATER TAX POWERS

European Commission president Romano Prodi has said he wants Brussels to be given powers to levy direct taxes across the European Union (EU).

In a speech to the European Parliament, Mr Prodi also called for greater coordination of the EU's economic policy.

Like all pan-EU tax issues, the proposal could be highly controversial.

US BLOCKS EUROPE'S WTO STEEL BID

The US has vetoed a request from Europe for the World Trade Organisation (WTO) to rule on the tariffs Washington slapped on steel imports earlier this year.

However, the move is unlikely to block a study by the WTO into the tariffs in the long-run.

Any country on the receiving end of such a complaint can veto one request to the WTO's dispute settlement body (DSB).

But it can only do so once, and the European Union is likely to repeat its demand — along with Japan — when the body meets on 3 June.

CITIGROUP BUYS US RETAIL BANK

Citigroup has agreed to buy San Francisco based Golden State Bancorp for $5.8bn (£3.97bn) in a cash and share deal, subject to shareholder and regulatory approval.

NORTH SOUTH ECONOMIC GAP NARROWS

Britain's north-south economic divide is about to reach its narrowest point for seven years, according to the latest research.

Business Strategies says growth rates in the north are likely to be just 0.7% below those in the south over the coming months.

Southern regions, below an imaginary line from the Severn to the Wash, are set to grow by an average of 2.1% this year.

Those to north are forecast to grow by 1.4%.

The difference is the narrowest since 1995 and a significant improvement on last year's 2.7% gap which was the widest for more than 10 years.

The divide is expected to narrow even further in 2003, with growth of 2.9% in the north and 3.3% in the south.

DOLLAR HITS FIVE-MONTH LOW AGAINST YEN

The dollar has fallen to a five-month low against the yen, raising hopes that higher exports will accelerate the US economic recovery.

The dollar had slipped below the 125-yen mark to 124.15 by the close of trade in the US on Tuesday, off earlier lows of 123.78.

The US currency's decline came amid signs of a long-awaited economic upturn in Japan and lingering uncertainty over the strength of the US rebound.

US UNBLOCKS YUGOSLAV AID

The US has announced that it is lifting a ban on millions of dollars' worth of aid to Yugoslavia, because of Belgrade's improved co-operation over war crimes suspects.

The aid was cut off on 31 March to try to force Belgrade to hand over more of the suspects indicted by the war crimes tribunal in The Hague.

After a meeting in Washington with Serbian Prime Minister Zoran Djindjic, US Secretary of State Colin Powell announced that the aid, worth $40m, was being unblocked.

Several war crimes suspects have handed themselves over to the tribunal in the past few weeks, after Belgrade set a new deadline for their surrender.

SRI LANKA 'POISED' FOR IMF AID

Sri Lanka is on the verge of receiving $60m in funds from the International Monetary Funds, the country's Finance Ministry has said.

The news came on the same day as government negotiators held their first talks for seven years with leaders from the Tamil Tiger rebels, who want an independent Tamil state in the Jaffna peninsula.

PROFITS FALL AT EMI

EMI, the only one of the world's big five record companies to be based in the UK, has seen profits slide 40% in what it termed a "challenging year".

The result overall is a fall in pre-tax profits to £153.3m in the 12 months to March 2002, from £259.5m the previous year.

STRIKE PROTESTS IN SOUTH KOREA

Workers in South Korea staged strike protests on Wednesday, despite government warnings that any illegal action which disrupted the World Cup football tournament would meet harsh consequences.

The militant Korean Confederation of Trade Unions (KCTU) said that tens of thousands of metal workers and chemical employees staged a four-hour walkout across the country.

CHINA HINTS AT PROTECTIONISM

China has indicated that it might follow the US example and offer assistance to its farmers.

China insisted that the recent adoption by the US of a farm bill has paved the way for others to introduce similar measures.

The bill includes large scale subsidies and protects US agriculture against international competition.

SENEGAL FIGHTS TO PROTECT FISHING INDUSTRY

The West African country of Senegal has said it wants to charge the European Union (EU) for fishing in its waters.

The minister responsible for the sector said the government was looking to charge the EU 20m euros ($18m; £13m) each year.

Since the beginning of this year the West African country has banned vessels from the EU from fishing in its waters after over-fishing led to a crisis for the local industry.

Talks between Dakar and Brussels have yet to produce an agreement on how commercial fishing should continue.

NEW £5 NOTE ISSUED

Victorian prison reformer Elizabeth Fry appears on the new high security £5 — only the second woman to appear on the back of an English banknote.
The new note comes into circulation on Tuesday.