Despite a low level of domestic demand, the
government maintains that better times are around the corner.
Such optimism seemed to be reflected in a business
survey on Friday, measuring corporate views on domestic confidence.
The survey, which subtracts the percentage of firms
saying domestic economic conditions were unfavourable from those
reporting favourable conditions, saw an improvement in the three months
The business survey index stood at minus 14 in the
April-June quarter, compared with minus 37 in January-March period.
But Japan's interest-rate decision follows harsh
words from the International Monetary Fund on Thursday.
In a review of Japan, the IMF said the economy was
poised to contract by 0.5% this year and urged the bank to implement
monetary policy that would put an end to deflation.
But the central Bank of Japan (BoJ) has stuck to its
pledge to keep interest rates just above zero as part of its plan to
maintain liquidity in the economy.
The Bank has also resisted pressure to set a target
for inflation — a widely used practice to control the prices of goods.
Japan suffers from deflation — where prices have
been falling for more than three years and the IMF believes the country
is not doing enough to combat this.
"The IMF has given its prescription from a
long-term perspective, but I don't think the BoJ feels that a special
action on deflation is needed at this particular time," said Yasuo
Goto, economist at Mitsubishi Research Institute.
FALLING CONSUMER CONFIDENCE DRIVES GLOOM
The White House has said it sees
"worrisome" signs in the US economy even as it says the
foundations for recovery are at hand.
One of the troublesome indicators was a report
released on Tuesday which showed consumers' faith in the strength of
economy fell to a five-month low in July.
"There are plenty of signs to look to in the
economy to see the strength that the president sees," White House
spokesman Ari Fleischer said.
"But there is now question that there are some
worrisome signs like consumer confidence."
The Conference Board reported its index of consumer
faith in the economy fell to 97 in July from 106 in the previous month.
Cheerleaders for the economy say that given what the
US has been through in recent months, Tuesday's number showed consumers
remain enthusiastic about prospects for growth.
Despite the nine-point drop, experts say the
resilience shown by Americans in recent months likely will continue to
drive economic growth.
US consumers over the last year have continued to buy
homes, cars and other retail goods, despite last September's terrorist
attacks, a recession and the ongoing spate of accounting scandals.
"Usually you have the consumer tanking, but the
consumer never tanked," said Delos Smith, senior business analyst
at the Conference Board, a non-profit research firm that compiles data
for the consumer confidence report.
Predictions call for Growth Domestic Product (GDP) to
fall to about 2.3% in the second quarter, much lower than the 6% pace
seen during the first three months of 2002.
IMF CUTS GLOBAL GROWTH FORECASTS
The International Monetary Fund has again cut its
growth forecasts for the world's main economies, the financial daily
Boersen-Zeitung reported in its Wednesday edition.
Quoting internal IMF forecasts, the newspaper said
the Fund expected the US economy to expand by only 2.2 per cent this
year, slower than the 2.5 per cent it was previously expecting. And next
year, the United States would grow by just 2.6 per cent rather than the
3.25 per cent the IMF has been forecasting until now.
The Fund was also cutting its German growth forecast
to just 0.7 per cent this year, instead of 0.9 per cent, and to 2.1 per
cent in 2003, instead of 2.7 per cent, the newspaper continued.
Similarly, French gross domestic product (GDP) was
expected to expand by just 1.3 per cent this year and by 2.4 per cent
next year, slower than the previous forecasts of 1.4 per cent and 3.0
per cent. And the IMF expected Italian growth to reach only 1.0 per cent
this year and 2.3 per cent next year, Boersen-Zeitung added.
TURKEY ISSUES REFORM PLEDGE
The Turkish government has promised to press ahead
with economic reforms even though it might be replaced after early
general elections in November.
Prime Minister Bulent Ecevit's government told the
International Monetary Fund on Thursday that it would push through what
reforms it could between now and then, including plans to privatise the
country's state-owned banks.
The government remained committed to "timely
implementation... of our policy strategy", Economy Minister Kemal
Dervis said in a letter to the IMF.
The government said it would sell part of the Halk
bank by March 2003, and would make a second attempt to dispose of
Vakifbank by June of the same year.
A third state-owned bank, Ziraat, would be sold
"as conditions permit", the letter stated.
EUROZONE RATE FREEZE 'SET TO CONTINUE'
The European Central Bank has turned more pessimistic
on eurozone growth prospects, in a sign that the bloc's 10-month
interest rate freeze could continue for some time to come.
The ECB said in its monthly bulletin, published on
Thursday, that while growth was likely to pick up in the 12-nation
eurozone in the months ahead, "uncertainty as to the strength of
the current recovery is high".
BRAZIL'S DELIGHT AT $30BN LIFELINE
Brazil's government and stock markets have been
celebrating the news that the country is go get extra $30bn (£20bn)
loan to help it to recover from its financial crisis.
Markets in New York and Europe rallied after the
International Monetary Fund (IMF), announced details of the loan.
In Brazil stocks rose 5% and the currency, the real,
But the main share index is still 24% below the level
reached at the beginning of the year.
Brazil's front-running presidential candidate, left
winger Luiz Inacio Lula da Silva, welcomed the IMF loan.
MARKET SHOCKS 'MAY HIT UK GROWTH'
The Bank of England has warned that the recent
turbulence on the world's stock markets could damage the UK's economic
The Bank's forecast of growth and inflation in the UK
have been revised lower in its latest quarterly inflation report.
The Bank now predicts that UK inflation is set to
remain below its target of 2.5% for most of the next two years.
The forecast seems likely to rule out any early
chances of a rise in interest rates.
UK interest rates have remained at a 38-year low of
4% since last November.
JAPAN TO CUT TAXES
Finance Minister Masajuro Shiokawa said on Saturday
Japan would cut taxes by more than one trillion yen ($8.4 billion) next
year to stimulate the economy, reviving an ambitious target that had
appeared to be abandoned.
WORLDCOM REVEALS NEW $3.3BN ERROR
The level of accounting errors at bankrupt
telecommunications firm WorldCom is almost double the level previously
An internal audit has revealed an additional $3.3bn
(£2.2bn) of improperly reported earnings — taking the total to over
As a result of the discovery, WorldCom said that its
financial statements for the year 2000 will have to be reissued.
BMW said its pre-tax profits for the April to June
quarter rose by 2.5% to 1.02bn euros ($990m; £646m).
AUSTRALIAN EMPLOYMENT FALLS
Australia has reported an unexpected fall in jobs
during July, which economists said reflected uncertainty over the global
Figures from the Australian Bureau of Statistics
showed total employment fell by 28,000 in July, against economists'
expectations of a rise of 10,000.
RUBBER PRODUCERS JOIN FORCES
The world's biggest rubber producers have signed a
trade agreement aimed at boosting prices to help struggling farmers.
Indonesia, Malaysia and Thailand have formed the
International Tripartite Rubber Corporation in an attempt to regulate
prices by controlling supply.
Critics claim the venture is likely to fail because
insufficient funds have been allocated to it.
Indonesia, Malaysia and Thailand control more than
two thirds of the world's trade in rubber.
FRESH CONCERN OVER JAPAN ECONOMY
Japan's industrial output fell for the first time in
five months in June. That has raised fresh concerns over the nation's
ability to pull itself out of recession. Surging exports to the US have
been the main prop of Japan's economic recovery.
But the yen's surge against the dollar and
uncertainty over the US economy has raised doubts over whether demand
from America will continue to buoy Japan's exports.
Factory output in June was 0.7% lower than in May,
the latest figures have revealed.
Japan's ministry of Economy of Trade and Industry has
still forecast rising output for the next two months.
CONSUMER CONFIDENCE DRIES UP IN ASIA
With joblessness on the rise and investments worth
less and less, consumers in Asia are increasingly unwilling to spend, a
survey has suggested.
Shoppers in Australia, New Zealand, Taiwan and
particularly Hong Kong are becoming markedly more gloomy about their
prospects, market research firm ACNielsen said.
The firm said 99% of the 8,000 people in 13 Asian
countries it interviewed said they felt in the grip of a global
recession, up from 85% in its last survey six months ago.
ALAN GREENSPAN TO BE KNIGHTED
The UK is to award Alan Greenspan, chairman of the US
Federal Reserve, an honorary knighthood.
The honour, which was approved by the Queen, is to
recognise Mr Greenspan's "contribution to global economic
stability", the UK Treasury said.
Mr Greenspan, who makes crucial decisions about
raising or cutting US interest rates, will receive the award when he
next visits the UK, possibly in the early autumn.
"The award is in recognition of... the benefit
that the UK has received from the wisdom and skill," a Treasury
Mr Greenspan, sometimes referred to as the most
powerful man in the world because of his control over the US economy, is
also famous for his ability to keep the markets and the politicians
CHENEY TALKS UP ECONOMY
Vice President Dick Cheney has told an audience in
San Francisco that the fundamentals of the American economy remain
He credited President Bush's policies as well as
Federal Reserve rate cuts for boosting the economy, and claimed the
Republican administration inherited the recession from its predecessor.
But even as he tried to talk up the economy, he faced
heckles from protesters, yelling "Cheney is a corporate
Mr Cheney once ran the huge energy-concern
Halliburton and has been dogged by speculation about his involvement in
the company's offshore vehicles.
O'NEILL'S HOPES FOR ARGENTINA DEAL
US Treasury Secretary Paul O' Neill has promised to
help Argentina resolve its differences with the International Monetary
Earlier Argentina's president had told him that
Argentina needed urgent aid to help it overcome its financial crisis.
Mr O'Neill — on the last leg of a tour of the
region — failed to offer any fresh aid to crisis-hit Argentina.
But the US financial chief said he hoped a deal
between the IMF and Argentina would be completed "very
Argentina, which descended into economic and
political crisis in December, is negotiating with the IMF to roll over
DR CONGO WINS WORLD BANK AID
The World Bank has agreed to lend the Democratic
Republic of Congo $410m (£266.7m) to help get the country back on its
In addition, the republic will receive a $44m grant
through the bank's International Development Association (IDA) arm,
which only lends to very poor countries.
The money will help DR Congo with its rehabilitation
and reconstruction programme, aimed at improving agricultural production
and restoring infrastructure.
WALL STREET SURGES
Shares in the US have closed higher, surging late in
the day after a volatile trading session.
The Dow Jones Industrial Average opened 165 points
higher at 8,439 points, but quickly moved into negative territory,
eroding some of Tuesday's gains.
ITALIAN MOBILE OPERATOR CARVED UP
Telecom Italia Mobile has said it plans to pay 18m
euros ($17m; £11m) for the capital and remaining assets of Blu, sealing
the demise of Italy's fourth biggest mobile phone operator.
Blu, controlled by the UK's BT Group and the Benetton
family's Edizione Holding, tumbled into crisis in 2000 after a
shareholder dispute resulted in it failing to win a third-generation
mobile phone licence.
It was effectively up for sale from this time, but a
deal had foundered on whether European authorities would allow the
company to be split up, as shareholders wanted, or demand a sale in one