Aug 12 - 18, 2002










Japan's central bank has decided to keep its interest rates on hold in an attempt to keep money flowing around the economy.
The interest-rate decision was widely expected, as the country fights to stage a fragile recovery, led by its export sector.


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 to June.

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.


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.


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.


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.


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 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, rallied.

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.


The Bank of England has warned that the recent turbulence on the world's stock markets could damage the UK's economic recovery.

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.


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.


The level of accounting errors at bankrupt telecommunications firm WorldCom is almost double the level previously reported.

An internal audit has revealed an additional $3.3bn (2.2bn) of improperly reported earnings taking the total to over $7bn.

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).


Australia has reported an unexpected fall in jobs during July, which economists said reflected uncertainty over the global economy.

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.


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.


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.


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.


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 spokesman added.

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 guessing.


Vice President Dick Cheney has told an audience in San Francisco that the fundamentals of the American economy remain sound.

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 crook."

Mr Cheney once ran the huge energy-concern Halliburton and has been dogged by speculation about his involvement in the company's offshore vehicles.


US Treasury Secretary Paul O' Neill has promised to help Argentina resolve its differences with the International Monetary Fund.

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 quickly".

Argentina, which descended into economic and political crisis in December, is negotiating with the IMF to roll over its debts.


The World Bank has agreed to lend the Democratic Republic of Congo $410m (266.7m) to help get the country back on its feet.

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.


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.


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 piece.