June 13 - 19, 2005






The amount Japan earns from abroad rose in April for the second month in a row, defying predictions of ill effects from a weak economy.
The current account surplus, a measure of the difference between what Japan earns and pays, rose 5.2% year-on-year to 1.63 trillion yen ($15bn; 8.3bn).
The figure contrasts with huge deficits for the US funded largely by investment from Japan and other Asian states.
But Japan's trade balance was weak, amid ongoing concern about the economy.



The growth in the current account surplus was mostly the result of a surge in income from Japanese investments overseas, the finance ministry's figures showed.

Much of the 18.3% growth from April 2004 in investment income came from US and European bonds. Japan is one of the world's biggest buyers of US government debt.

On the other hand, while exports grew 7%, imports were up 12%.

Japan has traditionally shown strength in export industries such as cars and electronics which has helped it counteract weakness in domestic demand.

Although the consumer at home is spending more and corporate investment has also grown, economists said the export picture remained gloomy.

"I don't expect a clear recovery in export growth until the second half of this fiscal year (which ends in March)," said Naoki Iizuka, chief economist at Dai-Ichi Research Institute. The Japanese fiscal year finishes in March. High prices for raw materials such as oil also contributed to the trade problems.


The US economy is growing in a "strong" and "robust" manner, the White House has said.

Giving its forecasts for the year, the White House said the economy is on track to grow by 3.4% this year, down from an earlier target of 3.5%.

Despite the dip, growth is set to be almost double that of the European Union and eurozone.

The US rate of inflation, however, has picked up as a result of high oil prices and is now forecast at 2.3%.

The US Federal Reserve has been raising its benchmark borrowing costs in an effort to control price growth as the world's biggest economy emerges from of a slowdown.

At the start of May it lifted the benchmark rate to 3%, the eighth time the Fed has tweaked rates since June.

Higher rates do not seem to have halted the rebound, however.

"Economic growth is steady, it is strong and our economy's underlying fundamentals are robust," Treasury Secretary John Snow said in a statement.

Job creation, one of the hot issues at the last US presidential election, has picked up slightly and the unemployment rate is forecast at 5.2%.

The US should add about 178,000 jobs a month, the White House has said.

It needs to create at least 150,000 jobs every month in order to keep pace with population growth, economists have estimated


French President Jacques Chirac and German Chancellor Gerhard Schroeder are due to meet in Paris ahead of next week's crucial EU summit.

The talks are likely to be overshadowed by Thursday's war of words between UK Prime Minister Tony Blair and the French president.

Mr Blair made it clear he would not give up the British EU budget rebate, worth 3bn ($5bn) each year.

The Paris talks will also focus on the future of the European constitution.

Mr Chirac and Mr Schroeder will be working out how best to counter Tony Blair's strong riposte on the British rebate.

In Luxembourg on Thursday, the French president said it was time for Britain to compromise on the money it gets back from the EU budget each year.

The response from Downing Street was swift and uncompromising.

Mr Blair said Britain would not give up that money because the UK was still paying in twice as much as France and that without the rebate, it would have been 15 times as much.

This war of words has set the scene for a deeply uncomfortable EU summit next week, during which Britain will be isolated on the rebate, with the 24 other member states arguing that it should be scrapped.

The French and German leaders meeting in Paris are determined to force Britain to compromise on the budget, although it is not clear whether they are willing to do the same.


The finance ministers of the leading industrial countries are meeting in London in a final effort to agree a deal on relieving Africa's debts.

The talks come just one month before world leaders and thousands of anti-poverty campaigners converge at Gleneagles for a G8 summit.

Britain has vowed to make poverty reduction a key plank of the summit.

Development campaigners warned that the meeting would be seen as a test of political will and honesty of the rich.

Supermodel Claudia Schiffer lent her support for the coalition of development groups who are campaigning for 100% debt relief.

"I have two children, but if I was living in parts of Africa I'd have a one in five chance of dying during childbirth," she said at a press conference called by the Global Call to Action Against Poverty (GCAP), a global coalition of organisations representing 150m people in 72 countries.

The spokesperson for the coalition, South African Kumi Naidoo, told that he believed that growing pressure from the public is beginning to have an effect on governments.

And Richard Curtis, a leading figure in the UK's Make Poverty History Campaign, said that the campaign had sent a million e-mails to Tony Blair, and told the BBC that it demonstrated that "this generation is not non-political and disengaged".

The development lobby wants the finance ministers to agree to debt relief for all poor countries, to back calls for the doubling of foreign aid to $100bn per year, and to support plans for changes in the world trading system that would cut subsidies enjoyed by rich world farmers.


Federal Reserve chairman Alan Greenspan has said the US economy is continuing to grow in 2005, and hinted that the Fed would continue to raise rates.

He told the US Congress that the economy "seems to be on a reasonably firm footing, while underlying inflation remains contained".

But he warned that rapidly-rising house prices, linked to speculation, could add to inflationary pressures.



Analysts had hoped Mr Greenspan would point to a pause in the rate rises.

Bond prices fell while share prices continued to be soft on the news.

The US rate-setting body has increased rates from 1% to 3% in the past year, in a series of 0.25% increases, to try to curb the rapidly-expanding economy.

After his testimony, analysts said they expected another rate rise to 3.25% at the next Fed meeting on 29-30 June.


European Union Trade Commissioner Peter Mandelson is in Shanghai amid rising temperatures in a trade row over textiles.

Mr Mandelson will talk to Bo Xilai, China's Commerce Minister, to seek an agreement to restrict Chinese exports.

The EU fears China could overwhelm Europe's textile producers and is threatening sanctions if China does not curb its exports itself.

China says the EU and the US are acting unfairly by seeking to limit imports.

The explosion in China's textile trade has followed the scrapping of the Multi Fibre Agreement on 31 December 2004.

Since then, both the EU and US have complained that textile exports have soared, in some cases fourfold.


Bangladesh's Finance Minister Saifur Rahman has unveiled the national budget for the next fiscal year.

Effective from July, it contains some populist measures like doubling agricultural subsidies and soft loans.

Mr Rahman proposed spending a little over $10bn for government administration and to meet "development expenditures".

But the opposition parties rejected the budget as over-ambitious, predicting it would cost the government too much.

Members of the ruling Bangladesh Nationalist Party cheered Mr Rahman as he presented the budget in parliament. He proposed to double agricultural subsidies to the equivalent of about $200m.


Kuwaiti distribution and warehousing firm PWC Logistics has secured a second major contract from the US military.

The deal, which could be worth as much as $14bn (8bn) over five years, will see PWC Logistics supply US and allied troops across the Middle East.

The company secured a similar $3.27bn logistics contract with the Pentagon in February.

The new deal covers US and allied troops and operations in Kuwait, Iraq, Jordan and Turkey.

Under the deal, PWC Logistics will also assist in the supply of US operations in Afghanistan.

The overall contract will run for an initial 18-month period, with options to extend it by up to five years.


The Emirati boom town of Dubai was paralysed for several hours by a power blackout on Thursday amid the sweltering temperatures of the southern Gulf.

The electricity went out at 9.50am (0550 GMT) and about four hours later an official said power was restored at 80 per cent.

The official said the power cut was caused by an 'unexpected technical fault', adding that teams of electricians were working to restore power.


A Kuwaiti parliamentary committee last Wednesday approved a huge oilfield development project which has been held up for years because of the need for massive foreign investment.

"The committee unanimously approved the government draft law to seek the help of foreign companies to develop four oilfields" near the border with Iraq," MP Abdul Wahab al-Harun said.


The dollar held steady at lower levels against the euro last Wednesday as players treaded water on the eve of US Federal Reserve Chairman Alan Greenspan's testimony on the US economy. The euro rose to $1.2315 in late European trading, from $1.2286 late on Tuesday in New York. The dollar rose to 106.90 yen, from 106.58 on Tuesday. On the London Bullion Market, the price of an ounce of gold stood at $424.55 against $424.10 late on Tuesday.


A World Trade Organization panel last week ruled in favour of the United States in a dispute with Mexico over import restrictions that hit US beef and long-grain rice.

The WTO dispute settlement panel found that Mexico's imposition of anti-dumping duties breached international trade rules and called on Mexico to abide by them.

The panel's report was issued to the US and Mexico last month, and the Mexican economics ministry had said it planned to appeal.


Thailand's economy slowed sharply in the first quarter of 2005, growing 3.3 percent due to a sharp spike in oil prices and a rise in consumer prices, the government's economic think tank said.

The first quarter growth compared with 6.1 percent in all of 2004, the National Economics and Social Development Board (NESDB), the government's economic advisory body, said in its latest quarterly economic outlook.

The NESDB, however, expects a better economic performance in the second half of 2005 as "temporary hindering factors diminish," public spending increases, and exports of agricultural products are further stimulated.


Uganda has imposed extra excise duties and upped VAT in an attempt to reduce the country's dependence on money from Western donors.

The budget published last week also cut taxes on schoolbooks and medicines.

The government promised to fund 60% of spending in 2005-6 from tax revenues, up from 54% the previous year.

Donors have warned that President Yoweri Museveni could be trying to make himself president for life, and the UK has cut financial support by 5m. Museveni has responded by calling for Uganda to make itself more self-sufficient.


Strong worldwide demand for laptop computers is to deliver another boost to chipmaker Intel, the firm has said.

According to the US chip giant, sales and profits for the three months to June are set to match or exceed its previous highest estimates.

A switch by consumers and businesses to laptops from desktop PCs is driving sales of the Centrino chip, Intel said.

Intel stock has risen more than 25% in the past two months. Intel's mid-quarter update said it expected to make sales of between $9.1bn (5bn) and $9.3bn, up from its previous estimate of between $8.6bn and $9.2bn.


Crude oil prices topped $54 a barrel last Thursday as the first storm of the Caribbean hurricane season headed for oil fields in the Gulf of Mexico.

The price of oil markets' benchmark crudes rose more than $1.

Raising oil output will be on the agenda at next week's meeting of the Organisation of Oil Producing Nations (Opec), the cartel's president said.

Sheikh Ahmad al-Fahd al-Sabah said Opec members were interested in seeing oil prices did not damage global growth.


India has come out as a top Asian destination for investment in a survey of fund managers' top picks.

The survey, carried out by the Reuters news agency, found that over the next three months India tied with Taiwan as managers' favourite.

Over the longer timeframe of a year, India came second only to China as the best place to put clients' money.

China's attraction, managers said, was growing consumer demand, while in India the prospect of solid reform appealed.


Electricity supply in developed countries is straining to cope with demand, an International Energy Agency (IEA) report suggests.

In a report called 'Saving Electricity In A Hurry', the agency predicts there will be outages like those experienced in the United States, Japan and Canada.

Several developed countries have experienced power shortages and more are likely to occur, it says.

A mix of factors lead to power cuts but pre-planning rarely happens, it adds.

The report lists recent electricity outages in the United States, Japan, New Zealand and Canada and says there is "reason to believe that this list will grow".


Israel's Supreme Court has upheld the government's plan to withdraw from the Gaza Strip, removing the last legal obstacle in the way of a pullout.

The court rejected an appeal by Jewish settlers, who said the plan was a violation of their human rights.

Israel plans to withdraw from the Gaza Strip and four settlements in the West Bank, beginning in August.

The move is fiercely opposed by settlers and their supporters, who have tried to thwart it for months.

Ten of the 11 judges upheld the plan as legal. One judge said the move was unconstitutional and should be cancelled.


Oil giant BP has announced plans to invest up to $2bn (1.1bn) in Saudi Arabia's petrochemicals industry.

The UK company said its subsidiary Innovene has signed a memorandum of understanding with Saudi development firm Delta International.

"The memorandum marks the beginning of detailed negotiations between Innovene and Delta," BP said.

The company said the investment would form a "platform for long-term growth opportunities" in Saudi Arabia.

BP reported a 29% jump in first-quarter net profits in April, boosted by a sharp increase in world oil prices.


Internet search phenomenon Google has overtaken a swathe of venerable rivals to become the world's biggest media company by stock market value.

After its shares hit an all-time high on the New York markets on Tuesday, Google is now worth $80bn (44bn).

This takes it ahead of media leviathan Time Warner, which is valued at $78bn.

The valuation comes in spite of the fact that Google's annual sales total just $3.2bn, a fraction of Time Warner's $42bn.


Siemens is to sell its loss-making mobile phone unit to Taiwanese technology firm BenQ.

No price was announced, but the German giant said the sale would cost it 350m euros ($429m; 235m) in 2005.

The deal sees Siemens take a 50m euro stake in BenQ, which will retain rights to the Siemens brand for five years and supply phones to the German firm.

The mobile unit has long been a key weakness for Siemens, and rumours of a sell-off have been rife for months.

Siemens said it hoped to complete the deal by the end of September, subject to approval by regulators and its shareholders.


The Bank of England has kept UK interest rates on hold at 4.75% for the tenth month in a row.

The Bank's Monetary Policy Committee (MPC) had been widely expected to keep rates on hold due to slowing spending and fears of rising consumer bad debt.

The EEF, which represents manufacturers, has welcomed the decision.

However, the British Retail Consortium (BRC) had wanted a rate cut to boost consumer spending in the High Street.


Manufacturing output bounced back in April, rising 0.9%, its highest monthly gain in a year.

Analysts had expected a rise of only 0.4%, after a 1.6% drop in March.

But the three-month data from the Office for National Statistics showed a drop of 1.4%, the biggest three-month on three-month fall since August 2002.

Separate figures showed Britain's trade gap was worse than expected at 4.8bn ($3.29bn), higher than the 4.7bn forecast and the 4.6bn seen in March.


French Prime Minister Dominique de Villepin has set out his plans to revitalise the country's economy and get France working again.

In his first policy speech, he said job creation was a priority. He suspended previously planned income tax cuts.

Mr de Villepin took office after Jean-Pierre Raffarin stepped down in the wake of the French public's rejection of the European constitution.

But the prime minister insisted France was still committed to the EU project.

Focusing on employment he said 2.5m people were unemployed and yet 500,000 jobs remained unfilled.

In an apparent reference to US-style capitalism, he promised not to impose an alien culture on the French social model. At the same time, he said France must strike a balance between social protection and the need to create jobs.


Apple has confirmed that it is dropping IBM chips from its Mac computers in favour of those made by Intel.

The first Apple computers with the Intel chips onboard will be on the market by this time next year.

"We think Intel's technology will help us create the best personal computers for the next 10 years," Steve Jobs, the head of Apple, said.

The move is being seen as a big gamble for Apple strategy, and a boost to Intel at the expense of IBM.

It ends a decade-long relationship between Apple and IBM, which have recently wrangled over supply problems.


UK consumer service firms, such as cinemas and travel agents, are feeling the pinch as higher interest rates and slower growth hit High Street spending.

According to a survey by business group the CBI and auditor Grant Thornton, business volumes fell for the first time in 18 months in the past quarter.

At the same time, profits stopped rising and costs increased.

As a result, business confidence was dented and a number of firms said they will take a tighter control of costs.


US Federal Reserve chairman Alan Greenspan has added his weight to calls for China to allow the yuan to trade freely against other currencies.

America has long argued that China artificially pegs the yuan below its true market value, so as to give Chinese exports an unfair advantage.

Mr Greenspan said he was sure that China would remedy the situation "reasonably soon".

Yet his Chinese opposite number Zhou Xiaochuan said it was some time away.


Japanese companies increased their spending on plant and equipment during the first three months of this year, official figures have shown.

The latest survey to indicate that the Japanese economy is continuing to grow, firms raised their capital spending for an eighth consecutive quarter.

It increased by a year-on-year 7.4%, compared to the 3.5% annual growth seen during October to December 2004.


Spending on weapons around the world topped $1 trillion (560bn) for the first time in 2004, a new report says.

A study by the Stockholm International Peace Research Institute (Sipri) found that countries around the world spent $162 on weapons for each person alive.

The US alone accounted for 47% of the global total, mainly because of soaring spending on its "global war on terror".

Arms companies were benefiting from the demand, with sales at the top 100 firms up 25% in 2003 on the year before.

The pace of mega-mergers in the arms trade in recent years had slackened, Sipri said, but had left major military suppliers comparable in size and influence to top multinational corporations.


The current weak euro is good news for Europe as it helps its exporters, says the International Monetary Fund (IMF).

The comments came from Michael Deppler, director of the IMF's European department, as the euro remained near eight-month lows against the dollar.

While the euro stayed at about the $1.23 level, Mr Deppler said somewhere between $1.20 and $1.30 was "about right" for the currency. The euro has fallen amid political and economic uncertainty in Europe.


The European Parliament has entered a dispute over the 2007-2013 EU budget by backing a proposal to spend 1.07% of member states' gross national income.

The figure falls between the 1.14% suggested by the European Commission, and the 1% insisted on by the six biggest net contributors to EU coffers.

A European summit in Luxembourg next week will attempt to resolve the row.

The UK is under pressure to give up its rebate, won in 1984, but has threatened to use its veto to preserve it.

The Luxembourg presidency of the European Union is working on its own compromise proposal and is holding a series of bilateral "confessional" talks with European leaders.