The Japanese cabinet approved the country's first zero growth forecast in real terms in seven years, which came as the central bank continued a two-day meeting to consider slashing interest rates to rock-bottom.

With the world's second largest economy battered by slumps in domestic demand and exports, the Washington-based Institute of International Finance (IIF) said the global economy would shrink 0.4 percent in 2009, after 2.0 percent growth this year.

Charles Dallara, managing director of the IIF -- which represents more than 375 of the world's major banks and financial institutions -- called it "the most severe, globally synchronised recession in modern economic history".

The global crisis requires a global coordinated response, he said at a news conference.

Dallara said the economy was mired in a negative feedback loop of weakening economic activity and intense financial market strains.

"You'll see much more bang for the buck" with a coordinated response, he said, adding: "It will be important that these measures be complemented in Europe and in Japan."

In a grim assessment, the IIF said in its monthly Global Economic Monitor report: "It should be emphasised that an overall contraction in the global economy is a truly weak outcome, and the first time this has happened in the post-1960 period."

Mature economies -- including the US, Britain the 15-nation eurozone and Japan -- that are now in recession were forecast to contract a hefty 1.4 percent amid the worst financial crisis since the Great Depression.

The US economy, the world's largest and the epicentre of the financial tsunami, would shrink 1.3 percent in 2009 after growth of 1.2 percent this year, according to the IIF projections.

The eurozone would contract by 1.5 percent from 0.9 percent growth, and Japan would shrink 1.2 percent after zero growth, the IIF said.

France, a part of the eurozone, said Friday it will sink recession next year for the first time since 1993 while it also faces a steep rise in unemployment.

Tokyo share prices were down 1.10 percent by noon Friday following the zero growth forecast, though trade remained cautious ahead of the Bank of Japan decision on interest rate cuts.

Japanese news reports said auto giant Toyota is likely to suffer its first-ever operating loss in the year to March 2009 due to a stronger yen and a global industry slump

It would be Toyota's first operating loss since it began releasing earnings figures in 1941, the Nikkei business daily said.

The dollar bounced back from fresh 13-year lows against the yen, which retreated from earlier highs as investors debated whether rates will be cut from the already low 0.3 percent, dealers said.

By late morning, the dollar was at 89.48 yen, the same level as in New York late Thursday. It had fallen to as low as 87.16 Thursday.

The euro fell to 1.4228 dollars in Tokyo trade from 1.4268 in New York and to 127.30 yen from 127.70.

World crude prices held steady above 36 dollars on Friday, at their lowest levels in more than four years, as the OPEC oil cartel's announcement of a record 2.2 million barrels per day production cut failed to rally prices.

Meanwhile the United Nations Thursday warned countries struggling with the falling value of their currencies to resist hiking interest rates to prevent devaluations.

"Rising interest rates and falling government expenditure will only reinvite speculation and worsen matters in the real economy," said the UN Conference on Trade and Development (UNCTAD) in a policy newsletter.

UNCTAD cited Brazil, Hungary, Iceland, Romania and Turkey as countries facing devaluations.

Related News
China pledges 'strong backup' for Hong Kong in global crisis
China Friday approved a currency swap agreement with Hong Kong as Premier Wen Jiabao promised "strong backup" for the city to ensure its financial stability amid the global economic crisis.

Hong Kong Chief Executive Donald Tsang unveiled the swap agreement when meeting journalists at the end of a three-day visit to Beijing.

It will boost the amount of yuan that Hong Kong banks can draw on as they service companies in the city that use the Chinese currency when trading.

Tsang also said China had agreed to let eligible Hong Kong companies use the Chinese unit as a settlement currency for trade transactions, Dow Jones Newswires reported.

No other details were made available, including the amount of yuan to be swapped.

"The motherland will always provide strong backup for Hong Kong," Wen told Tsang earlier Friday, according to a statement issued by the Chinese government.

"The central government will make unremitting efforts to support the regional government and Hong Kong's economic stability and continued economic development and prosperity."

The central government had decided on a 14-point plan to further integrate Hong Kong with the mainland in a broad range of areas including finance, infrastructure, investment and services, Wen said.

"We will strengthen the financial cooperation between the interior areas and Hong Kong, strengthen the building of Hong Kong's infrastructure (and) push forward cooperation between Hong Kong and the Pearl River Delta," Wen said.

The Pearl River Delta, just north of Hong Kong, is home to thousands of export-oriented enterprises, many of them set up with capital from the city.

Wen also promised to further open up to Hong Kong enterprises the service industries in the interior of China, while adopting measures to expand Chinese tourism in the city.

In addition, the central government would facilitate Hong Kong investment in mainland enterprises, especially small and medium-sized companies currently facing difficulties, Wen said.

Tsang warned this month that the impact of the global woes on Hong Kong in 2009 could be as bad as in the wake of the Asian financial crisis in the late 1990s.

But Wen voiced confidence that the former British colony would be able to solidify its status as an international finance centre.

"The central government strongly believes that through the common efforts of all the people of Hong Kong, Hong Kong will be able to overcome the difficulties brought on by the financial crisis," he said.

Share This Article With Planet Earth

del.icio.us	Digg	Reddit
YahooMyWeb	Google	Facebook

Related Links
The Economy

Memory Foam Mattress Review

SPACE MEDIA NETWORK PROMOTIONS Solar Energy Solutions Tempur-Pedic Mattress Comparison ... Newsletters :: SpaceDaily :: SpaceWar :: TerraDaily :: Energy Daily XML Feeds :: Space News :: Earth News :: War News :: Solar Energy News