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TRADE WARS
Japan posts second-biggest trade deficit in May
by Staff Writers
Tokyo (AFP) June 20, 2011

Japan in May posted its second-worst trade deficit since records began as exports tumbled on the impact of the March earthquake and tsunami, data showed Monday.

Shipments of automobiles, a key sector for the world's third-biggest economy, plunged due to massive production disruption caused by the twin disasters that shattered supply chains and led to power shortages.

Japan logged a deficit of 853.7 billion yen ($10.7 billion) in its trade with the rest of the world, the second biggest monthly deficit since comparable records began in 1979 and the biggest shortfall for two-and-a-half years.

The average market forecast was for a deficit of 744 billion yen.

Exports in May tumbled 10.3 percent from a year earlier to 4.76 trillion yen for the third straight month of declines, with shipments of automobiles plunging 38.9 percent and electronic components falling 18.5 percent.

Imports rose 12.3 percent to 5.61 trillion yen following the March 11 catastrophe to chalk up a year-on-year rise for the 17th consecutive month due to higher costs of oil and gas.

"Given the enormity of the disaster, the current situation is within the realm of expectations," Chief Cabinet Secretary Yukio Edano said at a news conference.

"Production is recovering faster than expected due to the efforts of individual companies, and I believe the situation will change in the not-so-distant future," Edano said.

While auto exports suffered a steep decline in May, the drop of nearly 40 percent was an improvement on April's fall of nearly 70 percent, said Daiwa Institute of Research economist Hiroshi Watanabe.

This illustrated the pace of recovery after power shortages and supply woes forced the likes of Toyota and Honda to shutter factories, he said. "The deficit will shrink in the summer or later."

Credit Suisse economists said "auto exports will recover relatively quickly" while the high-tech industry remains a concern due to slow shipments of semiconductors.

"With the recovery in exports of high value-added products, we expect that the trade deficit will start shrinking within a few months," it said.

The government on Monday upgraded its economic assessment for the first time in four months amid recoveries in earthquake-hit supply chains following the March 11 disasters.

But it cut its view on the global and US economies for the first time in 28 months in the view that a slowdown abroad could pressure the Japanese economy. Overseas demand was expected to drive Japan's recovery before the disaster.

The nation's biggest recorded earthquake and the tsunami it generated left more than 23,000 dead or missing, wiped out entire towns along the northeast coast and crippled a nuclear power plant, leading to meltdowns and radiation leaks.

Subsequent power shortages and a supply crunch forced Japan's biggest companies to shut factories, leading to massive production disruption.

The economy was pushed back into recession, contracting an annualised 3.5 percent in the January-March quarter at its sharpest pace since a record 18.0 percent tumble in January-March 2009.

Economists expect it to return to growth in the second half of the year amid reconstruction spending but signs of overseas economic weakness and the ongoing nuclear crisis remain concerns, said Watanabe.

Japan's trade balance was negative for a second consecutive month with the May deficit, which reversed a year-before surplus of 309.1 billion yen.

With its biggest trade partner China, Japan ran a deficit of 214.7 billion yen, more than triple the year-before deficit of 60.5 billion yen.

Japan's trade surplus with the United States fell 56.0 percent, and that with the European Union dived 77.1 percent.

burs-dwa/dan




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China to slash taxes on luxury handbags, shoes
Shanghai (AFP) June 20, 2011 - China, the world's fastest growing market for luxury goods, is expected to reduce or scrap taxes on imported high-end products to boost domestic consumption, state media reported Monday.

A new tax system for luxury products is to be introduced by October 1, the 21st Century Business Herald said -- the beginning of a week-long holiday for National Day and a shopping frenzy for Chinese consumers.

China's steep luxury taxes -- which are as high as 60 percent -- have for years sent well-heeled shoppers swarming to Hong Kong and Europe for products such as Louis Vuitton handbags and Rolex watches to avoid the hefty tariffs.

The finance ministry's revamped system will reduce or remove taxes for products such as watches, clothes, shoes, suitcases, cosmetics, perfumes and milk powder, the newspaper said, citing unnamed sources.

Commerce ministry spokesman Yao Jian told reporters last week that it was a "general trend" for China to cut tariffs on mid- and high-end consumer products as part of the nation's efforts to boost domestic consumption.

There has been "consensus" on the issue among various government departments, Yao said.

Policymakers are trying to boost domestic spending and reduce their reliance on exports and investment to drive the world's second largest economy.

Chinese demand for luxury goods has exploded in recent years along with rapid economic growth and the country is forecast to be the world's top buyer of such products by 2015, according to consultancy PriceWaterhouseCoopers.

Fifty-six percent of China's luxury purchases in 2010 were made overseas, according to a study published by consulting firm Bain & Company in November.





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Washington (AFP) June 16, 2011
Mongolia promised Thursday to give US companies a role in its booming energy sector as President Barack Obama reached out to the young democracy that is also being courted by neighboring China. Mongolian President Tsakhia Elbegdorj capped a trip to Washington with a White House meeting with Obama, the very day that the country's Prime Minister Sukhbaatar Batbold held talks in Beijing and rec ... read more


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