Japan CEOs at Davos bemoan strong yen

Updated 25 January 2013
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Japan CEOs at Davos bemoan strong yen

DAVOS: Japan's central bank needs to allow the yen to depreciate further, instead of waiting for cues from other major economies before moving, Japanese executives from companies hit by a rising local currency said yesterday.
Their comments follow the Bank of Japan's move to double its inflation target to 2 percent and made an open-ended commitment to buying assets next year, in an attempt to end years of economic stagnation.
"Today, we are still in a position where the yen is a handicap," Carlos Ghosn, Nissan Motor Co.'s chief executive, said in an interview during the World Economic Forum in Davos.
"A natural territory for the dollar-yen exchange rate should be 100. Historically, it's been 110."
The yen posted steep losses yesterday after three days of gains to trade at about 90 yen to the dollar, weighed down by Japan's record trade deficit and comments from an economics official who said the government had no problem with the dollar hitting 100 yen.
"Ultimately, what we want is stability in the exchange rate," said Toshiba Corp. Chairman Atsutoshi Nishida in a separate interview, adding that a dollar-yen exchange rate of about 100 would be suitable for the company.
"The problem (is) that the US will do something and the Bank of Japan will follow. A major economy will do something, and the Bank of Japan will follow. We are always following."
A strong yen, a high corporate tax rate and other issues such as the high cost of electricity following the shutdown of most of the country's nuclear power plants has resulted in Toshiba having to move manufacturing jobs outside Japan to remain competitive, Nishida said.
Worsening relations between China and Japan — over a chain of disputed islands, known as Diaoyu in China and Senkaku in Japan — have also hurt sales, the executives said.
"Our sales have been affected in China, just like all other Japanese companies," said Nissan's Ghosn. "We hope we won't have too many hiccups like this and all the investments that we've done are being jeopardized."
Sales of Japanese cars and other products have been hurt in recent months. Nissan's sales in China are down about 20 percent since tensions erupted in September, a senior Nissan executive said on Jan. 15.
Japanese politicians have done little to soothe relations so far, with hawkish Prime Minister Shinzo Abe, returned to power in a landslide victory last month, having vowed to take a tough stance against China during his election campaign.
However, the reality of political office will soon set in and Abe may ease the hardline stance he took while campaigning, said the Toshiba chairman.
"Prime Minister Abe has many priorities, but I think the first thing he wants to do is revive the Japanese economy," said Nishida.
"China is Japan's largest export market and Japan's ties with China will have an effect on the prime minister's economic policy. He will be realistic on this."
Also in Davos, Jaime Caruana, the head of the world's central banking forum, said central banks are coming under too much pressure from politicians to act to promote growth and weaken currencies.
Caruana, general manager of the Bank for International Settlements, also said in a Reuters Insider television interview that the world was reaching the point where the damage from central banks' printing money could outweigh the benefits.
Asked about pressure from the new Tokyo government on the Bank of Japan to increase asset purchases to drag the economy out of its fourth recession since 2000 and end deflation, he said authorities should focus more on their own actions.
"There is always a risk of overburdening central banks. There is perhaps excessive pressure when we discuss about growth; probably the attention should be focusing on productivity, competitiveness, labor market participation. There is a bit too much focus on central banks," Caruana said.
Central bank measures such as cutting interest rates could only buy time for governments to take action on structural economic reform, but "sometimes low rates provide incentives that time is not used so wisely", he said.
Asked whether he was concerned about action by central banks to weaken currencies and the risk of competitive devaluations, Caruana said authorities needed to explain clearly the rationale behind their actions.
"If this is the case, probably some of the anxieties about currency wars will be minimized. The central banks are taking a lot of actions, but I don't think that behind that is this rationale," he said.
The BIS chief said quantitative easing policies by some central banks including the US Federal Reserve and the Bank of England were starting to show undesirable effects such as the mispricing of risk.
"As time goes on, the balance of the benefits that we get with low interest rates and a lot of liquidity and these interventions and the costs, is going to higher costs and less efficiency on the side of the benefits," he said.
Asked whether he saw the risk of new asset price bubbles, Caruana said: "We need to pay attention to the misvaluation of risks, the misassessment of risk. I think we need to monitor that."
He pointed to high-yield segments of the markets as one area where bubbles were starting to appear.


Asian stocks hit as Trump drops Kim summit but losses tempered

A man walks past a bank electronic board showing the Hong Kong share index at Hong Kong Stock Exchange Friday. (AP Photo/Vincent Yu)
Updated 25 May 2018
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Asian stocks hit as Trump drops Kim summit but losses tempered

  • Traders had already been nervous in recent days after the US president warned he could pull out of the June 12 meeting with the North Korean leader, while also voicing his displeasure at a deal to avert a trade war with China.
  • In a letter released by the White House, Trump told Kim he was canceling the summit because of North Korea’s “anger” and “hostility.”

HONG KONG: Asian markets mostly fell on Friday as Donald Trump shocked the world by pulling out of next month’s historic summit with Kim Jong Un, though analysts said the losses were tempered by hopes the talks can be rekindled.
Traders had already been nervous in recent days after the US president warned he could pull out of the June 12 meeting with the North Korean leader, while also voicing his displeasure at a deal to avert a trade war with China and threaten tariffs on car imports.
The news Thursday took many by surprise — including North and South Korean officials — and fueled concerns about the future of a rapprochement that has had many hoping for peace on the divided peninsula.
In a letter released by the White House, Trump told Kim he was canceling the summit because of North Korea’s “anger” and “hostility.” The message came after a key aide to Kim hit out at comments from Vice President Mike Pence, saying they were “ignorant and stupid” and warning the talks could be canceled.
However, Trump’s letter added that the talks could still go ahead “at a later date.”
For its part, Pyongyang said the decision “unexpected” and “regrettable” but added: “We again state to the US our willingness to sit face-to-face at any time in any form to resolve the problem.”
“It looks like we are back to fire and fury as the modus operandi for the White House again after President Trump (threatened) a new 25 percent car import tariff and canceled the summit with North Korea,” said Greg McKenna, chief market strategist at AxiTrader.
“Not only was the summit canceled but it was back to threatening the DPRK with a military response.”Wall Street ended lower, while Asian trading was muted. Tokyo ended the morning slightly higher, while Hong Kong slipped 0.3 percent and Shanghai was barely moved. Sydney and Singapore each fell 0.1 percent while Seoul was 0.2 percent lower.
Manila and Kuala Lumpur also fell but Wellington, Taipei and Jakarta were in positive territory.
While warning the issue remained fragile, analysts said there was still hope the meeting will go ahead.
“As we’ve seen countless times before, the president tends to walk back some of his more boisterous rhetoric time and time again,” said Stephen Innes, head of Asia-Pacific trading at OANDA.
“While the US and their allies have offered a way to prosperity for North Korea, it was never going to come without some significant concession on the nuclear non-proliferation front.”
And Eli Lee, Bank of Singapore’s head of investment strategy, added: “Given the US’ surprising acceptance of the meeting only in March, the cancelation... may simply be due to the fact that both sides need simply more time for preparation and to find a middle ground in terms of their demands.”
On oil markets, both main contracts extended Thursday’s more than one percent losses after Russia said an agreement with OPEC to cap production — which has provided support to prices in recent years — could be up for revision at a meeting next month .
The comments from Energy Minister Alexander Novak dented a rally in the commodity, which has hit three-and-a-half-year highs on the back of improving demand and supply worries from Venezuela and Iran.

Tokyo — Nikkei 225: UP 0.1 percent at 22,457.20 (break)
Hong Kong — Hang Seng: DOWN 0.3 percent at 30,666.38
Shanghai — Composite: FLAT at 3,154.04
Euro/dollar: DOWN at $1.1705 from $1.1725 at 2100 GMT
Pound/dollar: DOWN at $1.3364 from $1.3385
Dollar/yen: UP at 109.53 from 109.30 yen
Oil — West Texas Intermediate: DOWN nine cents at $70.62
Oil — Brent North Sea: DOWN 12 cents at $78.67
New York — Dow: DOWN 0.3 percent at 24,811.76 (close)
London — FTSE 100: DOWN 0.9 percent at 7,716.74 (close)