NEWS,30.07.2013

Egyptian exports start to boom

Egypt is in the early stages of an export boom, suggesting its economy could begin to recover in the next few months if a minimum level of political stability is restored.
Helped by a falling Egyptian pound, non-oil exports have grown at double-digit annual rates since early this year despite violence on the streets and deep uncertainty over the country's political future.
Egypt's export sector accounts for only slightly more than 10% of the overall economy, and this relatively modest contribution cannot by itself end high unemployment or generate enough tax revenue to fix the government's shattered finances.
But the surge in exports, which has received little publicity amid this year's flood of bad economic news from Egypt, shows many manufacturers are finding ways to ride out the political turbulence - and could enjoy strong growth if the country eventually gets a stable government.
"It's a good sign if they're managing to achieve that kind of export growth, especially in the current environment," said John Sfakianakis, chief investment strategist at MASIC, a Riyadh-based investment firm.
Overall Egypt still runs a huge merchandise trade deficit, which was $23.8bn in the financial year to March, although this was already 2.7% narrower than in 2011-12 as exports grew and imports remained steady.
In the separate energy sector, which accounts for about a fifth of overall exports, Egypt has sharply cut back natural gas shipments, diverting supplies to the domestic market to avoid power shortages.
Recovery
Egypt's non-oil exports grew strongly for much of the past decade, rising 18.5% to $18.6bn in 2011, the year when Hosni Mubarak was overthrown, according to the State Information Service.
Their growth plunged last year as the election of Islamist president Mohamed Mursi worsened political tensions and deterred investment; industrial unrest, poor security, fuel shortages and difficulties obtaining finance hit many companies.
Non-oil exports inched up just 2% in 2012, less than half the rate of consumer price inflation. But shipments began to recover around the start of this year, rising 7% from a year earlier in the first two months of 2013.
Trade minister Mounir Fakhry Abdel Nour told reporters that non-oil exports jumped 21% year-on-year in June, a month when big Egyptian cities were rocked by mass protests against Mursi that led to his overthrow by the army on July 3.
In many ways, the operating environment for Egyptian companies has remained as tough as it was last year. But exports of low-technology, cost-sensitive products such as textiles, food and leather have jumped, businessmen say.
Textile exports rose 16.5% from a year ago, according to the Textile Export Council. Processed food exports climbed 26% year-on-year in the month of May alone, and were nearly twice their level in May 2010.
A major reason for the export recovery is the depreciation of the Egyptian pound, which makes shipments more competitive. Depreciation accelerated in the first half of this year.
There are also signs that some Egyptian exporters are starting to tap fast-growing demand in markets beyond Europe and the Arab world, their traditional focuses.
Non-oil exports to non-Arab African countries surged 28% from a year earlier in the first five months of this year. Exports to the Arab world climbed 20%, helped by an economic recovery in neighbouring Libya after its civil war.

Bulgaria set to slash electricity prices

Bulgaria's energy watchdog says it will lower electricity prices by up to five percent starting on Thursday, in a new bid to appease protesters calling for the government to step down.
The DKEVR state energy regulatory commission late on Monday approved the price cut, which will come into effect on August 1, as the EU's poorest country continues to struggle against high bills, the commission said.
Last winter, high electricity bills sparked mass street protests against low living standards, growing poverty and unemployment, forcing out the previous conservative cabinet.
New protest rallies have called for the resignation of current technocrat Prime Minister Plamen Oresharski in office only since May.
To appease public anger, Oresharski's government has passed a package of social measures but the daily protests have continued for the 47th day on Tuesday and the electricity price cut was not expected to put an end to them.
Bulgarians pay about eight cents per kilowatt hour of electricity half of what consumers in wealthier EU countries pay their power utilities.
But incomes in the Balkan country are also just a fraction of the rest of the bloc, with monthly salaries averaging about €400  ($530) and pensions at €138.
Slumping household consumption and meagre exports contributed to an overheating energy production sector this year, prompting authorities to curtail output, while deals on expensive green energy prevented utilities from lowering costs for consumers.
Under the new move, all clients of the three power utilities Austrian EVN, Czech CEZ and Energo-Pro will see daytime electricity costs reduced by up five percent and nighttime costs by up to about seven percent.

Spain's economy close to leveling off

Spain's economy all but emerged from a two-year slump in the second quarter but its recovery looks fragile at best, given weak consumer demand and a simmering political scandal at home and faltering growth abroad.
Gross domestic product shrank 0.1% between April and June from the previous quarter, according to Tuesday's data from state statistics agency INE, which matched a Bank of Spain estimate given last week as well as market forecasts.
Between January and March the economy shrank 0.5%.
Given the signs of an upturn in economic activity, also including the first drop in unemployment in two years in the second quarter, Economy Minister Luis de Guindos has called an end to Spain's recession.
Many economists are not convinced.
"We're not counting on a further improvement in the third quarter and are very sceptical of any statement that the recession in close to being over," Ebrahim Rahbari, an analyst at Citi in London, said.
Spain's economy has been in and out of recession since 2008, when a burst property bubble undermined the foundations of one of the country's key pillars of growth, construction.
That sent unemployment to record highs, depressing business and saddling the banking system with billions of euros of soured real estate assets and loans.
Spain's biggest bank Santander SA, which insulated itself against the worst of the market meltdown by expanding its already dominant foreign operations, said on Tuesday half year group profits rose 29% on lower loan losses.
It said operating earnings were hit by the sluggish Spanish economy but also offered hope the impact of the property slump on the government and lenders - bailed out last year with €42bn of European aid - might be easing.
It said provisions against loan losses which many Spanish banks booked heavily in 2012 - dropped sharply, and that it might consider buying nationalised banks Catalunya Banc or NCG Banco if they came up for sale.
Temporary respite
Since 2008, already subdued domestic demand has been knocked back further by tax hikes and spending cuts aimed at balancing a budget which has one of the largest shortfalls in the eurozone.
Growth-friendlier policies have played a bigger role in Europe's economic debate in recent months as austerity has lost its lustre, but Spain's still high fiscal imbalances mean more budget cuts will have to be made, potentially hitting the tentative signs of recovery.
Meanwhile, allegations of millions of euros being filtered illegally to ruling party leaders, including Prime Minister Mariano Rajoy, has helped half the conservatives' approval rating putting them level with the opposition Socialists.
That has added an element of political instability that carries faint, but nonetheless unwelcome, echoes of events in fellow euro zone struggler Italy, where a shaky coalition government could fall if former prime minister Silvio Berlusconi loses a supreme court appeal hearing that began on Tuesday.
But the centre-right People's Party of Rajoy, who has denied wrongdoing, has a strong majority in parliament and unless new evidence ties him directly to the scandal, he is expected to remain in power.
Rajoy, along with his economy minister, has recently done his best to talk up the economy, and the second quarter also saw the first drop in unemployment in two years, to 26.3%.
But that lower figure still more than double the euro zone average was largely due to temporary factors especially strong trade data, which includes seasonal tourism.
Spanish retail sales due on Wednesday are expected to show high-street spending has shrunk every month for three years.
Spain's high reliance on activity beyond its borders exports rose to a third of economic activity in the first quarter adds uncertainty to the outlook amid a shaky global recovery and enduring weakness in Europe, where around 70 percent of Spain's exports are sold.
Martin van Vliet, analyst at ING, said he expected Spain's economy to flatline and then gradually return to growth in the first half of next year. "But the pace of growth will probably be too slow to create jobs, which is a prerequisite to embark on a self-sustaining recovery," he said. 

NEWS,25.07.2013

Protesters block gas drilling site

Protesters blocked access to a drilling site in southern England on Thursday as part of a campaign against the controversial "fracking" process used in shale gas exploration, illustrating the potential battle ahead for Britain's nascent shale industry.
Estimates have said Britain may have major shale reserves which could help reverse a rising dependency on energy imports, but the industry is having to tread carefully in order to reassure a sceptical public and vocal environmental lobby.
Cuadrilla Resources is readying a site to drill a well near the village of Balcombe in West Sussex. The well is a conventional one that will not use fracking, but Cuadrilla has fracked elsewhere, and is one of a handful of companies with access to shale acreage that might be fracked in future, and so its activities have become a target for anti-fracking protests.
A spokesman for the privately-owned company said on Thursday that protesters had stopped vehicles from accessing the site.
Hydraulic fracturing or fracking retrieves gas and oil trapped in tight layered rock formations by injecting high-pressure water, sand and chemicals.
The protest has been organised by campaign group 'Frack Off'. They fear that Cuadrilla, the only company to have fracked a well exploring for shale gas in Britain at its Lancashire site, could seek to frack in Sussex at a later date.
"We have tried other methods. We now have no choice but to take matters into our own hands and protect ourselves from the threat fracking poses to our health and environment," said protester Alex Griffiths in an email from Frack Off.
Drilling and fracking wells will in the next few years be critical to establish whether shale gas can be commercially produced in Britain, where fracking is controversial. It was banned for a year in 2011 after triggering small earthquakes, and concerns remain amongst environmental groups that chemicals used could reach water supplies.
The Cuadrilla spokesman said that the company hoped to begin drilling at the site early next week and that the vehicles were carrying parts for the drilling rig.
UK utility Centrica recently bought a quarter stake in Cuadrilla's northern England shale licences. French oil company Total has also said it would like to explore for shale gas in Britain.

Eurozone credit slump deepens

Loans to the euro zone's private sector shrank by more than expected in June, starving the economy of the funds needed to sustain recovery and piling pressure on the European Central Bank to take fresh action.
Loans to the private sector shrank by 1.6% from the same month a year ago, ECB data released on Thursday showed, a bigger fall than even the lowest forecast in a poll of economists, which gave a mid-range reading of -1.1%.
The latest weak lending figures highlight one of main obstacles to recovery in the eurozone, where purchasing manager indexes (PMI) showed private industry expanded for the first time in more than a year in July.
Lacklustre demand is dragging on the appetite for credit, while banks restrain lending to repair their balance sheets.
In a step to reviving lending to the bloc's struggling small and mid-sized businesses, the ECB said last week it would let banks use more of the assets once blamed for triggering the financial crisis as collateral for cheap loans.
Howard Archer, economist at Global Insight, said the weak lending figures heaped pressure on the ECB to do more.
"The further marked fall in lending to eurozone businesses in June maintains pressure on the ECB to come up with concrete measures aimed at improving credit availability to companies, especially small and medium-sized ones," he said.
"We think it is very possible that the ECB will eventually take its key policy rate down from 0.50% to 0.25% as we anticipate that the euro zone will continue to find it very tough to develop clear growth," he added.
The ECB holds a policy meeting next Thursday. No change in interest rates is expected.
An ECB survey released on Wednesday showed that eurozone banks, facing tougher capital requirements, tightened lending standards for both companies and home loans in the second quarter even though their access to funding eased.
Seeking to reassure markets unnerved by the US Federal Reserve's exit plan from money printing, the ECB said earlier this month it would keep interest rates at record lows for an extended period and may yet cut further.
ECB policymakers have since qualified this forward guidance, with Bundesbank chief Jens Weidmann said on July 11 the ECB had not "tied itself to the mast".
A poll of 70 economists published on Wednesday showed the ECB is probably done cutting interest rates but may still take other measures to stimulate an economy that may soon creep out of recession.
The survey was conducted before the PMI survey suggested the euro zone private sector grew this month for the first time since January 2012 news that will ease pressure on the ECB to further loosen monetary policy.
Banks granted non-financial firms €12bn ($16bn) less in loans in June than in the previous month, data adjusted for sales and securitisations showed, after a fall of €18bn in May.
Euro zone M3 money supply a more general measure of cash in the economy grew at an annual pace of 2.3% in June, slowing from 2.9% in May and below the consensus forecast of 3.0% in a poll of analysts.

EU lagging behind on 4G

EU member states should do more, and faster, to introduce next-generation 4G mobile phone services if Europe is to reap the benefits of the new technology.
About 75% of the European Union population of about 500 million has no access to 4G services, EU Digital Agenda Commissioner Neelie Kroes said on Thursday.
In stark contrast, in the United States more than 90% of the population had 4G access, she said.
Kroes said that of the 28 member states, three - Cyprus, Ireland and Malta - had no 4G at all while only Germany, Estonia and Sweden had advanced systems in place.
There was virtually no 4G coverage in rural areas across the EU, Kroes said, with the EU accounting for only five percent of global 4G connections.
"This is no way to run an economy. It means ... that Europeans living in rural areas and those on holiday get treated like second-class citizens," Kroes said.
"It doesn't matter where you are, you pay money for a device and mobile subscription and it should work."
4G operates five times faster than the current 3G network and allows users to download large e-mail attachments quickly, watch live television without buffering, make high-quality video calls and play live games on the go.
It is seen as the next essential step in the telecommunications revolution and Kroes has repeatedly lambasted EU countries for lagging behind.
Earlier this week, she said she had to reluctantly agree to delays in nine out of 14 member states who had committed to free up 800 megahertz bandwidth for 4G use by January this year but had failed to make the deadline.

Detroit bankruptcy hearings begin

A judge is considering what to do with challenges to Detroit's bankruptcy from retirees who claim their pensions are protected by the Michigan Constitution.

US Bankruptcy Judge Steven Rhodes settled into his chair shortly after  14:00 GMT. The city wants him to put a stop to lawsuits in other courts, especially after an Ingham County judge said state officials ignored the constitution and acted illegally in approving the bankruptcy last week.
The state appeals court temporarily stopped three lawsuits challenging the bankruptcy process on Tuesday.
As lawyers for some of the thousands of creditors arrived Wednesday, they passed protesters holding a banner saying: "Cancel Detroit's debt. The banks owe us."
The case is expected to last at least a year.

Britain's economy picks up speed

Britain's economy sped up between April and June on the back of stronger spending by consumers and businesses and giving a boost to the government less than two years before an election.
It came at the same time as a raft of UK company earnings reports showing growth picking up.
Gross domestic product rose 0.6% in the second quarter compared with the previous three months, in line with forecasts, preliminary data from the Office for National Statistics showed.
That was double the pace of growth in the first three months of the year but the economy still remains smaller than before the 2008-09 recession, suggesting to some economists that it still needs nurturing by the Bank of England.
The numbers were a boost for finance minister George Osborne, who has fended off calls from the International Monetary Fund and the opposition Labour party to spend more to speed up growth.
"Britain is holding its nerve, we are sticking to our plan, and the British economy is on the mend - but there is still a long way to go and I know things are still tough for families," Osborne said in a statement.
"So I will not let up in my determination to make sure we put right all that went wrong in our economy."
Growing signs of a pick-up in the British economy have coincided with a narrowing of Labour's lead over the Conservatives in some opinion polls.
The recovery also comes as other countries in Europe are struggling to show any growth at all.
Compared with a year earlier, Britain's economy expanded 1.4%, faster than 0.3% in the first quarter. It was the fastest increase since early 2011 although it was boosted by an extra working day in the April-June period this year.
Sterling weakened after the data and British government bond prices pared losses as some investors had been betting on stronger growth which would have reduced further the chance of the Bank of England pumping more money into the economy.
It was the first time that all sectors of the economy  agriculture, production, construction and services - grew since the third quarter of 2010.
The Bank of England's new governor, Mark Carney, may see the data as a sign that the economy is edging closer to what he has termed "escape velocity" or sustainable growth, though he is still likely to judge it needs extra help to get there.
From next month, Carney is widely expected to start providing detailed guidance on how long interest rates will remain low, in an effort to encourage consumers to spend and businesses to borrow and invest.
Still smaller
Britain's economy remains 3.3% smaller than in the first quarter of 2008 which was its peak before the financial crisis plunged the country into recession, tempering the good news about the growth in the second quarter.
"This confirms our view that we are heading down the road to recovery, even if there are likely to still be a few bumps ahead," said Neil Bentley, deputy director-general of British employers group CBI.
"Underlying conditions are quite weak as consumers are still saddled with debt and despite the global economy picking up, the potential for getting knocked off course remains."
Thursday's data showed that output in Britain's service sector - which makes up 78% of GDP - rose by 0.6% in the second quarter after ticking up 0.5% in the first three months of the year.
Services provided the strongest contribution to overall growth, adding 0.5 percentage points, with the retail, hotels and restaurants and the business services and finance components accounting for the bulk of the increase.
Industrial output was 0.6 percent higher while construction - which now accounts for around 6% of GDP after shrinking sharply after the financial crisis - expanded by 0.9%.
Upbeat company news reinforced the sense of an economy on the mend. Telecoms operator BT, for example, posted first quarter profits comfortably ahead of forecasts driven in part by a good performance from the retail division.
Improving construction and housing markets helped two of the biggest trade suppliers, Travis Perkins and Howden Joinery post increased first-half profits.
Consumers, a key engine of Britain's economy, are perking up too. They are now more optimistic about the economy than at any point since April 2010, as measured by a new consumer confidence index by market researchers YouGov and the Centre for Economics and Business Research.
The ONS's preliminary estimates of GDP are among the first released in the European Union, and are based partly on estimated data. On average, they are revised by 0.1 percentage points up or down by the time a second revision is published two months later, but bigger moves are not uncommon.

Obama: Our economy can be stronger

US President Barack Obama sought to inject momentum into his economic and domestic policy agenda on Wednesday with a speech designed to clarify his vision for his second term and hammer Republicans in the House of Representatives for getting in his way.
Obama defended his government's record managing the economy through the recession in his first term and said new spending on infrastructure and education were needed now to grow the middle class, which he argued would boost the nation's economy.
"As Washington prepares to enter another budget debate, the stakes for our middle class could not be higher," Obama said in remarks prepared for a crowd of cheering supporters in a gymnasium at Knox College in Galesburg, Illinois.
Galesburg left a lasting impression on Obama, a former Illinois state senator, early in his political career when the town struggled after it lost its factories.
Obama faces a battle this fall with Republicans in Congress over the budget and raising the debt ceiling.
While the president wants to increase investment in areas he argues would spur economic growth, Republicans want to cut spending and try to force the administration to scale back its signature healthcare program.
"We'll need Republicans in Congress to set aside short-term politics and work with me to find common ground," Obama said.
"It may seem hard today, but if we are willing to take a few bold steps - if Washington will just shake off its complacency and set aside the kind of slash-and-burn partisanship we've seen these past few years  our economy will be stronger a year from now," he said.
Obama plans to expound on his ideas in speeches across the country in the weeks ahead. His address on Wednesday did not include major new policy proposals, but new ideas are expected to be sprinkled in future remarks.
Obama has said he doesn't believe his speech will change minds in Congress, but he hopes to reach their constituents to exert pressure on lawmakers from their home states.
The buildup to Obama's speech has been relentless, as the White House seeks to get past a rough start to his second term, which has been dominated by a series of thorny domestic and foreign issues.
An early push to toughen gun laws failed in Congress, and the Republican-led House of Representatives has said it will not move ahead on sweeping immigration reforms passed by the Senate.
The White House has also been thrown off-message by controversies over phone and internet surveillance, and over the Internal Revenue Service's targeting of conservatives groups seeking tax-exempt status.
Republicans dismissed the speech as being long on rhetoric and short on ideas.
"Americans aren't asking the question 'where are the speeches?' They're asking 'where are the jobs?'" said John Boehner, Speaker of the House of Representatives.

Don't discount the EU

THE 6th South Africa-European Union (EU) summit was held on July 18 and this was, perhaps, well overdue. Tensions between South Africa and the EU have been high since South Africa joined the Brics bloc, comprising Brazil, Russia, India, China and South Africa.

The theme of the summit was ‘Job creation through inward investment’ and aptly so, since several European countries, along with South Africa, are battling unemployment.

The situation worsened through European investors being wary of developments in South Africa after the country cut bilateral investment treaties with Belgium, Luxembourg and Spain and will do so with a total of roughly 12 EU countries.

South Africa’s joining of the Brics and the cutting of bilateral investment treaties has raised fears that these moves will be at the expense of its long-standing ties to Europe’s developed economies.

As an economic region, the EU remains South Africa's leading trade partner and, perhaps even more importantly, three-quarters of our foreign direct investment (FDI) stock originates from the EU.

Given the traditionally and current strong ties between us and the EU, any changes in the EU can consequently have a significant impact on the local economy.

For example, if the EU can turn around its 18 months of economic contraction, South African exports to the region might start to increase again and its contribution toward FDI might become even more substantial.

On the other hand, EU regulations impacting our exports to the region can just as easily hinder local manufacturers and exacerbate the trade deficit.

For example, in the week before the summit, the EU notified the World Trade Organisation (WTO) of a draft commission regulation on food.

As one of our major exports to the EU, this regulation will affect far more than just the agricultural sector. Consider the minimum wage for farmworkers, the rising petrol price and now the mandatory compliance to this regulation.

These costs, of whatever nature, all contribute to the already struggling economy through impacting the farmers and workers, the packaging, distribution and export companies.

The difference among the three costs (wages, petrol and regulation) is that we have a say in what the final EU regulation looks like. In other words, before the regulation comes into effect, we are allowed to review and comment on the draft regulation.

If the comments are of a national interest, the department of trade and industry takes a national stance on the regulation and engages the EU through the WTO. This formally initiates a dispute in the WTO.

If the consultations prove fruitless after 60 days, South Africa can request adjudication by a panel.

While it appears as though we are moving to favour the Brics nations, we cannot simply ignore developments in the EU.

Should it recover from its current slump, the EU still offers a significant market for our exports and a large source of investment for our development.

NEWS,22.07.2013

Japan's Abe says he will focus on economy

Japanese Prime Minister Shinzo Abe, fresh from a strong election victory, vowed on Monday to stay focused on reviving the stagnant economy and sought to counter suspicions he might instead shift emphasis to his nationalist agenda.
The victory in parliament's upper house election on Sunday cemented Abe's hold on power and gave him a stronger mandate for his prescription for reviving the world's third-biggest economy.
At the same time, it could also give lawmakers in his Liberal Democratic Party (LDP), some with little appetite for painful but vital reforms, more clout to resist change.
"If we retreat from reforms and return to the old Liberal Democratic Party, we will lose the confidence of the people," Abe told a news conference on Monday.
He emphasized that his priority remains proceeding with his "Abenomics" programme of hyper-easy monetary policy, government spending and economic reform, describing it as the cornerstone of other policy goals.
"It is not easy to overcome 15 years of deflation," Abe said.
"It is a historic project. We will concentrate on that. We won't be able to strengthen the financial base for social security without a strong economy. The same goes for security and diplomacy."
Abe's LDP and its coalition partner, New Komeito, won 76 of the 121 seats contested. Along with seats that weren't up for election, the bloc now has a commanding 135 seats in the 242-seat upper chamber.
The win also raises the chances of a long-term Japanese leader for the first time since the reformist Junichiro Koizumi's rare five-year term ended in 2006.
It also ends a parliamentary deadlock that began in 2007 when Abe, then in his first term as premier, led his party to a humiliating upper house defeat that later forced him to resign. The LDP remains short of a majority on its own.
Ever since Abe stormed back to power with a big win in a December lower house poll, some - including Japanese businesses with a big stake in the matter - have worried the hawkish leader will shift focus to the conservative agenda that has long been central to his ideology.
That agenda includes revising the post-war pacifist constitution, strengthening Japan's defence posture and recasting Tokyo's wartime history with a less apologetic tone.
Despite the hefty win, Abe's mandate was undercut by low voter turnout, with 52.61% of eligible voters casting ballots, more than 5 percentage points below the turnout in the last upper house poll in 2010. That could keep up pressure to stay focused on the economy.
"Three faces"
For now, many experts suggest, Abe will stick with economic matters as he tries to beef up his so-far disappointing economic reform plans. He also confronts a decision on whether to go ahead with raising the 5% sales tax to 8% next April, part of a planned doubling by October 2015 aimed at reining in Japan's massive public debt.
"My understanding is that Abe-san has three faces: Abe as right-wing, Abe as a pragmatist, Abe as the economic reformer," said Shinichi Kitaoka, president of the International University of Japan.
"He has been showing the third face so far and will try to do the same after the election."
Still, Abe is moving towards security policy changes that mark a big shift in a country that has prided itself on pacifist ideals even as it built up a military bigger than Britain's.
Abe reiterated on Monday that he wants to debate changing a self-imposed ban on exercising the right of "collective self-defence", or aiding an ally under attack.
The ban means Japan would be unable to intercept an enemy missile fired at a US navy ship, Abe noted, which he said would call into question the US alliance itself.
Abe's government is also reviewing the possibility of acquiring a preemptive strike capability and creating a Marine force to protect remote islands such as those at the core of a territorial row with China.
One clue to how Abe intends to proceed on the touchy topic of wartime history will be whether he visits the Yasukuni Shrine for war dead, where Japanese leaders convicted as war criminals by an Allied tribunal are also honoured, on the emotive Aug. 15 anniversary of Japan's defeat in World War Two.
A pilgrimage to the shrine would outrage China, where bitter memories of Japan's past militarism run deep, and upset Washington, which fears a further fraying of Tokyo's already fraught relations with its neighbours.
Abe moved quickly to improve ties with China and South Korea at the start of his first 2006-2007 term but it is unclear whether he will repeat that success in his second.
He has since taken a tougher stance towards Beijing, but reiterated on Monday his "door is always open" to diplomacy.
Ties between China and Japan have been seriously strained by territorial rows and feuds over wartime history.
Concerns are simmering about the risk of an unintended clash near disputed isles in the East China Sea where Japanese and Chinese vessels have been playing a cat-and-mouse game for months.
"In that environment, something could go wrong," said Michael Green, Japan Chair at the Washington-based Center for Strategic and International Studies. "That's the Black Swan."
Abe again said he wants to revise the 1947 constitution, drafted by US occupation forces after Japan's defeat and not altered since, although he made clear that was a long-term goal.
Conservatives see the constitution as not only restricting Japan's right to defend itself but as responsible for eroding traditional mores such as duty to the state.
The LDP and smaller parties that also favour revising the constitution failed to obtain the two-thirds majority required in both houses before a constitutional revision can be put before the government in a referendum.
The LDP's coalition partner is cautious about changing the charter's signature war-renouncing Article 9 which, if taken literally, bans maintenance of armed forces.
Sunday's election also left many wondering about the future of a competitive two-party democracy in Japan.
The opposition Democratic Party of Japan, which surged to power in 2009 only to be ousted last year, suffered its worst drubbing since its founding in 1998. 

Japan ruling party wins elections

Japanese Prime Minister Shinzo Abe's ruling Liberal Democratic Party (LDP) won an overwhelming victory in elections for the upper house of parliament, recapturing control of the chamber, final returns showed on Monday.

The conservative LDP won 65 seats and its ally, the New Komeito, captured 11 seats in Sunday's voting. The ruling coalition had needed 63 for a majority.

"I must respond to people's hopes that I will bring about [an economic recovery] that they can actually feel," the premier said on Sunday night.

Abe, who took office in December, promoted aggressive monetary easing to prop up the economy and appealed to voters to support his economic policies as he vowed to pull the country out of 15 years of deflation.

On Sunday, the main opposition Democratic Party of Japan grabbed only 17 seats, its worst showing in an upper house election since its foundation in 1996, while the Japanese Communist Party made significant leaps, winning 8 seats, the biggest number since 1998.

"It is a crucial step forward for us to take the offensive" against the LDP, JCP leader Kazuo Shii told a news conference.

"Citizens are concerned that the LDP will go out of control," he said.

In the 2007 upper house elections, the LDP led by then-premier Abe suffered a crushing defeat, losing a majority for the first time in its history.

The upper house has elections for half of its 242 seats every three years, and this year 433 candidates competed for the 121 seats.

Voter turnout in Sunday's elections was estimated at 51.57%, the lowest since the 1995 race, according to a tally by the Kyodo news agency.

Detroit not banking on Fed help - city

Detroit must dig itself out of the hole it created and cannot wait to see if the federal government will come to its rescue, the city's emergency manager said on Sunday.
Kevyn Orr, charged with guiding the collapsed Motor City out of the largest municipal bankruptcy in US history, said any outside assistance would be "great" but he is not banking on it.
"Hope is not a strategy from my perspective. I can't plan on the basis of what may or may not happen or what help may or may not come," Orr said on "Fox News Sunday."
"We are not expecting the cavalry to come charging in," he said. "We have to fix it because we dug the hole."
Detroit filed for bankruptcy on Thursday, setting the stage for a costly court battle with creditors and opening a new chapter in the long struggle to revive the cradle of America's auto industry.
If approved by a federal judge, the bankruptcy would force Detroit's thousands of creditors into negotiations with Orr to resolve an estimated $18.5bn in debt.
Detroit Mayor Dave Bing said he was talking to officials in Washington about what they could do to help.
"I'm not sure exactly what to ask for. I mean, money is going (to) help, no doubt about that, but how much?" Bing said on ABC's "This Week."
The mayor has had no executive authority since Orr's appointment as emergency manager in March.
Michigan Governor Rick Snyder told CBS' "Face the Nation" the city's problems had been 60 years in the making and he saw no prospect of a federal or state bailout.
Detroit has been hit hard by the move away from industrial manufacturing in America since the 1950s, its problems compounded by chronic mismanagement and a dwindling population. Retirees now far outnumber active workers among the city's 700 000 residents, and unfunded pension liabilities are a key source of its problems.
After the economic collapse of 2008, Washington injected billions of dollars into automakers General Motors and Chrysler as the first step of a quick bankruptcy process. But the federal government made no promises this time.
Vice President Joe Biden said on Friday said it was unclear whether Washington could help.
Steven Rattner, who led the auto industry restructuring in 2009, said it would be a mistake for Michigan and the federal government not to provide funds for the city.
"America is just as much about aiding those less fortunate as it is about personal responsibility. Government does this in so many ways; why shouldn't it help Detroit rebuild itself?" Rattner wrote in an opinion piece Friday in The New York Times.
The bankruptcy led investors to dump the city's municipal bonds on Friday but Orr deflected criticism that it will be hard for investors to lend the city money again.
"The reality is, they are going to look at the credit rating of a rehabilitated city. And if that city is capable, they're going to make rational decisions because they are financial institutions," Orr said on the Fox programme.

"After some time, after this little kerfuffle, we'll be back in business."

Biden on visit to fire up US-India ties

US Vice President Joe Biden was due in India on Monday at the start of a four-day visit designed to revive momentum in flagging diplomatic ties and fire up bilateral trade.
Biden, the first vice president to visit India in three decades, will meet senior leaders including Prime Minister Manmohan Singh in New Delhi before heading to the financial hub Mumbai to deliver a keynote speech on the economy.
In an interview published in Monday's Times of India newspaper, Biden said the world's two biggest democracies had a "tremendous capability to work together" but should be doing more.
He also emphasised that he wanted to see an acceleration in bilateral trade, which he said was on track to meet $100bn this year.
Emerging market
"The United States has welcomed India's emergence and both nations have profited from it," the vice president said.
"India's rise as a global economic power is one of the most powerful stories of the 21st century," he added.
The announcement of Biden's visit was made during a trip to India last month by Secretary of State John Kerry, who sought to assuage Indian fears about the aftermath of next year's withdrawal of US troops from Afghanistan.
India, which has spent more than two billion dollars of aid in Afghanistan, fears any return of the Taliban, hard-line Islamists who were strong allies of Pakistan before being toppled in 2001.
Nascent talks between the US and Taliban were due to start last month after the Islamists opened an office in Doha, but they collapsed before even getting off the ground.
Renounce violence
In his meeting with Indian leaders, Biden is expected to reiterate that the US will not back any peace process involving the Taliban unless they renounce violence.
"If the Taliban are to have any role in Afghanistan's political future, they will need to break ties with al-Qaeda, stop supporting violence and accept the Afghan constitution as part of the outcomes of any negotiated peace settlement," he told the Times of India.
"We strongly support the role India has played in Afghanistan, leveraging its economic strength to improve Afghanistan's economy ...in projects that will help to ensure our common goal of a stable and prosperous future for the Afghan people," he added.
Biden will fly on Wednesday to Mumbai where he is expected to hold a roundtable with business leaders and press for stronger intellectual property protection.
While bilateral trade has grown in recent years, there is still widespread frustration among US business leaders over what they see as unfair trading practices.
Among the points of contention is India's championing of generic drugs - which advocates say save lives in poor nations - despite protests from Western drug firms.
India in turn has been alarmed by proposals in the US Congress to curb visas for high-tech workers.
Insecurities
India's Finance Minister P Chidambaram and Commerce Minister Anand Sharma were both in Washington last week to pitch for investment and discuss India's readiness to open talks on a bilateral investment treaty.
"Economic engagement in both trade and investment, though robust, is well below potential, given the opportunities a growing economy like India offers and the opportunities in the largest economy of the United States," Sharma said.
Biden will be the most senior administration official to visit India since President Barack Obama visited in 2010.
While the US has been among the world powers calling for India to be given a permanent seat at the UN Security Council, observers detect a sense of drift in ties.
"India is a natural ally of the US but... relations require greasing occasionally because insecurities have crept in, especially on the Indian side," Subhash Agrawal, of the Delhi-based think tank India Focus, told AFP.
Biden will head from India to Singapore on Thursday, where officials say he will tackle tensions over the disputed South China Sea.

NEWS,18.07.2013

China's growth must be sustained - IMF

China needs another round of "decisive measures" to make sure it continues its successful economic growth as its margins of safety are falling amid growing domestic problems, the International Monetary Fund said in its latest report.
The world's second largest economy has been underpinned by a mix of investment, credit and fiscal stimulus, but such a pattern of growth is unsustainable, the fund said in a report on its annual Article 4 meeting with Chinese officials.
"To secure more balanced and sustainable growth, a package of reforms is needed to contain the growing risks while transitioning the economy to a more consumer-based, inclusive, and environmentally-friendly growth path," the report said.
"While China still has significant buffers to weather shocks, the margins of safety are diminishing."
The IMF didn't change its latest forecast for 2013 growth in China of 7.75%, though it noted downside risks to the forecast. Its figure is above the Chinese government's target of 7.5% and also above most private economists' forecasts of between 7% and 7.5%.
China's new leaders have repeatedly indicated that they are prepared to tolerate slower growth to push through reforms and deregulation to wean the economy off a reliance on exports and investment and encourage more consumption.
That resolve has been tested, however, as growth slowed in the April to June quarter to 7.5%, the ninth quarter in the last 10 that expansion has weakened, and exports fell in June for the first time in 17 months.
Analysts have suggested that the government may step in if growth falls to 7% or below in any quarter, though it is unclear where the government's bottom line would lie.
The IMF said that for the near term, a priority is to rein in broader credit growth and prevent a further build up of risks in the financial sector.
It noted the rise of China's shadow banking system, where credit is available outside regular channels to companies that banks won't lend to, but which risks creating piles of hidden bad debts that become a threat to financial stability.
Banks could be vulnerable in future if asset qualities should worsen. The significant expansion of local government debt levels in recent years is another cause for concern.
The IMF said China's agenda should include accelerated financial sector reforms, a revamp of local government finances, a more market-based currency exchange rate with less intervention, opening more markets to competition and liberalising the capital account.
"With a successful transition, China will grow at a healthy pace for years to come," the report said.
"Activity may be somewhat slower, a trade off worth making for the benefit of much higher income in the medium to long run - a growth trajectory that will also be good for the global economy."

Bernanke: Fed flexible on bond buying

Federal Reserve chairperson Ben Bernanke said on Wednesday the US central bank still expects to start scaling back its massive bond purchase programme later this year, but he left open the option of changing that plan if the economic outlook shifted.
While sticking closely to a timeline to wind down the bond buying that he first outlined last month, Bernanke went out of his way to stress that nothing was set in stone.
"Our asset purchases depend on economic and financial developments, but they are by no means on a preset course," he told the House of Representatives Financial Services Committee.
Under the plan Bernanke laid out on June 19, the US central bank would likely reduce its monthly bond buys later this year and halt them altogether by mid-2014, as long as the economic recovery unfolds as expected.
He did not depart from that guidance on Wednesday, but he said the current $85 billion monthly pace of purchases could be reduced "somewhat more quickly" if economic conditions improved faster than expected. On the other hand, it "could be maintained for longer" if the labor market outlook darkened, or inflation did not appear to be rising toward the Fed's 2% goal.
"Indeed, if needed, the (Fed's policy) committee would be prepared to employ all its tools, including an increase (in) the pace of purchases for a time, to promote a return to maximum employment in a context of price stability," Bernanke said.
The remarks lifted US stock prices modestly and government debt prices also rose. The dollar firmed against the euro and the yen.
"There is something in these comments for everybody," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. "Bernanke has done a good job of leaving himself plenty of maneuver room in terms of policy."
Bernanke's testimony to Congress on the Fed's semi-anual monetary policy report may be his last if he steps down when his term as chairman ends in January, as many expect, and a number of lawmakers lauded him for his service.
Under Bernanke, the Fed has held overnight interest rates near zero since December 2008 and more than tripled its balance sheet to about $3.46 trillion with bond purchases aimed at driving down longer-term borrowing costs and spurring investment and hiring.
Calming the waters
Bernanke set off a brief but fierce global market sell-off last month when he outlined the Fed's plans to curtail its so-called quantitative easing, and he has joined a slew of officials since then who have spelled out their intention to keep rates near zero well after the bond buying ends.
Bernanke acknowledged that one of his motives in talking about tapering last month had been to head off a possible bubble in financial markets. Many economists had suspected that had been an important reason.
"Not speaking about these issues would have risked a dislocation, a moving of market expectations away from the expectations of the (Fed's policy) committee. It would have risked increased build-up of leverage or excessively risky positions in the market," he said.
While the end of the Fed's bond buying may be in view, Bernanke repeated that officials will keep rates near zero at least until the jobless rate, which stood at 7.6% in June, falls to 6.5%, as long as inflation remains in check.
He also said the Fed would look closely at any decline in unemployment to see whether it was being driven by strength in hiring or a decline in the number of Americans looking for work, in which case the central bank would be more patient before raising rates.
Any rate hike cycle, he said, would be gradual.
"We intend to be very responsive to incoming data, both in terms of our asset purchases - but it's also important to understand that our overall policy, including our rate policy, is going to remain highly accommodative," Bernanke said.
The testimony led traders in futures markets to push back their expectations for when rates will rise to December 2014 from as early October 2014 a day earlier. The Fed said last month that 14 of its 19 policymakers do not believe it would be appropriate to raise rates until sometime in 2015.
As for bond purchases, economists on Wall Street expect the Fed to start reducing them at its meeting in September.
Speaking about the Fed's bloated balance sheet, Bernanke suggested the central bank would hold the government bonds it has bought for a long time, if not to maturity, and reinvest any proceeds to keep its balance sheet from shrinking quickly.
Recovering at a modest pace
Some Fed officials have been concerned about the low level of inflation and have expressed a hesitance to trim bond purchases until inflation quickens. The central bank's preferred price gauge is a full percentage point below its target.
Bernanke repeated his view that transitory factors appeared to be restraining price gains, although he said policymakers were aware that very low inflation raised the risk of an outright deflation, which could sap the economy's strength.
Data on Tuesday showed that inflation firmed last month, and hiring in recent months has been relatively strong.
However, the government said on Wednesday groundbreaking for homes fell to a 10-month low. In addition, retail sales were weak in June, and second-quarter GDP growth is expected to come in at around a dismal 1% annual rate, painting a very mixed picture for Fed policymakers.
Bernanke, who appears for a second day of testimony before the Senate Banking Committee on Thursday, said the economic recovery was continuing at a moderate pace thanks to a generally stronger housing sector, which was helping conditions in the labor market improve gradually.
He also repeated that the Fed felt the risks to the economy had decreased since the fall.
But he said higher taxes and cuts in federal spending could exert a larger drag on growth than expected, and that worsening conditions overseas could hurt conditions back home.
"With the recovery still proceeding at only a moderate pace, the economy remains vulnerable to unanticipated shocks, including the possibility that global economic growth may be slower than currently anticipated," Bernanke said.

Bernanke hearing turns into 'eulogy'

With a smile periodically playing across his face, Ben Bernanke almost looked pleased to face questions from members of the US House of Representatives on Wednesday, but that might be because he knows that it was for the last time.
During a hearing described several times as more like a eulogy than testimony on monetary policy, the Federal Reserve chief received bi-partisan thanks for his service as successive members said they had heard he may not be in the job next year.
Bernanke has kept silent about his future plans, but he is widely expected to depart when his current term as Fed chairperson expires on January 31. Nor has he pushed back against perceptions that he is ready to return to private life.
That impression was reinforced last month by President Barack Obama, who said Bernanke had already stayed in office "a lot longer than he wanted".
"I feel a little bit like Bette Midler, the very last guest on the very last episode of The Tonight Show that Johnny Carson hosted. She famously quipped to Carson, 'You are the wind beneath my wings," said Washington state Democrat Denny Heck.
"There's some application to that ... as it relates to the economy and I thank you for your service," he said.
Another Democrat, Al Green from Texas, pleaded with him not to go, while it was suggested that T-shirts for his retirement party be printed with the logo "$34 trillion" to celebrate the amount of US household wealth restored on his watch.
Democrats have been staunch supporters of Bernanke, even though he is a Republican originally appointed by former president George Bush. Obama tapped the one-time Princeton professor for a second four-year term in 2009, thanking him for his aggressive efforts to combat the deep 2007-09 recession and virulent financial crisis.
The Bernanke-led Fed cut overnight interest rates to near zero in late 2008 and launched an unconventional policy of buying longer-term government and mortgage-backed debt to drive other borrowing costs lower.
Many Republicans privately blame Bernanke for helping Obama get re-elected in 2012 and have been outspoken public critics of the aggressive policies he has championed.
Some Republicans repeated their complaints on Wednesday, but they also spent time warmly acknowledging his service, while noting this could be his last appearance before the House.
Indeed, the atmosphere in the crowded hearing room was a great deal lighter than during the dark days of the financial crisis when Bernanke had to endure a heavy barrage of critiques, and the Fed chief looked more at ease.
One lawmaker asked him if now would be a good time for a friend to refinance his mortgage. Bernanke cheerfully responded: "I am not a qualified financial adviser."
However, there were moments when he looked as if he might be relieved he would not have to endure long-winded congressional hearings for much longer, although he does address the Senate banking panel on Thursday.
His smile thinned when committee chairperson Jeb Hensarling, a Texas Republican, announced three hours into the hearing that Bernanke would have to sit through another 10 minutes of questioning.
And he slumped visibly, head on hand, as he listened to Michele Bachmann, a Republican from Minnesota, wonder aloud whether the US Treasury was cooking the books on the federal budget, before politely deflecting her question.
Likewise, his final words to the committee, in response to a question from New Mexico Republican Steve Pearce about whether there was a level of immigration into the United States that could hurt the economy, sounded unapologetically dismissive: "I don't know."