Bank of Japan Governor Masaaki Shirakawa said the economy will keep expanding, playing down concern that it may fall into a recession.
“Economic growth will probably keep decelerating for the time being, but return to a moderate expansionary path thereafter,'' Shirakawa said in a speech at the central bank's quarterly branch managers meeting in Tokyo today.
Higher oil and raw-materials costs are slowing global growth and crimping corporate profits, and some economists say Japan is headed for its first recession since 2001. The bank may say next week that the world's second-largest economy is slowing more than it had forecast in April, after confidence among large manufacturers fell to a four-year low.
A recession is “unavoidable'' because rising energy and commodity prices are eroding incomes, said Masaaki Kanno, a former central bank official and now chief economist at JPMorgan Securities in Tokyo.
Shirakawa reiterated that the central bank has no bias regarding the direction of its next policy move.
“The Bank of Japan is committed to implementing monetary policy flexibly by closely checking upside and downside risk factors,'' he said.
The bank in April shelved a policy of gradually raising interest rates. Economists predict Shirakawa and his colleagues will keep the benchmark rate at 0.5 percent this year.
Export Growth
Shirakawa said export growth and capital investment are slowing and companies' profits are decreasing because of rising commodity costs. He described consumer spending as “firm'' and industrial production as “flat.''
Global financial markets remain volatile, the governor said, adding that the U.S. economy is stagnating and the outlook is “uncertain.'' Inflation is accelerating worldwide because of the commodities boom, he said.
“Economic growth has been undershooting the bank's April outlook, while prices have been overshooting,'' said Mari Iwashita, chief market economist at Daiwa Securities SMBC in Tokyo. “It's too early to say whether Japan will slip into a recession or not.''
The central bank's Tankan business survey last week showed companies expect earnings to fall for the first time in seven years because of the increase in costs.
Japan's economy will probably expand 1.5 percent in the year ending March 2009 and 1.7 percent in the following year, the bank said in April. Consumer prices excluding fresh food will climb 1.1 percent this year and 1 percent next year, it said. The central bank will publish a review of the April outlook on July 15.
The bank will release its quarterly regional economic report, which is Japan's version of the Federal Reserve's beige book, at 2:30 p.m. Managers of the Osaka, Nagoya, Fukuoka and Sapporo branches will hold news conferences later today.
Christ Hospital is buying Kenwood-based Midwest Ultrasound Inc.
The sale is expected to be complete on June 30. Terms of the deal were not disclosed.
Midwest Ultrasound, which started in 1983, providing diagnostic ultrasound services in partnerships with hospitals and large physician practices.
"Midwest Ultrasound is a well regarded company with a strong reputation for excellent patient care" Christ CEO Susan Croushore said in a press release.
"Our collaborative spirit and shared mission to improving care in this community strengthens available services and introduces greater capacity of care in the region. We look to provide better access and more convenience for our patients and customers. This acquisition gives us the flexibility to more easily adjust to market growth and to better accommodate those we serve."
Midwest Ultrasound manages more than 25 regional vascular, cardiac and general ultrasound labs. It has more than 80 employees.
"We are delighted to work with the Christ Hospital, who we know will continue to provide the community with much-needed, and the highest-quality cardiac and vascular ultrasound services," said Dr. Peter Podore, CEO of Midwest Ultrasound.
Industrial production dipped in May, underscoring the strain on factories from the deep housing slump.
The Federal Reserve reported Tuesday that output at the nation’s factories, mines and utilities fell 0.2% in May, following a 0.7% decline in April.
The latest report on manufacturing activity disappointed economists. They were forecasting a 0.1% rise in overall production.
Target says same-store sales increased in April but fell short of analyst expectations as consumers shopped for necessities such as food and skipped higher-priced items such as jewelry.
The Minneapolis-based discount retailer says same-store sales for the four-week period ended May 3 rose 3%, missing the 4.5% growth expected by analysts polled by Thomson Financial.
The company said results were weakest where the housing slump hit hardest, including Florida, Arizona, Nevada and parts of California.
Total April sales rose 9% to $4.25 billion.
Year-to-date, same-store sales fell 0.7% while total sales rose 5% to $14.3 billion.
The company expects May same-store sales growth to range between a 1% decline to a 1% increase.
Sales of existing homes fell in March, after registering a modest increase the month before, according to a report by an industry group released Tuesday.
The National Association of Realtors (NAR) reported that sales by homeowners fell 2% in March to an annual pace of 4.93 million, down from the February reading of 5.03 million. The number was down 19.3% from 6.11 million a year earlier.
Economists were expecting the measure to fall to an annual pace of 4.92 million.
"Though mortgage rates are at historically low levels, some borrowers are facing restrictive lending practices in declining markets," said Lawrence Yun, NAR chief economist.
With a large number of homes to choose from, many buyers are biding their time, he added.
The median price of a home sold during the month fell 7.7% to $200,700 from $217,400 a year earlier. In February, the median home price fell 8.2%, which was the largest year-over-year price drop on record.
Overall, the median home price has now tumbled 12.8% since the record high reached in July 2006.
Home prices in the West fell 14.7% to $285,100, which helped spur a 2.2% increase in home sales in that region.
Sales also increased 2.2% in the Northeast, where home prices rose 4.6%.
An affiliate of U.S.-based buyout firm Carlyle Group has defaulted on about $16.6 billion of debt and expects its lenders to seize remaining assets as the global credit crunch tightens around leveraged investors.
The Carlyle Group said in a statement on Thursday that as Carlyle Capital Corp (CARC.AS: Quote, Profile, Research), a fund listed in Amsterdam, was unable to reach a deal with lenders it expected those lenders to take possession of the fund’s remaining residential mortgage-backed securities assets.
Carlyle said it had worked “exhaustively” to assist Carlyle Capital and took “extraordinary measures” to help it through its liquidity crisis.
It stressed that Carlyle Capital Corp (CCC) was a separate legal and business entity, and that it believed CCC would not have a measurable impact on Carlyle’s other funds, investments and portfolio companies. Carlyle Group said that Carlyle Capital’s defaults did not trigger cross-defaults for any Carlyle borrowings.
The Carlyle Group, based in Washington, DC, has more than $75 billion under management. One of the world’s largest private equity firms, it owns companies including TV ratings firm Nielsen, doughnut seller Dunkin’ Brands and former General Motors unit Allison Transmission.
Carlyle Capital said in New York late on Wednesday that talks with lenders deteriorated after a decline in the value of its mortgage investments, which it said would result in margin calls of $97.5 million on top of the $400 million it was already facing.
A “successful refinancing is not possible,” Carlyle Capital said, after trying for the past week to work out a deal with lenders to stave off bankruptcy.
The credit crisis, triggered last year when subprime mortgages made to risky U.S. borrowers went sour, has put increasing pressure on lenders to tighten credit and made it difficult to value collateralized debt, mortgage portfolios and other fixed-income securities — the investments that Carlyle Capital was set up to invest in.
Employers unexpectedly cut jobs in February at the steepest rate in nearly five years, a second straight month of employment losses that heightened fears the world’s largest economy has skidded into recession.
“The question appears no longer to be are we going into a recession but how long and deep it will be,” said economist Joel Naroff of Naroff Economic Advisors Inc in Holland, Pennsylvania.
The Labor Department on Friday said 63,000 non-farm jobs were eliminated on top of an upwardly revised loss of 22,000 in January, sharply contrary to Wall Street economists’ forecasts that 25,000 positions would be added in February.
The department also halved the number added in December to 41,000 from the 82,000 estimated a month ago, in a move that underlined the steady deterioration in the U.S. labor market.
“The underlying trends are horrible, with worse to come,” said economist Ian Shepherdson of High Frequency Economics in Valhalla, New York. The Federal Reserve “has to ease (U.S. benchmark interest rates) much more,” he said.
The U.S. central bank already has cut its federal funds target rate by 2.25 percentage points since September to its current 3 percent level and is widely expected to slash it again at its next policy-setting session on March 18.
A Reuters poll on Friday found that most major Wall Street dealers expect the fed funds rate to be at 2 percent and possibly lower by the end of April.
STOCK PRICES SUFFER
Financier Wilbur Ross will invest as much as $1 billion in Bermuda-based reinsurer Assured Guaranty Ltd, the bond insurer said Friday.
WL Ross & Co. will purchase $250 million worth of common stock and commit to buying an additional $750 million shares at the company’s option, and Ross will be appointed to Assured Guaranty’s board.
Bond insurers have struggled to maintain "AAA" ratings as bonds they back lose value amid the credit crisis. Assured Guaranty has been seen as one of the strongest in the sector, despite some exposure to the weakening credit markets.
The closing of the initial $250 million investment is subject to regulatory approvals; any subsequent investments will require shareholder approval, which the company will request at its 2008 annual meeting.
In order to draw on the $750 million commitment, Assured Guaranty (AGO) must maintain ‘AAA’ (stable) ratings for itself, and ‘AA’ ratings for Assured Guaranty Re Ltd. from credit ratings agencies Standard & Poor’s, Moody’s (MCO) and Fitch. Furthermore, the credit quality of its financial guaranty portfolio and investment portfolio must not decline significantly.
Merrill Lynch & Co. acted as financial adviser to Assured on the deal.
Billionaire Wilbur Ross has agreed to invest up to $1 billion in Assured Guaranty Ltd (AGO.N: Quote, Profile, Research), bypassing big bond insurers like Ambac Financial Group Inc (ABK.N: Quote, Profile, Research) in favor of a rival that has largely avoided the credit problems plaguing the industry.
Ross agreed to buy $250 million of common shares of Assured and committed to purchase up to $750 million in additional stock at the company’s option.
Investors had hoped that Ross’s WL Ross & Co LLC would help rescue Ambac, after reports last month that the tycoon was eyeing an investment in the second-largest bond insurer. Ambac’s efforts to raise new capital are progressing more slowly than hoped, according to people briefed on the matter.
Even without new funds, though, Ambac’s main unit has enough capital to maintain its top credit ratings, Moody’s Investors Service said on Friday.
The combination of positive and negative news meant that Ambac’s shares traded as much as 8.3 percent lower and 2.5 percent higher before settling to essentially unchanged.
Assured Guaranty shares rose as much as 15.8 percent.
Ross told Reuters that he had chosen Assured Guaranty because it needs capital to pursue new business, rather than to cure damage.
“The idea of this capital is … not to simply patch a hole,” Ross said in a telephone interview, adding that he was still in conversations with other bond insurers.
The toy industry and the nation’s leading standardization group released a plan Thursday that hopes to make sure toys manufactured around the world are safe.
The much-awaited proposal comes from the Toy Industry Association (TIA) and the American National Standards Institute (ANSI).
"This effort is a preventative plan to anticipate and discover hazards going forward," said Lane Hallenbeck, Chair of the ANSI Steering Committee that helped develop the plan.
The TIA/ANSI report contained three main recommendations:
Mandatory design hazard analysis
The groups proposed that toy companies test their products for design defects, the leading cause of recalls. Sue DeRegon, safety expert who was on the TIA/ANSI working committee, said the tests can be carried out by the companies themselves or by third-party laboratories.
Industry analysts say a majority of recalls come from careless designs that use dangerous small parts. Only a small percentage of recalls are due to hazards related to chemicals like lead paint.
Factory audits
The new safety proposal recommends that factories worldwide submit to regular manufacturing and quality audits in order to be certified under the new toy safety initiative. DeRegon said the audits would "most likely" be conducted by third party firms.
Mandatory Safety Testing
TIA-ANSI recommended that toy companies, including those that use overseas factories, perform mandatory safety checks by accredited labs to make sure their products meet current federal regulations pertaining to chemical, mechanical and other hazards.
Toy companies are currently not required to prove that their products have been tested for safety issues.
The recommendations will be available for public review on ANSI’s Web site for one month. Following the public comment period, a final proposal will be presented to the TIA Board for adoption and implementation.
Powered by WordPress -- XHTML 1.0