Friday, March 20, 2015

Abe to be first Japan PM to address joint session of US Congress

Abe to be first Japan PM to address joint session of US Congress

[WASHINGTON] Shinzo Abe is expected to become the first Japanese prime minister to address a joint session of the US Congress next month, crowning a visit focused on deepening trade and military ties.
Mr Abe is due to make the speech during a trip to Washington at the end of next month, diplomatic and legislative sources told AFP, with an official announcement expected soon.
Few Japanese politicians have ever addressed Congress and none have done so in a coveted joint session of the Senate and House of Representatives.
Japan's neighbours, which have perennially strained ties with Tokyo given the bitter legacy of World War II and ongoing territorial disputes, were muted in their reaction.
Seoul urged Mr Abe to use the opportunity to express his "sincere repentance" for wartime atrocities, while China's foreign ministry merely noted the reports of the invitation.
"If the speech by Prime Minister Abe is made, it should share the view about history held by (Japan's) previous governments and show sincere repentance for the past," an official with South Korea's foreign ministry told journalists.
He said that while Mr Abe's government has publicly endorsed a 1995 apology for wartime wrongs, ministers were pushing for more emphasis on patriotism in schools and making visits to a shrine that honors the war dead, including convicted war criminals.
Seoul also believes Tokyo has yet to fully atone for the excesses of its colonial past and the forced recruitment of South Korean women to wartime military brothels.
The friction is a source of irritation for Washington, which would rather see its two key regional allies bury the hatchet and instead focus on forming a united front against an increasingly assertive China.
The issue of wartime sex slavery was also behind some US opposition to Mr Abe's invitation, sources said.
Japan says it has already apologised, offered financial compensation and psychological help to victims.
Diplomatic sources said that Mr Abe's speech was expected to echo some of the themes from his July address to the Australian parliament, where he expressed humility about the "evils and horrors" of Japan's history.
"This is a tremendous opportunity for Prime Minister Abe to allay concerns, misgivings or miscomprehension in some instances here in Washington about what position on the past is, on Japan's behaviour during World War II," said Sheila Smith of the Council on Foreign Relations.
"This is a good moment for a global public to hear him first hand talk about the importance and significance of the past in shaping Japan's future ambitions."
DIPLOMATIC COUP
Seoul's JoongAng Ilbo newspaper described the invitation as a diplomatic coup for Mr Abe.
It said it may have been a reward for Japan's participation in the US-led Trans-Pacific Partnership free trade agreement - one of the areas where Washington and Beijing are jostling for influence.
Mr Abe's visit is likely to push forward talks on the partnership - a trade deal bringing together a dozen nations including Australia, Japan, Mexico, the United States and Vietnam.
Negotiators hope that by the time Mr Abe arrives, President Barack Obama will have won backing from Congress to close negotiations on the deal.
Mr Obama is seeking so-called fast-track authority that would allow the White House to secure the deal and submit it in its entirety to Congress to ratify, without the power to make amendments.
The US government estimates the country ships almost US$2 billion worth of goods to Trans-Pacific countries every day.
But Mr Obama faces some opposition in Congress, chiefly from within his own Democratic party, and from trade unions who worry about labour standards in the signatory countries and that jobs may be shipped overseas.
If Mr Obama gets the authority from Congress, diplomats say a comprehensive trade deal could be signed quickly after.
RISING CHINA
The visit is also expected to develop closer military ties between the two countries. Efforts are already under way to update "defence cooperation guidelines" that govern military relations.
China has for years been ramping up its military spending and expanding its hardware as it looks to become a "Blue Seas" power capable of projecting force beyond its immediate region.
This has sparked a US "pivot" toward Asia as well as provoked concern in the region, and Japan this year approved its biggest ever defence budget, with its third straight annual rise in funding.
The change in the defence guidelines comes after Japan revised the way it interprets its constitution, which has long been held to limit the country's military to a narrowly defined defensive role.
Under the new interpretation, Japanese forces would - in certain circumstances - be able to come to the aid of allies under attack, in so-called "collective defence."
AFP

China yuan level reflects fx supply, demand: central bank researcher

China yuan level reflects fx supply, demand: central bank researcher

[BEIJING] The current level of China's yuan reflects foreign exchange supply and demand and is appropriate and in line with economic fundamentals, Lu Lei, head of the research bureau at the People's Bank of China, said on Saturday.
Mr Lu reiterated the policy goal of keeping the yuan "basically stable on a reasonable and balanced level". "We believe the current level is appropriate, it reflects the situation of the real economy, reflects the surplus and shortfall in global capital, also reflects money supply of our country and other countries," he told reporters on the sidelines of a forum.
On Friday, the yuan ended its best week since 2007 after a rush of dollar sales over the past few days by major state-owned banks, possibly acting on behalf of the central bank.
REUTERS

Dollar drop is worst since 2011 as investors rethink Fed policy

Dollar drop is worst since 2011 as investors rethink Fed policy

[NEW YORK] The dollar slumped the most since October 2011 after the Federal Reserve reduced projections for interest- rate increases and expressed concern the dollar's surge is weighing on exports and inflation.
The US currency fell against all of its 16 major peers as banks including HSBC Holdings Plc said the 20 per cent surge since August is coming to an end. Economic reports next week may show inflation remains below the Fed's target, giving the central bank more room to maneuver.
"You always have to be careful with foreign exchange - it can move very quickly and you can't imply anything from previous trends," Charles St-Arnaud, senior economist at Nomura Securities International Inc, said by phone from London. "That's what happened to the US dollar." The Bloomberg Dollar Spot Index fell 2.2 per cent this week to 1,195.01 in New York. The gauge is up 1.9 per cent this month and 5.7 per cent this year.
The greenback slumped 3.1 per cent this week to US$1.0821 versus the euro, and fell 1.1 per cent to 120.04 yen.
Hedge funds trimmed their bullish dollar futures positions to the least since December, according to Commodity Futures Trading Commission data. Net futures position betting on a stronger greenback versus eight major peers in this category reached a record 448,675 contracts in January.
Fed Policy Fed policy makers on March 18 lowered their median 2015 forecast for the federal funds rate to 0.625 per cent from 1.125 percent three months ago. The slower projected pace of tightening boosted demand for emerging-market currencies, led by a 4.8 per cent rally in Russia's ruble and 3.8 per cent surge in Hungary's forint.
The change in Fed estimates softened the perceived monetary-policy divergence between the US and the rest of the world, which has been a driver of the dollar's ascent.
Central banks from Sweden to Australia have eased policies this year to spur growth and fight deflation by devaluing their currencies, in turn boosting investors' demand for dollar- denominated assets. The stronger greenback contributed to weaker exports that would be a "notable drag" on growth this year, Fed Chair Janet Yellen said.
Economic expansion has slowed in the US this year and the inflation rate has consistently fallen below the Fed's 2 per cent target.
Economists forecast the consumer price index rose 0.2 per cent in February, following a 0.7 per cent decline the previous month.
DOLLAR IMPLICATIONS
The Fed "can't ignore the stronger dollar's implications for growth," Alan Ruskin, the global head of Group of 10 foreign exchange at Deutsche Bank AG in New York, said by e- mail. "The US dollar's gains have reached the point where they are willing to indirectly protest dollar strength."
Fed Bank of Atlanta President Dennis Lockhart said Friday the central bank should begin raising rates in the middle of this year or later, noting the stronger dollar changed his view to a modest extent, while it was "not a game changer." The dollar has gained 19 percent in the past year, the best performance among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro declined 9.1 per cent, while the yen was little changed.
"This is not time to turn bullish with fanciful forecasts - most of the meat of the dollar bull-run is done," David Bloom, global head of currency strategy at HSBC Holdings in London, said in an interview Friday on Bloomberg Television. "The Fed rate hike is in the price. The big motivation behind the dollar bull market has dried up."
HSBC cut its 2016 forecast for the dollar to US$1.10 per euro on Thursday, from US$1.05.
BLOOMBERG

China to audit overseas assets of state-owned firms

China to audit overseas assets of state-owned firms


[BEIJING] The Chinese government will audit the overseas assets of state-owned enterprises, the regulator announced, as it tries to improve transparency and combat corruption.
The State-owned Assets Supervision and Administration Commission said late on Tuesday that it had issued a tender for the audit, in what state media said was the first time such a tender had been offered.
Companies who wish to apply must be incorporated in China and have Chinese government licences, the regulator said, adding that the results of the tender will be announced on April 7.
The only other details provided were technical ones about the bidding process.
The official Xinhua news agency said earlier this month that China does not audit the 4 trillion yuan (S$886 billion) of assets its state-owned enterprises hold overseas, highlighting difficulties the government faces when expanding its anti-corruption drive.
REUTERS

China urges more action to raise grain output

China urges more action to raise grain output

[SHANGHAI] China will step up efforts to increase grain output this year by providing stronger technical guidance and more credit, the state-owned Xinhua News Agency reported on Saturday.
Chinese Premier Li Keqiang has urged local governments to take more measures to help farmers protect farmland and minimise damage from accidents such as fires.
China's state cabinet has already ordered local governments to take up more responsibility to maintain supplies and increase reserves in the world's most populous nation.
Meanwhile, Vice Premier Wang Yang has also asked for more technical guidance, capital supply and water conservation projects to help farmers improve production and cope with challenges such as drought, Xinhua said.
Local governments have long prioritised the expansion of industries in order to boost tax income and have lacked incentives to develop agriculture. Farming accounts for only a small part of local GDP.
REUTERS

Singdollar stung by speculative shorting

Singdollar stung by speculative shorting

As many expect MAS to ease again in April, S$ has become key target among Asian currencies

Singapore
THE Singapore dollar is among Asia's weakest currencies as speculators have been shorting it as a one-way bet on expectations of further easing next month.
Year to date, only the Malaysian ringgit (MYR) and the Indonesian rupiah (IDR) have had it worse against the mighty greenback. According to Commerzbank, the ringgit and rupiah are the top underperformers. The US$ is up 6.5 per cent and 6.2 per cent against the ringgit and rupiah respectively. The S$ is the third weakest, with the US$ up 4.7 per cent since January.
While traders or speculators are attacking other currencies as well, they see the S$ as a sure thing, guessing that the Monetary Authority of Singapore (MAS) will ease the currency by 2 per cent next month.
On Friday, the S$ stood at S$1.389, falling from Thursday's S$1.380.
"Our view is to be short SGD, MYR and IDR, which should continue to underperform in the coming months," said Nomura Global Markets Research on Friday.
"Most participants expect MAS to ease again in April. So, for many speculators, the SGD has become . . . a favourite short against a USD long," said Barclays economist Leong Wai Ho.
They are going for others as well, said Mr Leong, "but the SGD offers the certainty of an expected 2 per cent payoff in mid-April, if they are right. So to speculators, it is a gamble that looks interesting."
Citi's Kit Wei Zheng is expecting the MAS to widen +/- 3 per cent the S$NEER (nominal effective exchange rate) policy band in April to deal with increased economic uncertainty and market volatility. "Wider band offers flexibility to accommodate temporary USD strength, and increases two-way risks for speculators," said Mr Kit.
In a surprise move in late January, MAS decreased the slope of its S$NEER, while maintaining its policy of a modest and gradual appreciation of the S$NEER policy band.
MAS uses the exchange rate as a monetary policy tool - unlike other central banks which use interest rates. It can make adjustments to exchange rate policy in three ways: the slope, width, and the midpoint or level of the policy band. MAS has two policy reviews each year, in April and October.
"Already, the floor of the band has been persistently tested since March," said Mr Kit. "While MAS has sufficient reserves to defend the floor of the band (after factoring in reserves managed by GIC), it may judge it futile to swim against the global tide of a strong USD."
If there is a re-centering lower by MAS in April, this will open up the space for USD/SGD to move towards 1.42 before S$NEER hits the new -2 per cent weak side of the policy band, said Nomura.
"The SGD NEER had been trading very close to the -2.0 per cent band since the MAS off-cycle decision to lower the policy slope on Jan 28, which saw the SGD accelerating its weakness against the USD," said United Overseas Bank senior economist Alvin Liew.
He added: "If the midpoint re-centering happens, our imputed end-2015 forecast will see the USD/SGD moving towards the 1.44 level, from our previous forecast of 1.40. If the SGD NEER continues its decline towards the -2.0 per cent band again even after the re-centering takes place, then the USD/SGD may move even higher towards the 1.47 level."
But it's not that everyone including Barclays' Mr Leong thinks MAS will ease next month. "These animal spirits would go away if MAS should remain on hold, as we expect in April," he said.
In January, MAS did warn speculators that it "stands ready to curb sharp movements in the S$NEER".

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