Bank of Japan makes rare rate cut

The bank of Japan has reduced its main interest rate from 0.5% to 0.3%. The first reduction in seven years. And the main interest in Japan is already the lowest in the entire developed world. This measurement resulted in the Nikkei index to go up but closed the day with a loss of 5%. The bank of Japan defended this decision by saying that the economical crisis has “increased further in severity”.

Thursday announced Prime minister Taro Aso that they created a five trillion yen economic package to boost the slacking economy. The second stimulus in two months. It includes an expansion of tax cuts on the housing market to help the struggling housing market, guarantee the loan of employees of small companies (to restore faith in the economy, funding for care of children and the elderly, and support for the unemployed young people. This is necessary because these groups feel the impact the most in times of an economical recession.
The first package consisted out of 11.7 trillion yen proposed by the previous prime minister; Yasuo Fukuda. Once again a government has to interfere to prevent worse to happen. This is also caused by their weakened currency and the decreasing export to the US and Europe.

Source: http://news.bbc.co.uk/2/hi/business/7701319.stm

China faces getting rich less quickly

In China the business is not so good as it has been during the past two years. The reason of this development is the global slowdown. The demand of toys, that are all made in China, declined. Many toy companies in China went bankrupt.
But the global slowdown is not the only reason why the demand of toys from the West declined. Last year, there were new safety regulations added to costs and wages went up.
All this contributed to the decline of toys. Global slowdown is the biggest contributor. Western people have less money to spend, so they buy less toys. Toy companies are not the only victims, other industries are suffering.
All this leads also to a fall of the stock market and house prices. The rich people in China see their profit decline. Despite all this, many people in China are not afraid. Many of them live already in poverty and can’t lose much.
So the economical recession is not only a problem that effects the Western economy, but also the Asian economy. But China has still its advantages and can still keep its strong position on the market despite all the companies that went bankrupt. The country will never go broke, but the rich people will not get richer, our get fast rich. They will have to do more effort and make their companies stronger and solid. I still believe that the country can become the new market leader, the new USA.

Source : http://news.bbc.co.uk/2/hi/business/7683866.stm

China Pledges to Boost Economy

On Saturday the 25th of October the Chinese Premier Wen Jiabao admitted, on the
two-day Asia-Europe meeting in Beijing, that his country was feeling some effects of the worldwide financial crisis. 43 leaders of nations were there to make new rules to guide the global economy. They also agreed that the IMF (International Monetary Fund) should take a leading role in assisting countries that are seriously affected by the crisis, if they request it.

Premier Wen Jiabao said that the government must spend to avoid a big crisis in the own economy.
He thinks that the government has to do everything to avoid that the financial crisis has an impact on the real (Chinese) economy.

Unfortunately it has already a ‘little’ impact because the Chinese economy is slowing down because of the smaller demand from foreign countries. China doesn’t export as much as in the previous years. However, the Chinese economy has still the fastest growth rate among the world’s largest economies.

On the two-day meeting the 15 euro zone countries and the UK have agreed to put a
$2.3 trillion in guarantees to help banks. The Asian countries have decided to create a
$80 billion emergency fund to help those who are facing liquidity problems.

I think that it's logical that also China feels some (negative) effects from the financial crisis but it's very good of the government that they will do efforts to minimalise those effects. By giving a boost to the national economy, they're on a good way! But I don't think that China has so much worries because even in financial crisis they have the fastest growth rate among the world's largest economies.

source: http://online.wsj.com/article/SB122495542486569603.html

Indian airline sector 'to shrink'

It is not going well in the Indian airline sector. Air India boss Raghu Menon says it could happen that half of India's airline could disappear during these economical bad times. He said that Air India has to take care of their money in the future because two other big companies have signed an alliance with each other.

The Indian airlines have to take care with one bad thing after the other. The baddest thing for them was the continuous rise of the fuel during 5 months and for an airline that is a disaster.

The other problem is the falling demand because off the rising ticket prices and the bad situation of the economy. That is why cost cutting is very important.

It will be a challenge for Air India to be a profitable airline in the future, certainly because two other big airline have signed an alliance.

I think it is good from those other two airlines to sign an alliance because they can split the costs and their are a team know, when one airline of the two is in bad papers, the other can help him.

I hope ffor Air India that they can be profitable in the future and that they can compete with the alliance but personnaly I don't think theyy can do. The alliance has more power because they are with the companies and can slit the costs but Air India has to do it al by themself and that will be a difficult job I think.

source: http://news.bbc.co.uk/2/hi/business/7675957.stm

Taiwan takes on tech innovation

Taiwan is the biggest technological workshop of South East Asia. Already 90% of the laptops are produced in Taiwan. But it’s not only laptops, they produce more than that, like self phones and motherboards for many products.
Taiwan had always one problem, it lies in the shadow of one of the biggest economies of the world (China). That is also the reason that many Taiwanese companies move their production to China. Also because they can produce their goods at lower prices.

The big Taiwanese companies, like Asus and Acer, have agreed that there are 2 ways to approach the market : the first one is to go for the global manufacturing as a provider and the second one is to go for the branded business. But to really succeed in the hi-tech space, is to creating innovative products under your own banners.

Brands like Acer and Asus have taking a strong position on the world wide laptop market. These brands offer laptops with the same continence as Western made laptops, but these laptops are cheaper. The fact that they also put time in finding new innovations and not only copy from other companies, make them stronger and give them a better position on the market. Despite that Taiwan is in the shadow of China, this country has a good economy, certainly because they are the market leader on hi-tech market.

Source : http://news.bbc.co.uk/2/hi/programmes/click_online/7686147.stm

East Asia set to start $80bn fund

East Asians nations have decided to raise a fund of $80bn to protect their region from financial turmoil. This has been discussed by the ten members of the Association of Southeast Asian Nations (Asean)and is supported by South Korea, China and Japan. Those last three countries even contributed 80% of the capital.
The fund can be used by any participating country in times of emergency or to boost its liquidity. What’s in my opinion a very good idea to avoid recession and to preserve the confidence of people in the economy.

The political leaders are mostly concerned of the Western economies because they are very reliable of export to the west. There even is increasing evidence that leading countries are entering a recession. Chip maker Samsung for example announced a 44% fall in its third quarter profits.
Earlier Asian shares fell sharply with the Nikkei closing around 9.6% down.
With this fund at their disposal we can only hope that the inflicted damage would be as low as possible. Especially since the emerging economies don’t have the financial reserves Western countries have.

(Asean nations exists out of: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.)


http://news.bbc.co.uk/2/hi/business/7688406.stm

Korea searches for Dollars

Last Saturday, The Wall Street Journal published an article concerning the (South) Korean economy. The South Korean government and banks are asking the citizens to search for Dollars in their houses and to deposit them in banks. The banks can loan that money to small companies.
Korea wants to attract foreign money so they can use it for loans to businesses that deal with foreign customers, who have an other currency. Especially the small manufacturers need foreign money because the don’t bank overseas like big companies do.

Just like a lot of banks in other countries in the world, South Korea has problems to obtain foreign currencies and especially Dollars. The South Korean government understands that problem and wants to help their local economy. This month they provided $8.5 billion to banks so they can help the smaller businesses with their Dollar liquidity problems.

I think it’s a nice initiative from the South Korean government but it doesn’t solve the problems on the long term. The government isn’t able to give that amount of money to the banks every month. So I think they have to find a new solution because the liquidity crisis all over the world will damage the banks’ foreign-currency funding and their creditworthiness.

source: http://online.wsj.com/article/SB122428493988946393.html

The best Asian growth story you've never heard of

Indonesia has a population of 235 million and it has a vast amounts of natural resources such as coal. In the 80’s and 90’s, the economical growth was about 7%, every year. But in 1998, they had an Asian financial crisis and many companies went bankrupt. The last three years, the country is again doing well with an economical growth of 6%. The country has, just like all other countries, problems. The main problems are high corruption, unemployment and the fact that many people live in poverty. Geography is also a sorrow point of Indonesia. The country exist out of 5 island. Communication is not easy, that’s why it is the world fastest-growing mobile market. They skipped the landline stage and jumped straight to wireless. The mobile market is also very competitive. The firms are bidding for customers. The competition is hard, but still attractive.

Indonesia is a underdog in the Asian economy. Everybody is looking to China and India, expecting them to become the new world leaders on the economical market. But Asia has other players, like Indonesia, with a big amount of natural resources and fast growing economy. The biggest problem of Indonesia, is corruption. Corruption makes it not interesting for the Western financier to buy stocks in Indonesia companies. Only Western companies in Indonesia are interesting, like some telecommunication companies.

Source : http://www.moneyweek.com/investments/stock-markets/the-best-asian-growth-story-youve-never-heard-of-13720.aspx

Eastern Savior

Two trillion dollar. That’s the amount of foreign currency reserves of China. And by some, this makes China a potential savior for the Western Banking problems.



To bail out suffering financial firms, the Western governments need a lot of money. And China seems a good place to get it. But it will be very unlikely that will write a blank cheque since they are also busy trying to protect their economy from a domestic economical slow-down. And any offered help will be attached with demands. In a certain way it’s a good thing China gets more power/status but when Western governments become to dependant from foreign loans, they could force all kind of decisions just because they have the money.
In fact, the Chinese are already doing something similar for a couple of years. They bought pieces of the US national debt which allowed the US government to spend more than they actually had.

China can’t help on their own, also the other emerging economies such as India, Brazil,.. need to help. And even if the money is available, it’s not certain the political will is present. Chinese leaders already said they believe Western governments should solve their own problems. I think that the emerging economies should also try to stabilize the world economy with everything what’s in their power, because sooner or later, it will affect their economy to.

Source: http://news.bbc.co.uk/2/hi/asia-pacific/7671482.stm

Domino or dynamo?

China has become the most important country in the world economy because most of the big countries have big losses as result of the global credit crisis. But the economy of China doesn't grow as much as in the past. The main reason is the sinking prices on the housing market. But China banks can handle this because they don't give big mortgages like in America, buyers of a house in China have to invest 30 or 40% of their one.
Chinese banks can also handle the credit crisis better than the Western banks because the total loans that they give to people is just 65% of their total deposit and that's lower compairing to Western banks.
The people of China haven't as much debts as the Western people so they can handle the sinking prices wich the Western people can't do
These are the mains reasons why China isn't a victim of the global credit crisis and with the help of the government and the national bank, the Chinese economy will do it good in the future

I think that all the Western banks and governments can follow China's example because their economy is good despite the global credit crisis.
Also the Westren can better follow China's example. We found it normal that we go to the bank when we needed money and ask for a loan, even if it's for a small amount of money, or a mortgage but we don't think what would happen if the economy is going down or if the prices would go up. But the banks are also guilty because they give us that loan or mortgage.
So I think that Western people, banks and government have to take over a little bit more of the Chinese system.

source:http://www.economist.com/finance/displaystory.cfm?story_id=12381871

Asia, too, feels the pain.

No single day will pass without some bad news of a bank getting in trouble caused by American mortgage-backed securities. But what about the Asian economies? Did they get in trouble despite the facts that they have $3 trillion in foreign currency, well capitalized banks that are hardly interested in those corrupted American bank products?

Unfortunately yes. Real estate prices are going down from Seoul to New Delhi. Singapore’s economy just entered a recession and some indicators even announce a coming recession in Japan.
What could be the cause that those growing economies gets into trouble?

Well, a important reason is the fact that all those countries depend heavily on our western dollars and euro’s. And now we, the west, are in the middle of a recession. We do not longer import as much as we did before. India for example announced that they growth was limited with only a +1.3%. Some people will say that’s still a good result in this worldwide crisis. It is, but when you know their growth was +7.4% in July you see that also they suffer from it.
It’s sad that the employees of those small companies they job get threatened due to our bank problems.

Who could help them with financial injections, loans etc? Surely not the United states since they already have difficulties in saving their own economy. So more and more people look toward China. China always was and still is an enormously powerful hound that charged ahead every obstacle on its way. Maybe China can confirm its status as a economical super power, equal or maybe even better then the US.

Source: http://www.iht.com/articles/2008/10/10/business/asiaecon.php

Japan agrees funding and tax cuts

On Monday the 29th of September, the BBC published an article about the newest financial plans of the Japanese government.

The Japanese government agreed to provide 1.81 trillion yen or 17 billion US Dollar to stimulate the Japanese economy. The Japanese economy is on the brink of a recession. It’s also very interesting for the inhabitants because it will cope the high energy and food prices in the country.They also promised the Japanese people tax cuts before the end of the fiscal year in March 2009.


The Japanese prime minister, Taro Aso, thinks to achieve an economic recovery and he also tries to help the (poor) people in his country. It’s also good for the country itself and the local economies.

I think that it’s a good idea of the prime minister because he wants to avoid a national recession. He tries to help the Japanese economy and the inhabitants, that is a very positive fact. On the other hand, I think that 17 billion US Dollar is a lot of money! The question is if it’s really doable to spend that amount of money to save the economy!? If they really are able to find that amount of money it would give the local economy a real boost!





source: http://news.bbc.co.uk/2/hi/asia-pacific/7641164.stm

Power Plants

India has a new product , a product that will give their economy a extra boost and help them to create extra jobs. Jatropha is a plant that can be transformed into biodiesel. This plant is not only good for India, but also for the world economy. The demand for fuel is still growing and with this alternative maybe the demand will decline. The government also believes in this new project and is investing in this sector. The Jathropha is not they only plant that they can use for biodiesel, they have another one. There is also one negative side of these plants, the crops take too long to bear fruit and the sole of the field are unreliable. This may not discourage the Indian government to invest in this project because it is a good project. We need to find alternatives for oil and this is a very good alternative. They have certainly the knowledge to develop this project. The best technicians and IT people come from India. They have enough space to develop it, so that won’t be a problem. Financially is it also not a problem, India has a lot of capital. To conclude the Indian economy is the best working economy of the moment, but like most economies they have a few defaults like inflation. They’re becoming more stronger and their spreading their knowledge over the world.

Source : http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=6899464&story_id=12270974

Junot Roegiers

The big boys are back

About 10 years ago, Japan was a bad country on the field of finances, now they are working on their comeback on the financial world market. Some big companies are engaged in buying shares of big American banks. Nowadays it's easy for the big Japanese banks to buy shares of banks or even the whole bank because of the bad situation on the financial market in Europe and Amercia.
The Japanese banks are well known in their own country but for us they are still unknown.
In every take over you have a little bit problems even in this case because Japan and Amercia have two different cultures. But the thing that Japanese banks can do best is to deal with hard and difficult situations and now they have to prove it.

I found it a good strategy of the Japanese banks to buy as much shares and banks in America (maybe in Europe) as they can because now they have to pay less for everything and the banks in America are more or less out of the problems. I hope for the Japanese banks and also a little bit for the American banks, that they can help the Americans and don't become a bad player on the market again. Because then there will be a bigger disaster than now. But I hope that they do not take over my bank because I don't trust them, I can't explain why I don't trust them but it's a feeling.

source: http://www.economist.com/finance/displaystory.cfm?story_id=12306044

Japan posts a rare trade deficit

In August, the Japanese trade gap slipped into the red. Japan is on the edge of a recession.
The reasons for the failing economy are the falling export and domestic demand. Because of the rising prices of oil, coal and natural gas, the Japanese governement has to pay more for the products they have to import.
The other problem they have is that their export doesn't grow proportionate with the cost of the import, so they lose a lot of money. The reason for that is the falling demand of Japanese cars. And it isn't Japan only that have problems with their economy but also overseas.It was since 1980 that Japan has have so much economical problems.

I think the only solution for the problems that Japan and the overseas areas have is to reduce the price of the oil and the raw materials in general so that the imports costs will going down
The governements of the US and the European countries could raise the purchasing power of the people so that there (probably) will be more demand of Japanese cars and the export of Japan will raise. Only the governements can help Japan, they have to take measures to help Japan and the world in general.

I also think that the problems, that Japan has, also hit other countries. Especially now because the financial world become weaker and weaker and soms people have already lost their money so I personaly think that the economical crisis doesn't stay only in Japan but will spread out.




source:
http://news.bbc.co.uk/2/hi/business/7635265.stm

Why China's milk industry went sour

On the 17th of September, the Chinese government found a dangerous chemical (melamine) in the milk products. Factories of dairy products added this chemical to mislead quality tests and artificially increase the price of their milk. Resulting in thousands of ill babies and damaging the reputation of the Chinese economy. Sadly enough some people say this news was already discovered during the Olympics, but China didn’t want to broadcast bad publicity during this very important happening.

In my opinion, this has to do with the fact that the Chinese economy focuses on producing cheap mass products instead of creating new innovative quality goods. They try everything to cut down the costs so their goods are still cheap enough to be sold abroad. Also the greed of big companies that want to gain more profit is an important factor. The poor farmers aren’t assembled in unions nor do they have the influence to be heard by higher authorities.

For the future, I think this won’t happen anymore because I consider this as a failure/flaw of the control system that isn’t enough developed yet due to the fast growing economy. And to quote the Chinese premier Wen Jinbao: “As head of the government I feel deeply grieved. But the most important thing is to draw a lesson from it”. If you look back at our own economical history, the most important lessons are also learned after critical periods.

Source: http://news.bbc.co.uk/2/hi/asia-pacific/7635466.stm

Brecht Zegers

China gloats as financial tsunami on Wall Street continues

On the 18th of September, the English newspaper, The Daily Mail published an article concerning the financial crisis in Wall Street, in the United States.
The author of the article mentions that China is using the financial crisis in the United States to show the world that we can not longer be dependent from just one big economic nation, that tries to rule everything, like the United States.
The former central bank Deputy Governor, Wu Xiaoling, said US regulators weren’t able to manage all the financial risks and China needs to learn from those mistakes in the United States to avoid such a crisis, or even bigger, in their own country.

I think that what the author mentions is right. We should not be so dependent from the United States like we are now. We also have a financial crisis in the US dependant countries. It would be better if we had a financial system that's not based on the US only. Diversification would be better, since no investor would invest all his money in one company, why should the big banks do it then? Look what happened in Belgium, the big crisis concerning Fortis and Dexia. The cause of that crisis is partial to blame on the financial crisis in the United States. Now the Belgian government had to give money to the two concerning banks to save them from bankrupt. Otherwise there would be a lot of people that lose their money.
So I think that it’s very important to have an diversification on the financial market, just like China claims.


Source: http://www.dailymail.co.uk/money/article-1057523/China-gloats-financial-tsunami-Wall-Street-continues.html