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