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US economy 'set to gain momentum'
WASHINGTON: US Treasury Secretary Henry Paulson said yesterday the US economy was set to pick up steam later this year, and pledged to fight any effort at trade protectionism that could slow growth.
"We are committed to keeping the US economy open to trade and investment, which underpins our economic strength, and to opposing protectionism whenever and wherever it arises," Paulson told a meeting of the International Monetary Fund.
Paulson said US economic prospects were good and played down the impact of a recent slowdown.
"While economic activity slowed below potential in late 2006, we expect GDP growth to rebound to three per cent by the end of this year," he said.
He said IMF-sponsored talks over the past several months on how to reduce global imbalances - principally big US deficits and corresponding surpluses in Asia and elsewhere - had been useful and said they weren't designed to be binding.
"While these consultations were never intended to produce joint policy commitments, they still contributed importantly to improved understanding about the participants' shared responsibilities for promoting adjustment of imbalances," he said.
http://www.gulf-daily-news.com/Story.asp?Article=179175&Sn=BUSI&IssueID=30026
Statement by U.S. Treasury Secretary Henry M. Paulson, Jr.
at the International Monetary and Financial Committee Meeting
April 14, 2007
HP-351
WASHINGTON, DC--Today's meeting is taking place against the backdrop of a continued strong and resilient global economy, which provides a favorable setting for overcoming the challenges we face. Both advanced and emerging economies have put in place improved policy frameworks that are underpinning sustained growth. With global growth expected to be near 5% this year, the past five years mark the strongest period of world growth since the early 1970s. Recent bouts of moderate financial turbulence, in mid-2006 and again in early 2007, have tested the system, but it has performed well. While ongoing vigilance is required, inflation risks appear contained and international trade continues to expand.
Prospects for the U.S. economy are good. While economic activity slowed below potential in late 2006, we expect GDP growth to rebound to 3% by the end of this year. Inflation risks appear to be contained, while the labor market is healthy – with 7.8 million new jobs created since mid-2003, low unemployment and strong real wage growth. I am happy to report that the U.S. continues to make excellent progress in steadily shrinking our federal fiscal deficit, which fell from 3.6% in FY2004 to 1.9% in FY2006, a pace faster than most thought likely. We are committed to keeping the U.S. economy open to trade and investment, which underpins our economic strength, and to opposing protectionism whenever and wherever it arises.
Trade liberalization remains essential to economic growth for all countries and a key catalyst for poverty reduction in the less developed countries. Now that Doha Round negotiations have resumed, we must seize the opportunity to reach agreement. All countries will benefit from an agreement, and all countries – both developed and developing – must contribute through real market access commitments in agriculture, manufacturing, and services, including financial services. The financial sector in particular is the backbone of a modern economy with virtually every other sector of the economy depending on its services.
Over the last several months, the United States has been a participant in the IMF-sponsored Multilateral Consultations on global imbalances. While these consultations were never intended to produce joint policy commitments, they have still contributed importantly to improved understanding about the participants' shared responsibilities for promoting adjustment of imbalances. Indeed, there has been some re-balancing of global demand over the last year, but it is important to ensure that the cyclical upturn now underway in many countries is translated into lasting improvements in underlying potential growth. Looking forward, we hope for faster sustained demand growth from Europe and Japan, more demand growth from major surplus countries, and greater exchange rate flexibility in Asian emerging economies, especially China. The counterpart to a falling U.S. trade deficit, by definition, is falling trade surpluses in other economies.
Progress on IMF Reform
The IMF is an essential organization for international monetary cooperation. It has proven this since its inception – fostering growth and integration in the wake of World War II; strengthening international surveillance after the breakdown of the Bretton Woods System; helping the global financial system overcome the debt crises of the 1980s and 1990s; and facilitating the transition of command economies. In serving the global economy, the Fund has adapted to changing times while adhering to its basic principles. The world is fast changing again. For the IMF to remain modern and relevant, it must re-invent itself. That is what our discussions on the Medium Term Strategy are all about.
First and foremost, the IMF must fundamentally reform its approach to surveillance over exchange rates. Let us be clear: exercising firm surveillance over members' exchange rate policies is the core function of the institution. The 1977 Decision on Surveillance over Exchange Rate Policies must be updated to reflect the dramatic rise of capital flows and the wider use of market-determined floating exchange rates, and to sharpen the focus on fundamental exchange rate misalignment. This should enable firmer surveillance in areas where market forces are not the prevailing paradigm, such as insufficiently flexible exchange rate regimes, or areas where macroeconomic policies and performance are poor even if the exchange rate freely floats. The updating should be accomplished in a manner that creates no new obligations under the IMF Articles. It should also incorporate the realities of how surveillance is actually undertaken in this day and age, and ensure that the conduct of surveillance is even-handed and candid. If exchange rate issues are not debated critically and openly at the Fund, alternative venues and approaches will necessarily emerge. For us, reform of the IMF's foreign exchange surveillance is the lynchpin on which other reforms depend, and we look forward to action in this important area very soon after these meetings. Moreover, it is not simply enough to revise the 1977 Decision. The IMF staff must do a better job in addressing foreign exchange surveillance on a day-to-day basis, particularly in Article IV reports.
Second, as part of the modernization and re-invention process, the IMF's governance structure needs to be overhauled. The Fund no longer looks like the world economy in which we live. Marginal reforms that do not fundamentally alter relative quota shares are insufficient – bold action is needed to boost the share of dynamic emerging market countries. Major emerging markets are producing an increasing share of global output, assuming greater responsibility for the functioning of the system, and will increasingly drive global growth. We continue to support protecting the shares of the poorest countries through an increase in basic votes. We reiterate the commitment of the United States to forgo the additional quota due us in the second stage ad hoc increase beyond what we need to maintain our pre-Singapore voting share and we reiterate our as of yet largely unheard call on other similarly situated countries to join us in doing this.
As part of this broader reform package, we have listened to our colleagues in emerging markets and we will support a new liquidity instrument to promote further reduction of vulnerabilities to capital account crises, provided the instrument is well-designed. We expect the instrument to include a high standard for qualification and provide that a country, which fully draws its funding under the instrument and subsequently requires additional resources, do so under a new IMF program. Policy actions to deepen domestic local currency capital markets should be an important part of efforts to mitigate the risks to national balance sheets.
Two important external reports have been issued since we last met, both of which have provided useful insights on key issues facing the Fund.
The Malan Report on Bank/Fund Collaboration provides recommendations on sharpening the focus of the IMF's work in low-income countries. We very much agree with these recommendations. The Fund has a very important role to play in poor countries, through surveillance, technical assistance, and financing when appropriate. But the IMF is not a development agency, and we strongly concur with the report's recommendation that the IMF's financing role in low-income countries should focus on actual balance of payments needs, as it does in emerging market members.
The Crockett Report will help catalyze the Executive Board's thinking on the important issue of how the IMF finances itself in the longer-term. The IMF has ample reserves to cover shortfalls in the immediate term, permitting time to fully consider the merits of the Report's recommendations. In parallel, options for further budget restraint must also be fully explored. If low levels of credit persist, the Board will need to give serious consideration to the appropriate role and size of the IMF going forward. The Report puts forward a number of financing options, and we are prepared to consider each on their merits in time.
Since we last met, there has been important progress on strengthening the joint World Bank/IMF Debt Sustainability Framework and Debt Sustainability Analyses (DSAs) for low-income countries. Vigilance will be required to deter the rapid re-accumulation of debt for post-MDRI countries, and we urge emerging bilateral creditors to exercise good judgment and lend responsibly. To this end, we hope that lenders and borrowers will use the DSAs as a tool for analysis and decision making.
Vigorous global efforts to combat terrorist financing, WMD proliferation financing, and other forms of illicit financing are necessary to promote international financial stability and global security. We must continue to assist countries in implementing the Financial Action Task Force's (FATF's) international standards on money laundering and terrorist financing. The IMF and World Bank have been major partners in this vital global effort, and we look for their continued close collaboration with FATF going forward. We also call on all countries to fulfill their UN obligations by implementing UN Security Council Resolutions 1540, 1718, 1737, and 1747 against WMD proliferation, particularly the economic and financial provisions of those resolutions. We commend FATF's effort to examine the risks of WMD proliferation financing and to enhance surveillance of emerging threats to the financial system.
Thank you.
=============================================================
One thing to look out for in the future are the trade balances of China and Japan. If they start shrinking then short the hell out of the JPY crosses. Also if Asian domestic demand goes up then the Asian countries will need to rely LESS on their exports and their trade surpluses will go down.
Simple eh?
As a side note ... I am fracking done with technical analysis. From what I have seen in the past few months, Fundamental analysis is king in my book. If there is a technical level that I will trade off of, I am from now on gonna need a fundamental reason to support tje technical level.
Ultimatepick
Statement by Treasury Secretary Henry M. Paulson, Jr.
Following Meeting of G-7 Finance Ministers and
Central Bank Governors
April 13, 2007
HP-349
Washington, DC--I was pleased to host the G-7 Finance Ministers and Central Bank Governors today here in Washington. We addressed many important issues on a very full agenda.
The current global expansion provides a positive backdrop to our discussions. The U.S. economy is healthy and is making a transition to a sustainable expansion. GDP growth in the 4th quarter was 2.5 percent and U.S. output is up by 3.1 percent over the past 4 quarters. Inflation remains moderate and the U.S. labor market is healthy, with low unemployment, steady job gains, and strong real wage growth. The overall strength of the U.S. economy has led to an improved federal budget situation over the past two years. The deficit, which was 1.9 percent of GDP in FY2006, has been cut in half three years ahead of schedule and the Administration's budget projects a return to a surplus by 2012. We continue to watch developments in the subprime mortgage market. While challenges in this market do not appear to pose a serious risk to the overall economy, many families have been affected. As I testified before Congress earlier this month, we are working closely with housing sector regulators on this issue.
Nevertheless, we remain aware of risks to the world economy. Fuel prices remain high and volatile. Protectionist pressures are rising. Global financial markets are vulnerable to reversals, as we saw earlier this year, though the system has proved to be resilient and adjustments orderly. My colleagues and I discussed the initial progress made towards implementing policies to help reduce global imbalances, including some rebalancing of global demand. However, more needs to be done. We need global demand to be underpinned by strong domestic demand in major economies such as Japan and Europe, and the cyclical upswings need to be translated into lasting improvements in potential growth. Greater exchange rate flexibility and stronger domestic demand in China are critical parts of rebalancing, and it is crucial that China move now with greater urgency. Oil exporters also need to undertake measures to increase investment and consumption. Tonight I will have a working dinner with my G-7 and Chinese colleagues. We will be joined by our counterparts from Russia, Saudi Arabia, and the United Arab Emirates to discuss investment flows from oil exporters to gain a sharper understanding of this increasingly important issue.
I have emphasized that our capital markets in the United States and abroad are vital to global economic growth. At our meetings today, I talked with my colleagues about the United States' approach to private pools of capital, including hedge funds, provided by the U.S. President's Working Group on Financial Markets (PWG). The PWG recognized the rapid growth of this industry and the increasing complexity of the financial instruments that hedge funds use. The U.S. federal regulators and policymakers unanimously moved in February to give unified, forward-leaning guidance for market participants for enhanced vigilance and market discipline. The PWG will continue to encourage market participants to take up this guidance. In our meetings today, we also discussed how robust domestic bond markets are necessary for the growth and stability of all economies, including the emerging markets. We continued our discussion about securities and mutual recognition among comparable regulatory regimes. In today's global marketplace, I believe this is an idea well worth considering and I will be supportive of our regulators' efforts to make progress in this area.
We are at a critical juncture for progress on the Doha Development Round of trade negotiation, and we had a serious discussion on the way forward. I urged my fellow Finance Ministers to encourage their trade ministers to achieve an ambitious deal because of the Round's potential to stimulate growth and economic development. Substantial progress on services, including financial services, must be integral part of a development round, so Finance Ministries need to work together to reinvigorate the financial services negotiations. Progress must be based on a substantive break-through.
As major shareholders of the IMF, the G-7 have a strong interest in safeguarding the legitimacy and effectiveness of that institution. To do so, we must make the IMF look more like the world economy in which it operates. The rise of emerging markets needs to be reflected in the IMF's governance structure. That is why it is essential, first and foremost, that we be bold and follow through with fundamental reform of IMF quotas. I think there is a path forward that could achieve this objective, but doing so will require a rededication by many countries to the understanding that a strong IMF benefits us all. A more representative IMF, however, will mean little without significant improvements in the institution's surveillance over exchange rate policies. For this reason, the G-7 reaffirmed our strong support for quick action to update the IMF's 30-year-old principles and procedures for exchange rate surveillance.
We had a good discussion on policies to promote development in low-income countries, especially ways to address debt sustainability concerns. Responsible lending policies and practices are fundamental to our efforts to enhance support to low-income countries. The key to preserving debt sustainability is to build upon and support the work reflected in the IMF/World Bank Joint Debt Sustainability Framework, and for all creditors to incorporate the framework into their lending practices.
We reaffirmed our commitment to vigorously counter money laundering, terrorist financing, and other illicit finance to promote the stability and integrity of the international financial system. We called on the Financial Action Task Force (FATF) to address emerging threats, including the threat of WMD proliferation finance, and to enhance implementation of FATF standards around the world.
Energy efficiency and security were also on the agenda. The United States is committed to improving energy security and tackling the important issue of climate change, as evidenced by the Administration's January announcement of the "Twenty in Ten" initiative. I urged my colleagues to explore creative policies to address these issues that will engage developing countries. We also need to explore options for accelerating market penetration of low-carbon energy technologies. Solving climate change is fundamentally a technology challenge, so we must consider how best to achieve this goal.
Thank you.
G7 probes better ways of utilising oil money
WASHINGTON: Saudi Arabia, the UAE, China, and Russia discussed with G7 nations how surpluses derived from oil sales should be invested and Beijing's plans to more actively manage its foreign reserves, a senior Japanese finance ministry official said.
After the official meeting, the G7 - Britain, Canada, France, Germany, Italy and Japan and the United States - held a dinner session with some non-G7 nations, often dubbed as a G7 "outreach" meeting.
At the outreach meeting, discussions focused on what kind of options oil-producing countries have to use their surpluses earned from oil sales more effectively.
These included boosting domestic investment to increase their oil supply capacity as well as improving the lives of future generations, the official said.
They also talked about plans to raise investment abroad, such as building refinery facilities outside their countries, and how to invest surplus money in capital markets.
China's deputy finance minister and deputy central banker also told participants about the country's plans to manage its $1.2 trillion foreign exchange reserves, the world's largest, the official said.
"What's new about today's discussion was that China explained that they would manage their foreign reserves outside and will not convert them back to the yuan," the official said.
When asked to clarify further, the official said China did not provide more details.
"They did not go into discussions on whether they will keep the dollar-denominated assets in dollars or whether they would shift them out of the dollar into the euro," he added.
Chinese representatives did not comment on the size of such reserve management plans or which foreign currencies will be involved, he added.
China is setting up a new investment agency to seek higher returns on its foreign currency reserves as it explores new ways of using the reserves.
The currency breakdown of China's foreign reserves holdings is a state secret but a large portion of the reserves is parked in US dollar assets.
China's financial firepower means the fund has the potential over time to make a big impact on world markets, but Chinese official have said the creation of the new investment agency would not have an adverse impact on the US dollar.
China has given no details of how much money the agency would manage, let alone how it might invest, but Finance Minister Jin Renqing has said Singapore's state-owned investment company, Temasek Holdings, would be one of its models.
=============================================================
Ah the secretive and devious Chinese. Wonder what they will do with their Americans bucks.
Dude ever mind! I found the damn thing for this week. But what I need is a calendar of FUTURE G-7 Finance Ministers and Central Bank Governors meetings. The G8 meetings are annually and are different from these.
Here is the info for this last one:
http://www.ustreas.gov/press/releases/hp350.htm
And here are some more goodies to sink your cat fangs into:
http://www.ustreas.gov/press/releases/archives/200704.html
April 13, 2007
HP-350
Statement of G-7 Finance Ministers and
Central Bank Governors
Washington, DC- We, Finance Ministers and Central Bank Governors, met today to evaluate the global economic outlook. Although risks remain, the global economy is having its strongest sustained expansion in more than 30 years and is becoming more balanced. In our economies, U.S. economic activity remains solid even as domestic demand moderates to a more sustainable growth path. The euro-area is experiencing a healthy upswing. UK growth remains robust and Canadian growth is accelerating. Japan's recovery is on track and expected to continue. We remain confident that the implications of these developments will be recognized by market participants and will be incorporated in their assessments of risks.
Further strengthening and rebalancing of domestic demand is desirable to help ensure the global economic expansion remains robust. We continue to be committed to maintaining price stability as the best contribution that monetary policy can make to sustained global growth. We will do more to increase trend economic growth rates, especially through structural reforms such as improving labor markets and long-term fiscal sustainability. We are confident that the continuation of our policies will support economic growth and contribute to reduce international imbalances. We will continue to work together to support the global adjustment process and urge others to do likewise. <== I see this as USD/JPY DOWN!
We reaffirm that exchange rates should reflect economic fundamentals. Excess volatility and disorderly movements in exchange rates are undesirable for economic growth. We continue to monitor exchange markets closely, and cooperate as appropriate. In emerging economies with large and growing current account surpluses, especially China, it is desirable that their effective exchange rates move so that necessary adjustments will occur.<=== Again USD/JPY DOWN.
We believe that a successful conclusion of the Doha Development round is imperative. We are committed to resisting protectionist sentiment. Substantially lowering tariffs and other barriers is essential to spur new growth in global trade and reduce poverty. We welcome recent steps to intensify engagement, recognizing that substantive movement towards a comprehensive final outcome requires all parties to make additional efforts. We expect spending on Aid for Trade to increase to $4 billion, including through enhancing the Integrated Framework. We support initiatives to enhance cooperation to enforce intellectual property rights and combat counterfeiting which are crucial to our knowledge-based economies.
We continued our discussions on how to develop local currency bond markets to enhance the contribution of financial markets to sustainable economic growth and to reduce emerging market economies' vulnerability to external shocks and financial crises. We look forward to the results of the high level conference on May 9-10 in Frankfurt, which will help to identify concrete recommendations to sustain the momentum of reform.<=== What conference ? The future G7 meeting?
We discussed recent developments in global financial markets, including hedge funds, which along with the emergence of advanced financial techniques such as credit derivatives, have contributed significantly to the efficiency of the financial system. We will continue to monitor the implications of these developments. Market-led and official initiatives focused on issues around private pools of capital intended to strengthen market discipline, risk management, market infrastructure, information and valuation practices, are essential contributions to global financial stability. In this context, we welcomed the work of the United States' President's Working Group on Financial Markets and its "Principles and Guidelines Regarding Private Pools of Capital" and look forward to the Financial Stability Forum's update of its 2000 Report on Highly Leveraged Institutions. We discussed the issue of mutual recognition of comparable regimes and look forward to further progress being made on cross-border access by investors to our securities markets.
We agree to push forward the ambitious package of bold and fundamental reforms in order to retain the IMF's relevance and legitimacy. Reforms should ensure that actual IMF quota shares, especially those of the most dynamic members, many of which are emerging markets, better reflect relative weights and roles in the global economy. We agree that the voice of low-income countries should be enhanced. A necessary element of IMF reform is improved surveillance over exchange rates. Surveillance must focus on external stability and be applied equally and even-handedly without creating new obligations. In this context, we welcome the Managing Director's proposals to update the 1977 Decision on Surveillance over Exchange Rate Policies and to develop a surveillance remit. We look forward to finalizing these proposals rapidly after the Spring Meetings. We took note of the work of the External Review Committee on IMF-World Bank Collaboration as well as of the report of the Committee to Study Sustainable Long-term Financing of the IMF. We agreed to consider the latter proposal in time alongside measures to further reduce administrative expenditures.
We encourage the use of the debt sustainability framework by all borrowers and creditors. We welcome continued work on principles for responsible lending and seek to involve other interested parties. We advocate a rapid resolution to Liberia's arrears to the international financial institutions. Available internal resources should be fully used to this end. We are prepared to make additional financial contributions. We look forward to the forthcoming International Conference on Education in Brussels.
In order to ensure energy security and to address climate change, we consider energy efficiency and the promotion of energy diversification to be important issues for both developed and developing economies. Diversification can include advanced energy technologies such as renewable, nuclear, and clean coal. We agree that market based policy measures should be effectively designed to meet specific conditions in each country.
We commit to continue the fight against money laundering, terrorist financing, and other illicit finance that risks the stability and integrity of the global financial system. We call for the effective and timely implementation of UN Resolutions 1540, 1718, 1737 and 1747.
1540 - http://daccess-ods.un.org/access.nsf/Get?Open&DS=S/RES/1540%20(2004)&Lang=E&Area=UNDOC
1718 - http://www.un.org/News/Press/docs/2006/sc8853.doc.htm
1737 - http://www.un.org/News/Press/docs/2006/sc8928.doc.htm
1747 - http://www.un.org/News/Press/docs/2007/sc8980.doc.htm
We commend the Financial Action Task Force on its commitment to examine the risks of weapons of mass destruction proliferation finance. We urge that as it reviews its strategic direction, the FATF consider expanding its mandate, enhancing global implementation of its standards, improving its strategic surveillance, and examining ways to bolster accountability and outreach activities.
We look forward to the successful launch of the International Compact for Iraq in Sharm El Sheik on May 3. We discussed economic prospects in the West Bank and Gaza Strip, and agreed to keep this under review.
==================================================
They did not specifically mention the carry trade. Wonder how the market is gonna see this.
Ultimatepick
FOREX VIEW:G7 Statement Provides No Relief For Yen, Dollar
Sat, Apr 14 2007, 23:15 GMT
http://www.djnewswires.com/eu
FOREX VIEW:G7 Statement Provides No Relief For Yen, Dollar
By Laurence Norman and Isabelle Lindenmayer
OF DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--The decision by the Group of Seven leading industrialized nations to make no changes to their views on currency issues leaves foreign exchange markets braced for more of the same in the coming week: euro strength, U.S. dollar declines and continued so-called carry trade bets that weaken the yen.
With a host of U.S. data due in the coming week, this opens the way for the euro to hit a new record high against the yen and for the single currency to test its 2004 high versus the dollar.
At Friday's spring meeting in Washington, the G7 repeated precisely what finance ministers had said about exchange rates in Essen, Germany, two months ago.
They again said currencies should "reflect economic fundamentals," described disorderly market movements as "undesirable" and called for countries with "large and growing current account surpluses, especially China" to allow movement in their real effective exchange rate.
Ministers made no explicit comment on yen weakness or carry trades, where investors borrow in low-yielding currencies, like the yen or the Swiss franc, to buy higher yielding assets.
European Central Bank President Jean-Claude Trichet said Japanese officials had commented that economic fundamentals were improving and that "this should be reflected in the foreign exchange market." Japanese Finance Minister Koji Omi had a different emphasis, saying, "I don't think there was anyone (among G7 officials) who specifically highlighted the yen and said it had problems."
Meanwhile, Bank of Canada Governor David Dodge said that G7 "views on the yen are exactly where they were the last time we met, that one should be very careful about placing one-way bets."
During the weekend's International Monetary Fund and World Bank spring meetings in Washington, the IMF said it is continuing work on updating the organization's foreign exchange surveillance role.
On Saturday afternoon, the IMF said China reiterated its pledge to take steps to increase currency flexibility, albeit in a "gradual and controllable manner."
No Surprise For Markets
Alan Ruskin, chief international strategist at RBS Greenwich Capital in Greenwich, Conn., said currency traders won't be "desperately surprised" by the lack of mention of the yen or the carry trade in the G7 statement. He said the yen had come under pressure in recent days partly on expectations there would be no change in the G7 language.
Ruskin said that comments on the carry trade by senior G7 officials at the end of February's meeting stirred "up a little bit of volatility but (they) generated nothing in terms of sustainable yen gains ... So I think there was a perceived green light in favor for the carry trade going into the meeting. Now, the light stays green," he said.
Ruskin said that should leave the euro in line to test key resistance levels against the yen, around Y162 or Y163. The euro Friday hit a record against the yen at Y161.46.
When markets open Monday, the euro could suffer some light profit-taking at first but "before the day's out, the yen should be weaker," Ruskin said.
Michael Woolfolk, chief currency strategist at the Bank of New York, agreed that for currency markets, the most significant news to come out of the G7 was "not what was said, but what was not said" about the yen and carry trades.
He said the group's communique also offered good news for emerging-market currencies, which have been bolstered by the carry trade but also benefit from strong global growth and high commodity prices.
"One of the things that we can take away from this communique is the broad-based agreement on the health of the global economy. G7 finance ministers believe the world economy is headed for a soft landing," Woolfolk said. He said it was also a positive sign that the communique had made no explicit reference to the recent equity markets volatility.
With the most senior Chinese officials staying away from the G7 meeting, there were no developments in the other international issue weighing on currency markets and the dollar in particular - the recent trade spats between China and the U.S.
Friday afternoon in New York, the euro stood at $1.3516 from $1.3489 late Thursday, while the dollar was changing hands at Y119.26 versus Y119.05, according to EBS. The euro traded at Y161.18 versus Y160.59 late Thursday.
Nearing An All-Time High
With the euro last week climbing to almost one cent shy of its all-time high against the dollar thanks to signals from the European Central Bank that it plans to raise rates in June and perhaps again after that, the single currency is very much ascendant, analysts said.
"Euro-dollar has breached resistance at the $1.3480 highs," Robert Lynch, currency strategist at HSBC, said Friday. "It would not take much for (the record level) to be reached," Lynch said. The euro's high against the U.S. currency is $1.3670, which it hit in December 2004.
Greg Anderson, currency strategist at ABN Amro in Chicago, said there are still a significant number of dollar bears who haven't wholeheartedly entered the market yet, underlying the scope for dollar declines.
"There is plenty of macro discretionary money that has yet to buy euro-dollar," he said.
The pressured dollar enters the new week facing a slew of U.S. data. The market will digest a March retail sales report, an April manufacturing report from the New York region, and a February report on net foreign purchases of U.S. securities. It will also face fresh comments Monday from a host of central bank speakers, including the ECB's Trichet and three U.S. Federal Reserve speakers.
The one release of the week that could reverse or at least temper the dollar's decline is Tuesday's consumer price index data.
Should March core prices - those excluding food and energy - remain even with the previous month's year-over-year advance of 2.7%, or even increase, that could "temporarily reverse the dollar's weakness," said Matthew Strauss, senior currency strategist at RBC Capital Markets.
-By Laurence Norman and Isabelle Lindernmayer, Dow Jones Newswires; 201-938-2096; laurence.norman@dowjones.com
(Takashi Nakamichi, Andrew Peaple and Luca DiLeo contributed to this article)
(END) Dow Jones Newswires
April 14, 2007 19:15 ET (23:15 GMT)
http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=52b08e3e-2aad-44d4-9838-115a3eaf6ab8
Japan's Omi Recommends IMF Sell Gold Reserves
Sun, Apr 15 2007, 01:25 GMT
http://www.djnewswires.com/eu
Japan's Omi Recommends IMF Sell Gold Reserves
WASHINGTON -(Dow Jones)- Japan's finance minister said Saturday he had proposed to the International Monetary Fund's policy-steering body that the fund sell its gold reserves to cover its falling income.
"Japan has told (the committee): 'Why not sell gold?'" Finance Minister Koji Omi told reporters after attending the International Monetary and Finance Committee's spring meeting in Washington.
Omi's proposal is in line with Japan's long-held stance as well as recommendations made earlier this year by a high-level panel at the IMF. In late January, the panel, chaired by Andrew Crockett, president of JPMorgan Chase & Co. (JPM), urged the fund to sell some of its vast gold reserves and invest the proceeds to raise income.
The fund currently is unable to earn enough revenue to cover its operating costs because of its shrinking loan portfolio. Countries such as Brazil, the Philippines and Uruguay have paid off loans from the fund ahead of schedule, reducing interest payments to the international lender, while fewer nations are seeking the fund's financial support.
Commodities traders have been closely watching the IMF's handling of gold. The fund is the third-largest holder of gold reserves in the world, after the U.S. and German central banks. As of late last year, the IMF said it held 103.4 million ounces of gold.
Omi Saturday also repeated Japan's position that countries shouldn't rely too much on exchange-rate changes as a means of reducing the world's trade imbalances.
"It's important that each country...move ahead with structural reforms and healthy developments, instead of trying to fix global imbalances solely through exchange rates," Omi said.
"The consensus (among the IMFC members) is that (each) individual country (should) maintain steady developments by resolving its own structural problems and, through that process, mend the world's imbalances," he said.
Earlier, Omi had attended the IMFC's spring meeting. Members of the committee discussed a range of issues, from the fund's battered finances, to the world's economy, to global trade imbalances.
-By Takashi Nakamichi, Dow Jones Newswires; 813-5255-2929; takashi.nakamichi@dowjones.com
(END) Dow Jones Newswires
April 14, 2007 21:25 ET (01:25 GMT)
http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=7a7e1488-00b9-4b13-9189-c88af9f83ce7
Glance ... where did you get this article?
I was looking for the agenda of the meeting schedules for this weekend to see of the yen carry trade was on the agenda as some said but for the life of me could not find it.
The 33rd G8 summit:
33rd June 6–8, 2007 Flag of Germany Germany Angela Merkel Heiligendamm, Mecklenburg [10]
http://en.wikipedia.org/wiki/G8
What are these G7 meetings? Is there a central website for these meetings? When are the other ones scheduled? It seems like there are meetings of this type about every 2 months.
Here is the last on at the beginning of february:
http://www.fxstreet.com/fundamental/analysis-reports/special-coverage/2007-02-12.html
Help man!
China-US Trade War - Don't Expect It To Happen
With more and more rhetoric being issued everyday, current US China relations seem to be reaching the precipice of a looming trade war. The speculation has mounted, peaking ahead of this week’s round of IMF and G7 ministers’ meetings, when Chinese officials announced that its own ministers were not attending the meeting. Granted, a quick clarification, noting the attendance of understudies calmed markets but the event helped to shine light on underlying tensions that are currently looming over the market. Incidentally, it sparks the question: are we seeing what is the start of a heavy trade war between the US and China? In short, not likely. Although there is ample support for both nations to stand on their own, imposing sanctions till the cows come home, the reality of such an event is a non starter. Even though protectionism creeps up every so often to drive the US dollar lower, over the long term, concessions by both should neutralize any major dollar impact. The relationship between the two parties is simply too important for both countries. At the same time, despite the underdevelopment and potentially explosive opportunities, neither side will want to just walk away.
WTO Will Review Sanctions For Months If Not Years
Ever since the US Commerce Department announced plans to implement tariffs on Chinese imported goods, both sides have been issuing statements. Chinese officials remain “strongly displeased” against not only the recent glossy paper tariff, but also the newly US submitted proposals to the WTO for lax piracy laws. On the other hand, US officials remain “firm but fair” in their decision, hoping to protect domestic manufacturers from increased competition. But are all these things doing anything to the current trade relationship? Hardly. The sanctions that were implemented on Chinese goods were focused mainly on glossy paper. Stemming from an Ohio based glossy paper manufacturer, the tariff only really constitutes a half a percentage of overall Chinese exports, making up a whopping $81 million of the approximately $220 billion trade relationship. Obviously, the story would be different if the US decided to place hefty 10-20 percent tariffs on China’s top exports including apparel, furniture and electrical machinery and equipment. Incidentally, the three sectors constitute $90 billion worth of exports to the US. As a result, the sheer thinness of the number confirms that the plan was to simply ruffle the feathers of the Chinese higher ups rather than spark protectionist measures. The same can be applied to the recently called for WTO sanctions by the US. Although protectionist at heart, the policy is just another ploy, placing pressure on Chinese officials. Here’s why. The sanctions will take months, if not a minimum of a year, to be ruled upon by WTO policy makers. The most recent example of this has been the submission of WTO sanctions against EU subsidies for France based Airbus. Although preliminary case reports are expected to be issued in November of this year, the EU’s counter case will not be ruled upon until April of next year. Ideally, this will give Chinese officials plenty of time to “rectify” the situation without any intervention from outside sources.
China And The US Need Each Other
China’s reliance on the US will also curb expectations of a blown out trade war. Although policy makers won’t admit it, China continues its attempts to tap the world’s richest economy in the US, it’s largest overseas market. The notion has sparked not only acquisitions of key manufacturing companies, like Lenovo for retail laptop creation, but also plans to expand domestic consumer automobile manufacturing. Similar to previous results by South Korea in its creation of both Daewoo and Kia, China car makers are hoping to expand production and build the competitiveness of its brands in the global market. There may also be longer term talk of a bilateral trade agreement similar to the one inked by the US and South Korea. Should a trade war ensue, however, hopes of this actually happening will dwindle at an accelerated pace.
In addition, China cannot stop buying US dollars. Their current bond market is one tenth the size of the US bond market. The average bond market valuation currently stands at approximately 95 percent of overall GDP while China ‘s market only represents 30 percent to GDP. With the US dollar likely to comprise a big portion of its managed float, as much as China tries to diversify, some of their money will still be used to buy US dollars and US treasuries. On the other hand, this also means that China’s bond market has plenty of growth potential. Expect US investors to aggressively try to get a piece of that pie.
Only When The US Slaps Big Sanctions On Steel, Should FX Traders Be Worried
Only if the US decides to impose stronger tariffs on imported Chinese goods, should FX traders be worried because this will force Chinese officials to think up retaliatory sanctions on its own swath of US imports. Mainly in focus would be China’s steel exports. Now considered the world’s largest producer of the steel and coiled steel products, China would see its global market share decrease in the unlikely event. The situation would couple well with already considered sanctions by the EU as policy makers there look to protect their own industrial producers of the base metal. As mentioned before, China could counter by hastening the pace at which US dollar reallocation takes place. Already amassing an FX reserve of $1.2 trillion, standing as the world’s fourth largest, China could essentially begin unloading a good majority of its $400 billion dollar position in the market. The move would crimp dollar demand and ultimately add an unnecessary weight to the underlying currency. Although good for American exporters, as a depreciated dollar would add to the overall competitiveness of the sector, the massive depreciation would have longer term negative effects on China. Much of Chinese growth is dependent on US demand. If the US economy slows as China’s dumping of US treasuries drives up yield, demand for Chinese goods will falter as well.
Conclusion
Looking at the evidence, the case for a trade war remains thin at best. With a lot at stake for both economies, a full blown war at this point would not only be pointless, it would be an act of pride with plenty of negative ramifications. Obviously, both sides recognize the implications and are likely to make concessions in the near term. For FX traders, there is no cause for worry. Protectionism creeps up every so often to drive the US dollar lower, over the long term, concessions by both should neutralize any major dollar impact. Already, Chinese officials have decided to cut back on government rebates issued on steel exports and other metal based exports as well as cracking down on widespread entertainment piracy. On the other hand, US officials have agreed to participate in talks scheduled within the next two months in efforts to resolve the impasse. If anything, taking a look back historically, trade sanctions at this time aren’t even worth mentioning as the two economies have dealt with higher stakes in the most recent past.
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Excellent article. The way I see it, China does not want it's dollar reserves to go down in value. At the same time the Yen refuses to go up in value. But the US needs the dollar to go down to control inflation. So what will happen? The EURO and probably the POUND will appreciate greatly. The Chinese will slowly sell their dollars and buy Euros and possibly pounds. The European economy is on fire (especially Germany)
Trichet is proud of the Euro strength. It is a source of Great Pride. This time around the European economy can withstand the shock of higher Euro.
Also I see gold going to 2000 plus in the near future because of the Chinese buying a shitload of it.
IMO ... this is the only way that the US can dig themselves out of the hole they are in.
Anybody else have a different view? I see the Euro going to 1.5000 +
Fantastic! I just started studying it too as you can see from my recent posts. This will help with all your trades and currency pairs. We can even start trading the beast and maybe tame it .... NOT!
Since the Japs look at Ichimoku, they trade off Ichimoku signals.
Ichimoku Kinko Hyo analysis works best on a weekly and daily chart. What charts are you looking at?
Rinker holder spurns Cemex's takeover offer
http://www.theaustralian.news.com.au/story/0,20867,21541961-643,00.html
No relationship will be as important to the twenty-first century as the one between the United States, the world’s great power, and China, the world’s rising power. China’s development is directly transforming the lives of one-fifth of the world’s population, and is otherwise influencing billions more. China’s rapid economic growth, expanding regional and global influence, continued military modernization, and uneven human rights record are also shifting the geopolitical terrain and contributing to uncertainty about China’s future course. After thirty-five years of “engagement,” the United States and Chinahave a relationship that was truly unimaginable two generations ago. At the same time, there are some Americans who believe that China’s strategic interests are incompatible with those of the United States.
The Council on Foreign Relations established an Independent Task Force to take stock of the changes under way in China today and to evaluate what these changes mean for China and for the U.S.-China relationship. Based on its careful assessment of the developments in the country and China’s likely future trajectory, the Task Force recommends that the United States pursue a strategy focused on the integration of China into the global community and finds that such an approach will best encourage China to act in a way consistent with U.S. interests and international norms. The Task Force concludes with a series of recommendations aimed to reinforce recent efforts to deepen U.S.-China cooperation. The overall message is that while the United States should not turn a blind eye to the economic, political, and security challenges posed by China’s rise and should be clear that any aggressive behavior on China’s part would be met with strong opposition, U.S. strategy toward China must focus on creating and taking advantage of opportunities to build on common interests in the region and as regards a number of global concerns.
http://www.cfr.org/publication/12985/
You absolutely gotta listen to this dudes(ettes).
APRIL 7
3rd Hour with Jim & John - Part 1
http://www.netcastdaily.com/broadcast/fsn2007-0407-3a.m3u
http://www.netcastdaily.com/fsnewshour.htm
The pesky, stab me in the heart and twist the knife in my heart NZD
However, not all of the risks to growth are on the upside. The high level of the exchange rate is likely to continue to lead to difficult conditions for exporters in other sectors. We expect this to dampen growth in exchange rate sensitive components of exports, such as manufacturing and tourism. The high level of the exchange rate, together with the renewed strength in domestic demand, is likely to see further demand for imports. Weak export volume growth and solid import volume growth will both limit the upside to GDP growth during 2007. Given these developments we still expect GDP growth to be below trend during the next 12 months.
http://www.treasury.govt.nz/mei/mar07/
Lets hope the market realises that the high NZD is a no no for exports. But will they listen? No! because I am shorting it. Of course it will go up.
Chinese businesses rushed to sell products overseas in January and February, concerned at protectionist sentiment abroad and government moves to slow exports, said Wang Qing, an economist at Bank of America Corp. in Hong Kong. ``It's more important to look at the first quarter as a whole, which is a really large trade surplus,'' said Wang.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3JlJDSqXjWg&refer=home
If you look at the whole quarter then the surplus is huge .. sorry about that .. jumped the gun.
China posted a trade surplus of 6.87 bln usd in March, down sharply from 23.76 bln in February, and the lowest level since February 2006, according to data released by the General Administration of Customs.
http://www.forbes.com/markets/feeds/afx/2007/04/10/afx3596142.html
The JAPS may be productive but they are probably gonna destroy the world.
http://www.gold-eagle.com/editorials_05/mauldin051605.html
What periods.
I will teach you. It is very important that we learn how to use them properly because the OTHERS do. The Japanese move in packs so if they see these signals then you can bet it will go in that direction.
What EMAs?
... traders should look to trend following tools such as moving averages (21- and 55-day perio ds are heavily used), DMI, and Parabolic SAR. (This refers to J. Welles Wilder Jr.'s Parabolic System. SAR stands for stop and reverse.) Momentum oscillators such as the relative strength index (RSI), MACD or stochastics should generally be avoided, especially intraday, due to the trending and institutional nature driving USD/JPY...
Glance, I hope you are using ichimoku when trading the JPY crosses.
http://www.investopedia.com/articles/forex/06/ichimoku.asp
The Japs use it ALOT.
Remember these posts?
http://www.investorshub.com/boards/read_msg.asp?Message_id=16404782&txt2find=ichimoku
http://www.investorshub.com/boards/read_msg.asp?Message_id=16405381&txt2find=ichimoku
I officially started my deep study of the JPY crosses. They are too good to pass up. I will be trading GBP/JPY with you soon enough.
You just planted a seed in my brain .. thanks!
Thanks Cap! I guess all we can go on is the word on the street and what news sources (FXCM squawk box) tell us. I wonder where they get their information though. Here is an example :
[04:15 GMT Apr 5] Option expirations today include vanilla [USD/JPY] 118.00, 119.00, [EUR/USD] 1.3100 and [GBP/USD] 1.9550 strikes. (hi)
or a better one :
[04:13 GMT Apr 5] [EUR/USD] option barriers still tipped at 1.3450 following expirations of 1.3250-1.3450 double no-touches at the New York cut yesterday. 1.3500 barriers also alive following expiration of 1.15-1.35 DNTs yesterday. (hi)
I know they offer forex options ... are they talking about their options? I doubt it. They must be talking about big money options but
how
who
when
where
why?
http://www.thetradingauthority.com/videos/recap/04-05-07_Psychology/04-05-07_Psychology.html
Very interesting stuff on Trader psychology!
We would like to know if there is a CENTRAL clearing house for forex options kinda like what the DTC is for stocks. I personally would like to know what DNT option is out there at what amount and for what payout. Say someone bet a million bucks that the Euro will not touch 1.3500 in the next month, the payout is 10 million and the entity has millions more to defend the barrier. Is it possible to know this? Do the forex options pass through the interbank? I would guess that some of these options are private but the word gets out in the street ...
Pelosi went to Syria to do business. And that business is telling them to cool off and ask them what they want. Look at North Korea. They were given a whole stack of money and now they are quiet until they run out and want more. If money is what Syria wants .... then that is what they will get if the US gets the equivalent in return.
Ignoring somebody only makes their ego get hurt more and pisses them off exponentially. Bush has a policy to show force which is good but then he has to say ok enough force .. what do you want? Bush's policies (ego) does not let him do the smart thing. Talk with then. DIALOG! He should ask them wtf do you want instead of bombing them?? If what they want is unreasonable and they won't budge them sure bomb them.
You gotta talk to your enemy.
Pelosi is doing good by listening to the "enemy". If there is no dialog then there can be no peace. You have to listen to their side of the story. Besides, it is good cop, bad cop. I am glad she is there.
Fisher of Fed Says Subprime Damage Is `Largely Contained'
The stuff he says about debt and capitalisn is very interesting.
http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vJiBpFKL2iUY.asf
You guys thing AUD is gonna hike tonight?
[16:56 USD/CAD: Like Watching a Glacier Trying to Climb a Hill Boston, April 3.
USD/CAD is working firmer in its range, retesting session highs at 1.1584, but
the move is coming at a decidedly, ahem, measured pace. Soft oil prices and
covering of USD index shorts are helping support the greenback in very muted
trade. Offers stretch for 1.1585 on up to 1.1610, dealers report. Dips are
limited to the 1.1560 area. Look for activity to stay muted through Thursday
when Canadian employment data is set for release. USD/CAD trades at 1.1580.
Jamie.Coleman@Thomson.com /rs
AMEN!!!
A debate between 2 well-known Economists
What I Learned at the World Economic Crisis
By Joseph Stiglitz
New Republic
April 17, 2000
Next week's meeting of the International Monetary Fund will bring to Washington, D.C., many of the same demonstrators who trashed the World Trade Organization in Seattle last fall. They'll say the IMF is arrogant. They'll say the IMF doesn't really listen to the developing countries it is supposed to help. They'll say the IMF is secretive and insulated from democratic accountability. They'll say the IMF's economic "remedies" often make things worse--turning slowdowns into recessions and recessions into depressions.
And they'll have a point. I was chief economist at the World Bank from 1996 until last November, during the gravest global economic crisis in a half-century. I saw how the IMF, in tandem with the U.S. Treasury Department, responded. And I was appalled.
The global economic crisis began in Thailand, on July 2, 1997. The countries of East Asia were coming off a miraculous three decades: incomes had soared, health had improved, poverty had fallen dramatically. Not only was literacy now universal, but, on international science and math tests, many of these countries outperformed the United States. Some had not suffered a single year of recession in 30 years.
But the seeds of calamity had already been planted. In the early '90s, East Asian countries had liberalized their financial and capital markets--not because they needed to attract more funds (savings rates were already 30 percent or more) but because of international pressure, including some from the U.S. Treasury Department. These changes provoked a flood of short-term capital--that is, the kind of capital that looks for the highest return in the next day, week, or month, as opposed to long-term investment in things like factories. In Thailand, this short-term capital helped fuel an unsustainable real estate boom. And, as people around the world (including Americans) have painfully learned, every real estate bubble eventually bursts, often with disastrous consequences. Just as suddenly as capital flowed in, it flowed out. And, when everybody tries to pull their money out at the same time, it causes an economic problem. A big economic problem.
The last set of financial crises had occurred in Latin America in the 1980s, when bloated public deficits and loose monetary policies led to runaway inflation. There, the IMF had correctly imposed fiscal austerity (balanced budgets) and tighter monetary policies, demanding that governments pursue those policies as a precondition for receiving aid. So, in 1997 the IMF imposed the same demands on Thailand. Austerity, the fund's leaders said, would restore confidence in the Thai economy. As the crisis spread to other East Asian nations--and even as evidence of the policy's failure mounted--the IMF barely blinked, delivering the same medicine to each ailing nation that showed up on its doorstep.
I thought this was a mistake. For one thing, unlike the Latin American nations, the East Asian countries were already running budget surpluses. In Thailand, the government was running such large surpluses that it was actually starving the economy of much-needed investments in education and infrastructure, both essential to economic growth. And the East Asian nations already had tight monetary policies, as well: inflation was low and falling. (In South Korea, for example, inflation stood at a very respectable four percent.) The problem was not imprudent government, as in Latin America; the problem was an imprudent private sector--all those bankers and borrowers, for instance, who'd gambled on the real estate bubble.
Under such circumstances, I feared, austerity measures would not revive the economies of East Asia--it would plunge them into recession or even depression. High interest rates might devastate highly indebted East Asian firms, causing more bankruptcies and defaults. Reduced government expenditures would only shrink the economy further.
So I began lobbying to change the policy. I talked to Stanley Fischer, a distinguished former Massachusetts Institute of Technology economics professor and former chief economist of the World Bank, who had become the IMF's first deputy managing director. I met with fellow economists at the World Bank who might have contacts or influence within the IMF, encouraging them to do everything they could to move the IMF bureaucracy.
Convincing people at the World Bank of my analysis proved easy; changing minds at the IMF was virtually impossible. When I talked to senior officials at the IMF--explaining, for instance, how high interest rates might increase bankruptcies, thus making it even harder to restore confidence in East Asian economies--they would at first resist. Then, after failing to come up with an effective counterargument, they would retreat to another response: if only I understood the pressure coming from the IMF board of executive directors--the body, appointed by finance ministers from the advanced industrial countries, that approves all the IMF's loans. Their meaning was clear. The board's inclination was to be even more severe; these people were actually a moderating influence. My friends who were executive directors said they were the ones getting pressured. It was maddening, not just because the IMF's inertia was so hard to stop but because, with everything going on behind closed doors, it was impossible to know who was the real obstacle to change. Was the staff pushing the executive directors, or were the executive directors pushing the staff? I still do not know for certain.
Of course, everybody at the IMF assured me they would be flexible: if their policies really turned out to be overly contractionary, forcing the East Asian economies into deeper recession than necessary, then they would reverse them. This sent shudders down my spine. One of the first lessons economists teach their graduate students is the importance of lags: it takes twelve to 18 months before a change in monetary policy (raising or lowering interest rates) shows its full effects. When I worked in the White House as chairman of the Council of Economic Advisers, we focused all our energy on forecasting where the economy would be in the future, so we could know what policies to recommend today. To play catch-up was the height of folly. And that was precisely what the IMF officials were proposing to do.
I shouldn't have been surprised. The IMF likes to go about its business without outsiders asking too many questions. In theory, the fund supports democratic institutions in the nations it assists. In practice, it undermines the democratic process by imposing policies. Officially, of course, the IMF doesn't "impose" anything. It "negotiates" the conditions for receiving aid. But all the power in the negotiations is on one side--the IMF's--and the fund rarely allows sufficient time for broad consensus-building or even widespread consultations with either parliaments or civil society. Sometimes the IMF dispenses with the pretense of openness altogether and negotiates secret covenants.
When the IMF decides to assist a country, it dispatches a "mission" of economists. These economists frequently lack extensive experience in the country; they are more likely to have firsthand knowledge of its five-star hotels than of the villages that dot its countryside. They work hard, poring over numbers deep into the night. But their task is impossible. In a period of days or, at most, weeks, they are charged with developing a coherent program sensitive to the needs of the country. Needless to say, a little number-crunching rarely provides adequate insights into the development strategy for an entire nation. Even worse, the number-crunching isn't always that good. The mathematical models the IMF uses are frequently flawed or out-of-date. Critics accuse the institution of taking a cookie-cutter approach to economics, and they're right. Country teams have been known to compose draft reports before visiting. I heard stories of one unfortunate incident when team members copied large parts of the text for one country's report and transferred them wholesale to another. They might have gotten away with it, except the "search and replace" function on the word processor didn't work properly, leaving the original country's name in a few places. Oops.
It's not fair to say that IMF economists don't care about the citizens of developing nations. But the older men who staff the fund--and they are overwhelmingly older men--act as if they are shouldering Rudyard Kipling's white man's burden. IMF experts believe they are brighter, more educated, and less politically motivated than the economists in the countries they visit. In fact, the economic leaders from those countries are pretty good--in many cases brighter or better-educated than the IMF staff, which frequently consists of third-rank students from first-rate universities. (Trust me: I've taught at Oxford University, MIT, Stanford University, Yale University, and Princeton University, and the IMF almost never succeeded in recruiting any of the best students.) Last summer, I gave a seminar in China on competition policy in telecommunications. At least three Chinese economists in the audience asked questions as sophisticated as the best minds in the West would have asked.
As time passed, my frustration mounted. (One might have thought that since the World Bank was contributing literally billions of dollars to the rescue packages, its voice would be heard. But it was ignored almost as resolutely as the people in the affected countries.) The IMF claimed that all it was asking of the East Asian countries was that they balance their budgets at a time of recession. All? Hadn't the Clinton administration just fought a major battle with Congress to stave off a balanced-budget amendment in this country? And wasn't the administration's key argument that, in the face of recession, a little deficit spending might be necessary? This is what I and most other economists had been teaching our graduate students for 60 years. Quite frankly, a student who turned in the IMF's answer to the test question "What should be the fiscal stance of Thailand, facing an economic downturn?" would have gotten an F.
As the crisis spread to Indonesia, I became even more concerned. New research at the World Bank showed that recession in such an ethnically divided country could spark all kinds of social and political turmoil. So in late 1997, at a meeting of finance ministers and central-bank governors in Kuala Lumpur, I issued a carefully prepared statement vetted by the World Bank: I suggested that the excessively contractionary monetary and fiscal program could lead to political and social turmoil in Indonesia. Again, the IMF stood its ground. The fund's managing director, Michel Camdessus, said there what he'd said in public: that East Asia simply had to grit it out, as Mexico had. He went on to note that, for all of the short-term pain, Mexico emerged from the experience stronger.
But this was an absurd analogy. Mexico hadn't recovered because the IMF forced it to strengthen its weak financial system, which remained weak years after the crisis. It recovered because of a surge of exports to the United States, which took off thanks to the U.S. economic boom, and because of nafta. By contrast, Indonesia's main trading partner was Japan--which was then, and still remains, mired in the doldrums. Furthermore, Indonesia was far more politically and socially explosive than Mexico, with a much deeper history of ethnic strife. And renewed strife would produce massive capital flight (made easy by relaxed currency-flow restrictions encouraged by the IMF). But none of these arguments mattered. The IMF pressed ahead, demanding reductions in government spending. And so subsidies for basic necessities like food and fuel were eliminated at the very time when contractionary policies made those subsidies more desperately needed than ever.
By January 1998, things had gotten so bad that the World Bank's vice president for East Asia, Jean Michel Severino, invoked the dreaded r-word ("recession") and d-word ("depression") in describing the economic calamity in Asia. Lawrence Summers, then deputy treasury secretary, railed against Severino for making things seem worse than they were, but what other way was there to describe what was happening? Output in some of the affected countries fell 16 percent or more. Half the businesses in Indonesia were in virtual bankruptcy or close to it, and, as a result, the country could not even take advantage of the export opportunities the lower exchange rates provided. Unemployment soared, increasing as much as tenfold, and real wages plummeted--in countries with basically no safety nets. Not only was the IMF not restoring economic confidence in East Asia, it was undermining the region's social fabric. And then, in the spring and summer of 1998, the crisis spread beyond East Asia to the most explosive country of all--Russia.
The calamity in Russia shared key characteristics with the calamity in East Asia--not least among them the role that IMF and U.S. Treasury policies played in abetting it. But, in Russia, the abetting began much earlier. Following the fall of the Berlin Wall, two schools of thought had emerged concerning Russia's transition to a market economy. One of these, to which I belonged, consisted of a melange of experts on the region, Nobel Prize winners like Kenneth Arrow and others. This group emphasized the importance of the institutional infrastructure of a market economy--from legal structures that enforce contracts to regulatory structures that make a financial system work. Arrow and I had both been part of a National Academy of Sciences group that had, a decade earlier, discussed with the Chinese their transition strategy. We emphasized the importance of fostering competition--rather than just privatizing state-owned industries--and favored a more gradual transition to a market economy (although we agreed that occasional strong measures might be needed to combat hyperinflation).
The second group consisted largely of macroeconomists, whose faith in the market was unmatched by an appreciation of the subtleties of its underpinnings--that is, of the conditions required for it to work effectively. These economists typically had little knowledge of the history or details of the Russian economy and didn't believe they needed any. The great strength, and the ultimate weakness, of the economic doctrines upon which they relied is that the doctrines are--or are supposed to be--universal. Institutions, history, or even the distribution of income simply do not matter. Good economists know the universal truths and can look beyond the array of facts and details that obscure these truths. And the universal truth is that shock therapy works for countries in transition to a market economy: the stronger the medicine (and the more painful the reaction), the quicker the recovery. Or so the argument goes.
Unfortunately for Russia, the latter school won the debate in the Treasury Department and in the IMF. Or, to be more accurate, the Treasury Department and the IMF made sure there was no open debate and then proceeded blindly along the second route. Those who opposed this course were either not consulted or not consulted for long. On the Council of Economic Advisers, for example, there was a brilliant economist, Peter Orszag, who had served as a close adviser to the Russian government and had worked with many of the young economists who eventually assumed positions of influence there. He was just the sort of person whose expertise Treasury and the IMF needed. Yet, perhaps because he knew too much, they almost never consulted him.
We all know what happened next. In the December 1993 elections, Russian voters dealt the reformers a huge setback, a setback from which they have yet really to recover. Strobe Talbott, then in charge of the noneconomic aspects of Russia policy, admitted that Russia had experienced "too much shock and too little therapy." And all that shock hadn't moved Russia toward a real market economy at all. The rapid privatization urged upon Moscow by the IMF and the Treasury Department had allowed a small group of oligarchs to gain control of state assets. The IMF and Treasury had rejiggered Russia's economic incentives, all right--but the wrong way. By paying insufficient attention to the institutional infrastructure that would allow a market economy to flourish--and by easing the flow of capital in and out of Russia--the IMF and Treasury had laid the groundwork for the oligarchs' plundering. While the government lacked the money to pay pensioners, the oligarchs were sending money obtained by stripping assets and selling the country's precious national resources into Cypriot and Swiss bank accounts.
The United States was implicated in these awful developments. In mid-1998, Summers, soon to be named Robert Rubin's successor as secretary of the treasury, actually made a public display of appearing with Anatoly Chubais, the chief architect of Russia's privatization. In so doing, the United States seemed to be aligning itself with the very forces impoverishing the Russian people. No wonder antiAmericanism spread like wildfire.
At first, Talbott's admission notwithstanding, the true believers at Treasury and the IMF continued to insist that the problem was not too much therapy but too little shock. But, through the mid-'90s, the Russian economy continued to implode. Output plummeted by half. While only two percent of the population had lived in poverty even at the end of the dismal Soviet period, "reform" saw poverty rates soar to almost 50 percent, with more than half of Russia's children living below the poverty line. Only recently have the IMF and Treasury conceded that therapy was undervalued--though they now insist they said so all along.
Today, Russia remains in desperate shape. High oil prices and the long-resisted ruble devaluation have helped it regain some footing. But standards of living remain far below where they were at the start of the transition. The nation is beset by enormous inequality, and most Russians, embittered by experience, have lost confidence in the free market. A significant fall in oil prices would almost certainly reverse what modest progress has been made.
East Asia is better off, though it still struggles, too. Close to 40 percent of Thailand's loans are still not performing; Indonesia remains deeply mired in recession. Unemployment rates remain far higher than they were before the crisis, even in East Asia's best-performing country, Korea. IMF boosters suggest that the recession's end is a testament to the effectiveness of the agency's policies. Nonsense. Every recession eventually ends. All the IMF did was make East Asia's recessions deeper, longer, and harder. Indeed, Thailand, which followed the IMF's prescriptions the most closely, has performed worse than Malaysia and South Korea, which followed more independent courses.
I was often asked how smart--even brilliant--people could have created such bad policies. One reason is that these smart people were not using smart economics. Time and again, I was dismayed at how out-of-date--and how out-of-tune with reality--the models Washington economists employed were. For example, microeconomic phenomena such as bankruptcy and the fear of default were at the center of the East Asian crisis. But the macroeconomic models used to analyze these crises were not typically rooted in microfoundations, so they took no account of bankruptcy.
But bad economics was only a symptom of the real problem: secrecy. Smart people are more likely to do stupid things when they close themselves off from outside criticism and advice. If there's one thing I've learned in government, it's that openness is most essential in those realms where expertise seems to matter most. If the IMF and Treasury had invited greater scrutiny, their folly might have become much clearer, much earlier. Critics from the right, such as Martin Feldstein, chairman of Reagan's Council of Economic Advisers, and George Shultz, Reagan's secretary of state, joined Jeff Sachs, Paul Krugman, and me in condemning the policies. But, with the IMF insisting its policies were beyond reproach--and with no institutional structure to make it pay attention--our criticisms were of little use. More frightening, even internal critics, particularly those with direct democratic accountability, were kept in the dark. The Treasury Department is so arrogant about its economic analyses and prescriptions that it often keeps tight--much too tight--control over what even the president sees.
Open discussion would have raised profound questions that still receive very little attention in the American press: To what extent did the IMF and the Treasury Department push policies that actually contributed to the increased global economic volatility? (Treasury pushed liberalization in Korea in 1993 over the opposition of the Council of Economic Advisers. Treasury won the internal White House battle, but Korea, and the world, paid a high price.) Were some of the IMF's harsh criticisms of East Asia intended to detract attention from the agency's own culpability? Most importantly, did America--and the IMF--push policies because we, or they, believed the policies would help East Asia or because we believed they would benefit financial interests in the United States and the advanced industrial world? And, if we believed our policies were helping East Asia, where was the evidence? As a participant in these debates, I got to see the evidence. There was none.
Since the end of the cold war, tremendous power has flowed to the people entrusted to bring the gospel of the market to the far corners of the globe. These economists, bureaucrats, and officials act in the name of the United States and the other advanced industrial countries, and yet they speak a language that few average citizens understand and that few policymakers bother to translate. Economic policy is today perhaps the most important part of America's interaction with the rest of the world. And yet the culture of international economic policy in the world's most powerful democracy is not democratic.
This is what the demonstrators shouting outside the IMF next week will try to say. Of course, the streets are not the best place to discuss these highly complex issues. Some of the protesters are no more interested in open debate than the officials at the IMF are. And not everything the protesters say will be right. But, if the people we entrust to manage the global economy--in the IMF and in the Treasury Department--don't begin a dialogue and take their criticisms to heart, things will continue to go very, very wrong. I've seen it happen.
An Open Letter1
By Kenneth Rogoff,
Economic Counsellor and Director of Research,
International Monetary Fund
To Joseph Stiglitz,
Author of Globalization and Its Discontents
(New York: W.W. Norton & Company, June 2002)
Washington D.C., July 2, 2002
At the outset, I would like to stress that it has been a pleasure working closely with my World Bank colleagues—particularly my counterpart, Chief Economist Nick Stern—during my first year at the IMF. We regularly cross 19th Street to exchange ideas on research, policy, and life. The relations between our two institutions are excellent—this is not at issue. Of course, to that effect, I think it is also important, before I begin, for me to quash rumors about the demolition of the former PEPCO building that stood right next to the IMF until a few days ago. No, it's absolutely not true that this was caused by a loose cannon planted within the World Bank.
Dear Joe:
Like you, I came to my position in Washington from the cloisters of a tenured position at a top-ranking American University. Like you, I came because I care. Unlike you, I am humbled by the World Bank and IMF staff I meet each day. I meet people who are deeply committed to bringing growth to the developing world and to alleviating poverty. I meet superb professionals who regularly work 80-hour weeks, who endure long separations from their families. Fund staff have been shot at in Bosnia, slaved for weeks without heat in the brutal Tajikistan winter, and have contracted deadly tropical diseases in Africa. These people are bright, energetic, and imaginative. Their dedication humbles me, but in your speeches, in your book, you feel free to carelessly slander them.2
Joe, you may not remember this, but in the late 1980s, I once enjoyed the privilege of being in the office next to yours for a semester. We young economists all looked up to you in awe. One of my favorite stories from that era is a lunch with you and our former colleague, Carl Shapiro, at which the two of you started discussing whether Paul Volcker merited your vote for a tenured appointment at Princeton. At one point, you turned to me and said, "Ken, you used to work for Volcker at the Fed. Tell me, is he really smart?" I responded something to the effect of "Well, he was arguably the greatest Federal Reserve Chairman of the twentieth century" To which you replied, "But is he smart like us?" I wasn't sure how to take it, since you were looking across at Carl, not me, when you said it.
My reason for telling this story is two-fold. First, perhaps the Fund staff who you once blanket-labeled as "third rate"—and I guess you meant to include World Bank staff in this judgment also—will feel better if they know they are in the same company as the great Paul Volcker. Second, it is emblematic of the supreme self-confidence you brought with you to Washington, where you were confronted with policy problems just a little bit more difficult than anything in our mathematical models. This confidence brims over in your new 282 page book. Indeed, I failed to detect a single instance where you, Joe Stiglitz, admit to having been even slightly wrong about a major real world problem. When the U.S. economy booms in the 1990s, you take some credit. But when anything goes wrong, it is because lesser mortals like Federal Reserve Chairman Greenspan or then-Treasury Secretary Rubin did not listen to your advice.
Let me make three substantive points. First, there are many ideas and lessons in your book with which we at the Fund would generally agree, though most of it is old hat. For example, we completely agree that there is a need for a dramatic change in how we handle situations where countries go bankrupt. IMF First Deputy Managing Director Anne Krueger—who you paint as a villainess for her 1980s efforts to promote trade liberalization in World Bank policy—has forcefully advocated a far reaching IMF proposal. At our Davos [World Economic Forum] panel in February you sharply criticized the whole idea. Here, however, you now want to take credit as having been the one to strongly advance it first. Your book is long on innuendo and short on footnotes. Can you document this particular claim?
Second, you put forth a blueprint for how you believe the IMF can radically improve its advice on macroeconomic policy. Your ideas are at best highly controversial, at worst, snake oil. This leads to my third and most important point. In your role as chief economist at the World Bank, you decided to become what you see as a heroic whistleblower, speaking out against macroeconomic policies adopted during the 1990s Asian crisis that you believed to be misguided. You were 100% sure of yourself, 100% sure that your policies were absolutely the right ones. In the middle of a global wave of speculative attacks, that you yourself labeled a crisis of confidence, you fueled the panic by undermining confidence in the very institutions you were working for. Did it ever occur to you for a moment that your actions might have hurt the poor and indigent people in Asia that you care about so deeply? Do you ever lose a night's sleep thinking that just maybe, Alan Greenspan, Larry Summers, Bob Rubin, and Stan Fischer had it right—and that your impulsive actions might have deepened the downturn or delayed—even for a day—the recovery we now see in Asia?
Let's look at Stiglitzian prescriptions for helping a distressed emerging market debtor, the ideas you put forth as superior to existing practice. Governments typically come to the IMF for financial assistance when they are having trouble finding buyers for their debt and when the value of their money is falling. The Stiglitzian prescription is to raise the profile of fiscal deficits, that is, to issue more debt and to print more money. You seem to believe that if a distressed government issues more currency, its citizens will suddenly think it more valuable. You seem to believe that when investors are no longer willing to hold a government's debt, all that needs to be done is to increase the supply and it will sell like hot cakes. We at the IMF—no, make that we on the Planet Earth—have considerable experience suggesting otherwise. We earthlings have found that when a country in fiscal distress tries to escape by printing more money, inflation rises, often uncontrollably. Uncontrolled inflation strangles growth, hurting the entire populace but, especially the indigent. The laws of economics may be different in your part of the gamma quadrant, but around here we find that when an almost bankrupt government fails to credibly constrain the time profile of its fiscal deficits, things generally get worse instead of better.
Joe, throughout your book, you condemn the IMF because everywhere it seems to be, countries are in trouble. Isn't this a little like observing that where there are epidemics, one tends to find more doctors?
You cloak yourself in the mantle of John Maynard Keynes, saying that the aim of your policies is to maintain full employment. We at the IMF care a lot about employment. But if a government has come to us, it is often precisely because it is in an unsustainable position, and we have to look not just at the next two weeks, but at the next two years and beyond. We certainly believe in the lessons of Keynes, but in a modern, nuanced way. For example, the post-1975 macroeconomics literature—which you say we are tone deaf to—emphasizes the importance of budget constraints across time. It does no good to pile on IMF debt as a very short-run fix if it makes the not-so-distant future drastically worse. By the way, in blatant contradiction to your assertion, IMF programs frequently allow for deficits, indeed they did so in the Asia crisis. If its initial battlefield medicine was wrong, the IMF reacted, learning from its mistakes, quickly reversing course.
No, instead of Keynes, I would cloak your theories in the mantle of Arthur Laffer and other extreme expositors of 1980s Reagan-style supply-side economics. Laffer believed that if the government would only cut tax rates, people would work harder, and total government revenues would rise. The Stiglitz-Laffer theory of crisis management holds that countries need not worry about expanding deficits, as in so doing, they will increase their debt service capacity more than proportionately. George Bush, Sr. once labeled these ideas "voodoo economics." He was right. I will concede, Joe, that real-world policy economics is complicated, and just maybe further research will prove you have a point. But what really puzzles me is how you could be so sure that you are 100 percent right, so sure that you were willing to "blow the whistle" in the middle of the crisis, sniping at the paramedics as they tended the wounded. Joe, the academic papers now coming out in top journals are increasingly supporting the interest defense policies of former First Deputy Managing Director Stan Fischer and the IMF that you, from your position at the World Bank, ignominiously sabotaged. Do you ever think that just maybe, Joe Stiglitz might have screwed up? That, just maybe, you were part of the problem and not part of the solution?
You say that the IMF is tone deaf and never listens to its critics. I know that is not true, because in my academic years, I was one of dozens of critics that the IMF bent over backwards to listen to. For example, during the 1980s, I was writing then-heretical papers on the moral hazard problem in IMF/World Bank lending, an issue that was echoed a decade later in the Meltzer report. Did the IMF shut out my views as potentially subversive to its interests? No, the IMF insisted on publishing my work in its flagship research publication Staff Papers. Later, in the 1990s, Stan Fischer twice invited me to discuss my views on fixed exchange rates and open capital markets (I warned of severe risks). In the end, Stan and I didn't agree on everything, but I will say that having entered his office 99 percent sure that I was right, I left somewhat humbled by the complexities of price stabilization in high-inflation countries. If only you had crossed over 19th Street from the Bank to the Fund a little more often, Joe, maybe things would have turned out differently.
I don't have time here to do justice to some of your other offbeat policy prescriptions, but let me say this about the transition countries. You accuse the IMF of having "lost Russia." Your analysis of the transition in Russia reads like a paper in which a theorist abstracts from all the major problems, and focuses only on the couple he can handle. You neglect entirely the fact that when the IMF entered Russia, the country was not only in the middle of an economic crisis, it was in the middle of a social and political crisis as well.
Throughout your book, you betray an unrelenting belief in the pervasiveness of market failures, and a staunch conviction that governments can and will make things better. You call us "market fundamentalists." We do not believe that markets are always perfect, as you accuse. But we do believe there are many instances of government failure as well and that, on the whole, government failure is a far bigger problem than market failure in the developing world. Both World Bank President Jim Wolfensohn and IMF Managing Director Horst Köhler have frequently pointed to the fundamental importance of governance and institutions in development. Again, your alternative medicines, involving ever-more government intervention, are highly dubious in many real-world settings.
I haven't had time, Joe, to check all the facts in your book, but I do have some doubts. On page 112, you have Larry Summers (then Deputy U.S. Treasury Secretary) giving a "verbal" tongue lashing to former World Bank Vice-President Jean-Michel Severino. But, Joe, these two have never met. How many conversations do you report that never happened? You give an example where an IMF Staff report was issued prior to the country visit. Joe, this isn't done; I'd like to see your documentation. On page 208, you slander former IMF number two, Stan Fischer, implying that Citibank may have dangled a job offer in front of him in return for his cooperation in debt renegotiations. Joe, Stan Fischer is well known to be a person of unimpeachable integrity. Of all the false inferences and innuendos in this book, this is the most outrageous. I'd suggest you should pull this book off the shelves until this slander is corrected.
Joe, as an academic, you are a towering genius. Like your fellow Nobel Prize winner, John Nash, you have a "beautiful mind." As a policymaker, however, you were just a bit less impressive.
Other than that, I thought it was a pretty good book.
Sincerely yours,
Ken
http://fleacia.livejournal.com/159547.html
LOL!
If I would want to buy gold, silver how would I go about it?
The end game is here ... they can't hide it anymore. Oh boy ... I would not like to be the next President of the United States.
Guess how they are going to get out of this. A World War!
Those m--ther f--kers!
The chips are in place. Troops on the doorstep of Iran. They wanted to do this from the start. Those cocksuckers!
Come up to Canada ... we gotta start building the bomb shelter.
Dude ... you gotta elaborate! What about China and the diversisifcation of FX reserves? (Japan too!)
http://www.netcastdaily.com/broadcast/fsn2007-0331-3a.m3u
Glance .. listen to this and tell me your opinion. The Fed is going to print their way out of this mess. That means super high interest rates. But how will the currencies react?
The money supply OF ALL CURRENCIES is going up at a pace not seen for over 30 years. Will we see what happened in the 80's? How did the USD perform during those times?
Damn! the more i try to get out the more they pull me back in!
The more i know, the more i realise I do not know shit! When will this madness end?
Yes because the interest rates will remain low and the dudes are gonna be able to get a cheap loan to buy more stocks. Pretty sad eh?
This is why
Japan's Business Confidence Slips From Two-Year High (Update2)
By Lily Nonomiya
April 2 (Bloomberg) -- Confidence among Japan's largest manufacturers fell from the highest in two years amid concern the U.S. economy may slow, curbing export demand.
The Tankan, Japan's most closely watched gauge of business sentiment, showed manufacturer confidence fell to 23 points in March from 25 in December, the Bank of Japan said in Tokyo today. The median forecast of 30 economists was for 24 points. A positive number means optimists outnumber pessimists.
Japan's shipments to the U.S., the nation's biggest market, may slow in coming months as the economy there falters under a slump in housing and slowing consumer spending. Sentiment among Japan's non-manufacturers was unchanged.
``The quarter was severe for manufacturers, who were forced to cut back production and had to deal with the shock of the global stock rout,'' said Hideo Kumano, a senior economist at Dai-Ichi Life Research Institute in Tokyo, and a former BOJ official. ``Non-manufacturers also had to deal with sluggish wage conditions which weighed down on consumer spending.''
A global stock drop that wiped out $3.3 trillion in market value caused the yen to surge to a three-month high as investors reduced holdings of assets funded by borrowing the currency. A higher yen hurts exporters by eroding the value of their sales.
Sentiment among large non-manufacturers stayed at 22 points in March. Economists expected the number to rise to 23 points.
The yen traded at 117.94 per dollar at 9:11 a.m. in Tokyo from 117.74 before the report. The Nikkei 225 Stock Average climbed 0.7 percent. The yield on the benchmark 10-year bond added 1.5 basis points to 1.665 percent.
Large manufacturers said they expected the yen to trade at an average 114.32 in the year ending March 31.
Spending Plans
Large manufacturers plan to increase spending on factories and equipment by 2.9 percent in the year that began April 1, the Tankan showed. Economists expected an increase of 1.7 percent.
Companies tend to be conservative in their capital expenditure estimates in the March survey and upgrade them later. Last March companies said they were planning to boost spending 2.7 percent in the year. By December this had risen to 12.4 percent.
Manufacturers said they expect confidence to fall in June to 20 and non-manufacturers said they expect to be more confident in June with sentiment at 23.
Other reports have already signaled that companies will step up outlays on factories and equipment this year. Machinery orders, which typically point to spending in three to six months, had their biggest gain in five months in January.
Kyocera Corp., a components maker, said last month it will spend as much as 30 billion yen to double production of parts used in electronics.
Labor Shortages
Companies surveyed said the shortage of labor is becoming more severe compared with the previous quarter. An index of labor demand among large manufacturers fell to minus 7 in March from minus 6 in December. The jobless rate was at an eight-year low in February.
Today's report is unlikely to deter the central bank from raising borrowing costs later this year.
The report ``confirms there's no reason for much action from the Bank of Japan in the short term,'' said Chris Loong, head of currency and asset allocation at State Street Global Advisors in Sydney. Statements by two central bank board members to be appointed this month will be important signposts indicating the future direction of the bank's policy, Loong said.
The Tankan, which means short-term economic outlook in Japanese, is the nation's most closely watched gauge of business confidence. It asked 10,958 companies about their outlook for sales, profit, spending and hiring as well as overall sentiment.
To contact the reporter on this story: Lily Nonomiya in Tokyo at lnonomiya@bloomberg.net
Last Updated: April 1, 2007 20:14 EDT