The Japanese Prime Minister Naoto Kan resigned after little more than a year at the head of government. Khan retired from the management office of the Democratic Party. The rating of 64-year-old Naoto Kan collapsed less than 20 per cent due to dissatisfaction with the Japanese on how to deal with the crisis of nuclear accident at the Fukushima-1 nuclear power plant following a powerful earthquake and tsunami of March 11th. He promised to resign after parliament adopted two laws – the issue of government bonds to cover the budget deficit and to promote energy production from renewable sources. Lawmakers approved the legislation this morning, stated Monday. It is expected that the ruling Democratic Party on Monday to elect its new leader, according to Japanese political tradition would be the new prime minister. The vote in the House will be Tuesday. It is believed that the best chances to take the party and prime minister is former Foreign Minister Seiji Maehara of the conservative wing of the DPJ, known for its hard line toward China and North Korea, told AFP. If elected, 49-year-old Maehara will become the youngest prime minister of Japan after World War II.
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The raising of the taxes in Japan should increase the funds for reconstruction of areas devastated by the earthquake and tsunami of 11 March, the government offered expert committee. It is not clear whether recommendations are binding on the political tension surrounding the Prime Minister Naoto Kan. The Commission proposal provides a basis for establishing the costs of restoring the northeastern parts of Japan, which was devastation by an earthquake of magnitude 9.0 and deadly tsunamis, which are expected to be over 10 trillion yen (124 billion dollars). The government plans to Cannes next month to present to parliament a small additional budget to overtime budget of 4 trillion. yen, approved in May, to combat the effects of natural disasters. Yesterday the government adjusted its assessment of material damage from the disaster to 16.9 trillion. yen, which is below the original estimates of 16-25 trillion yen.
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The Gross Domestic Product (GDP) of Japan shrank by 0.9 percent in the first quarter – twice as powerful than expert expectations. Calculated on an annual basis, it makes a drop of 3.7 percent, the government said in Tokyo. Analysts predicted a decrease of 2%. Since GDP also reported a decline in the previous quarter, according to country definitions is back in recession. The Asian country out of the previous major depression following World War II until the second quarter of 2009 earthquake and subsequent tsunamis and the nuclear accident in Fukushima nuclear power plant is expected to throw the country into even more serious crisis. Experts fear that the economy will stagnate and in the current quarter, because the consequences of the earthquake still loaded production and exports. The Japanese Economy Minister Kaoru Yosano said, however, a temporary phenomenon. The decline in GDP was mainly due to the effects of the earthquake. Japanese economy really will remain weak for some time. But she had the strength to stand fast back legs. Supply chain industry gradually stabilized and recovery is expected to stimulate the economy. Yosano confirmed the forecast of government, which expects to start in April fiscal year grew by just under one percent.
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The Federal Reserve (Fed) surpassed China and is now the largest owner of U.S. federal debt, although it has not gotten half the bonds worth 600 billion dollars from the program announced in November for the infusion of liquidity. On Thursday last week the Fed has held U.S. bonds to 1.108 trillion dollars. According to the latest data on foreign creditors of the U.S., the government bonds, which China holds are about 896 billion dollars, and for Japan – to 877 billion dollars.
“By June the Fed has accumulated to U.S. bonds worth 1.6 trillion. dollars – roughly the total U.S. debt held by China and Japan combined, “said Richard Gilhuli, strategist at TD Securities. Fed surpassed China as the largest creditor of the U.S. government a few months ago, “he notes. Fed buys U.S. debt in two programs. The largest is the program for injection of liquidity known as the QE2, which was launched in November and the buying of U.S. bonds to 600 billion dollars by June. Fed buys U.S. bonds and also for $ 30 billion each month, reinvest the payments of mortgages it holds. By June the Federal Reserve plans to acquire federal debt of $ 800 billion in both programs. Since November he bought bonds of 284 billion dollars. Fed provides 67% of bonds purchased QE2, have a maturity of between 4.5 and 10 years. Only 5% of acquired so far are bonds with a maturity longer than 17 years. Last Friday, the yield on 30-year U.S. Treasuries briefly climbed to their highest levels since April.
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Australia ended the monopoly of the stock exchange, permitting the creation of a second exchange for trading in shares in the country. Authorization is granted to Japan’s Nomura, but its purpose is to create competition to help develop the market. Among the main priorities of Australia has become the local stock market in the center of financial services in Asia-Pacific region, said Finance Minister Chris Bowen of the country, quoted by AP. According to him, higher competition should lead to cost reductions of about 6 million Australian citizens who have contributions to pension funds. “If Australia really wants to be considered a financial center if we are to global center for financial services, the monopoly days of our financial market must be completed,” said Bowen. Authorization for establishing a second exchange in the country is a company of Chi-X Global, which is part of network of Nomura Holdings.
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The U.S. government securities (GS) recorded its worst year since 1978, after the government expedite the issuance of new debt to help restore the economy from the deepest recession in six decades. According to the index of Bank of America Merrill Lynch government securities have lost 3.6 percent this year – the worst performance for at least 1978, when he began calculating the index. Holders of U.S. debt, however, have achieved returns of 81% in the last decade, according to this index, while the index for the same period Standard & Poor’s 500, including dividends and has lost 8 percent of its value. President Obama takes unprecedented amounts of funding for different programs. Only last week the Treasury sells government bonds worth 118 billion dollars. The issued government debt outstanding reached a record 7.17 trillion. dollars in November after the end of last year was a level of 5.80 trillion. “This is the largest increase in budget deficit for one year, excluding periods of wars and depressions. Realistic expectations for economic recovery and the accompanying increase in interest rates increased the yield of government securities, which automatically means lower prices, “says Christian Kari, a senior analyst at Societe Generale SA, Tokyo. According to him, prices could fall even more.
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Today’s session brought indexes in Asia and the Pacific region, the strongest decrease their day for the past eight months, but ended the week with a painful decline in most markets in the region. Stood at the head Japanese, Chinese and South Korean securities market, which lost between 4% and 6% of its market capitalization over the past five trading sessions. Reason for mass sales became the news of the failure of the Dubai government investment holding company Dubai World to meet its obligations to creditors. The Fund has a debt for 59 billion dollars, equivalent to most of Dubai’s foreign debt to 80 billion dollars. Meanwhile, the Japanese yen rose to its highest rate against the dollar since 1995. Financial difficulties of the Dubai World stocks fell on banks and insurers in the region, led by HSBC Holdings, whose shares fell nearly 8 percent. This is due to investor concerns about exposure of large international banks to fund Dubai. Construction companies also suffered because of the activity of the Dubai World in the construction sector. The regional index MSCI Asia Pacific, which brings together companies from stock markets in ten Asian countries plus Australia and New Zealand, slid 3.2 percent to 113.78 points. This is the strongest decrease in the stock measure within one day of 30 March so far. Financial companies in its composition have contributed most to the sharp drop in MSCI Asia Pacific. The good news that unemployment in Japan fell for the third consecutive month in October, while consumer spending increased household failed to stop reductions in the indexes. Thus MSCI Asia Pacific to cut their lead to five-year bottom of 9 March to 61 percent. For the past five trading sessions the index fell by 2,7 percent.
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