Business

TOKYO — The Bank of Japan (BoJ) on Tuesday slightly upgraded its growth forecast for the world's third-biggest economy but kept its super easy monetary policy unchanged.

The central bank said after a two-day policy gathering that it now expects a 0.9 per cent expansion in the year to March 2021, an upgrade from a previous projection of 0.7 per cent.

The brighter assessment came after a stimulus package launched by Prime Minister Shinzo Abe last year to prop up the economy and dampen the effects of an October hike in consumption tax from eight to 10 per cent.

The decision also followed a fresh trade deal clinched between the US and China, easing a concern that had long worried global investors.

"It is true that the downside risk surrounding the global economy is slightly lower due to... the US-China trade deal and the problem of Britain leaving the EU," BoJ governor Haruhiko Kuroda told reporters.

"Investors' risk sentiment has improved and stocks and long-term interest rates have risen in many countries," he said.

World markets have returned to relative calm after the turmoil caused by the killing of top Iranian general Qassem Soleimani by the US. The strike resulted in limited retaliation and the region has so far avoided an escalation in violence.

"Japan's economy has been on a moderate expanding trend... although exports, production and business sentiment have shown some weakness, mainly affected by the slowdown in the global economy and natural disasters," the BoJ said.

Nevertheless, the tax hike and natural disasters were weighing on domestic demand, it added.

But demand "is likely to follow an uptrend... mainly against the background of highly accommodative financial conditions and active government spending", it said.

The central bank also reiterated its pledge to continue its easy monetary programme in a drive to achieve 2-per cent inflation for "as long as it is necessary".

However, it dropped its inflation forecast to 1 per cent from an earlier estimate of 1.1 per cent.

The bank "will not hesitate to take additional easing measures" if necessary, it added.

Kuroda also said the bank will continue monitoring global risks. 

"There are still conflicts between the US and China and I think the path towards the second-stage agreement is unclear. And geopolitical risk surrounding the Middle East is rising," he said.

"I think the downside risk is still large."

On the outbreak of a new SARS-like virus in China, Kuroda said it is "too early to predict" any possible economic impact.

"At the moment, I don't think it'll have a big impact like SARS or bird flu but we'll monitor the situation carefully."

WASHINGTON —Improving US-China trade tensions have eased uncertainty and the world economy may have hit bottom but a sharp slowdown in India is creating a drag worldwide, the International Monetary Fund (IMF) said on Monday.

However, while the risks to the global economy have lessened, the Washington-based global lending institution cautioned that outcomes "depend to an important extent on avoiding further escalation" between Washington and Beijing.

In the latest update to its World Economic Outlook, the IMF cut the global growth estimate for 2020 by one tenth compared to the prior report released in October, dropping to 3.3 per cent.

It also lowered the 2021 forecast by a bit more to 3.4 per cent.

The sharp drop for India "accounts for the lion's share of the downward revisions", the IMF said.

The relationship between China and the United States, the world's dominant economic powers, is still troubled by "unresolved disputes" which continue to be a factor.

"The risk of protracted subpar global growth remains tangible despite tentative signs of stabilising momentum," the fund warned in its quarterly report. 

"Policy missteps at this stage would further enfeeble an already weak global economy."

US President Donald Trump signed a deal with China last week that ends the escalation but leaves in place tariffs on two thirds of the goods imported from the Asian economic power.

The trade truce led to an upgrade of China's growth forecast to 6 per cent in 2020, with a slight slowdown to 5.8 per cent projected for next year. 

But the giant Asian economy has been on a steadily slowing path for some time.

Meanwhile, the IMF trimmed US growth just a tenth to 1.6 per cent this year, with a repeat expected in 2021.

Since 2018, Washington and Beijing have exchanged tit-for-tat tariffs on hundreds of billions of dollars in two-way trade.

IMF chief Kristalina Georgieva on Friday said the two countries still have a long way to go to resolve their trade disputes — although the partial deal signed last week is a step forward.

"Trade truce is not the same as trade peace," she said.

In its previous analysis, the IMF had estimated that trade conflicts and tariffs cut 0.8 percentage points off of global growth. 

But two thirds of that damage was not due to the tariffs but to trade uncertainty created by the conflict, which causes companies to put the brakes on investment.

If tensions flare again, or if Trump's trade dispute with the European Union or confrontation with Iran should worsen, that too could undermine the "nascent bottoming out of global manufacturing and trade, leading global growth to fall short" of forecasts, the report said.

Slowing growth in India 

Receding risks of a hard Brexit have helped stabilise the outlook for Britain and the European Union. Healthy private consumption have helped the still-slow but upgraded growth prospects in Japan.

However, the IMF once again slashed expected GDP growth in India by 1.2 points this year and 0.9 percentage point in 2021 compared to the October forecasts. 

While growth remains relatively robust at 5.8 and 6.5 per cent for the two years respectively, it is not enough to continue to reduce poverty in the growing south Asian economy.

That nation has been one of the fastest growing in the world and a major engine of global expansion, together with China, as advanced economies have bumped along at far slower rates.

But it had already been downgraded in October due to a bigger-than-expected decline in domestic demand amid growing stress in the financial sector.

Meanwhile, Latin America continues to slow, even as Brazil has stabilised and growth there was upgraded.

Mexico was downgraded, while Chile suffered "a sizable markdown" amid widespread social unrest.

DAMASCUS, Syria — Syria’s President Bashar Assad on Saturday increased the punishment for transacting in foreign currencies to seven years hard labour, the presidency said, after the Syrian pound plummeted on the black market.

A new decree “upped the penalty for anybody who deals in anything other than the Syrian pound for payments, or any kind of commercial transaction”, it said. 

The punishment was increased from up to three years detention to seven years hard labour, as well as a fine, the presidency said in a statement.

Alongside the use of foreign currencies, the punishment would also be applied to transactions paid in precious metals, it said.

The Syrian pound has sunk to 1,200 to the dollar on the black market in recent weeks, despite an official exchange rate fixed at 434 to the greenback.

Before Syria’s civil war broke out in 2011, the rate stood at 48 pounds to the dollar.

Syrians are alarmed by record hikes in key staples such as sugar and rice, while blackouts in government-held areas have increased over fuel shortages.

Pro-government economists blame the economic crisis on international sanctions against Damascus.

But they say the recent de-facto devaluation of the Syrian pound is due to a liquidity crisis in neighbouring Lebanon, which has long served as a conduit for foreign currency into government-held areas of Syria.

On Saturday, Assad also increased fines for circulating information that seeks “to undermine confidence in the strength of the country’s currency”, the presidency said.

Syria’s nearly nine-year civil war has battered the country’s economy, and depleted its foreign currency reserves.

An array of international sanctions have targeted Assad’s government and associated businessmen since the start of the war in 2011.

DOHA — Gas-rich Qatar signed a $470-million deal on Sunday to build its first solar energy plant, capable of meeting up to one-tenth of peak national power demand.

The Al Kharsaah plant, near the capital, is a 10 square-kilometre joint venture with French and Japanese partners due for completion in 2022 ahead of the football World Cup.

“Eight times the solar power pledged in the World Cup bid will be produced,” Energy Minister Saad Al Kaabi told a media briefing in Doha.

Qatar’s ruler, Emir Sheikh Tamim Bin Hamad Al Thani, vowed at the United Nations last year that the tournament would be carbon neutral, but gave little detail on how this would be achieved.

“Production capacity will be around 800 megawatts and 10 per cent of peak demand,” said Kaabi following a signing ceremony between Qatari state firms, France’s Total and Japan’s Marubeni.

“Eight-hundred megawatts will be the largest [solar power plant] built by Total,” said the French energy giant’s chief executive, Patrick Pouyanne.

By contrast, Abu Dhabi’s Sweihan plant, one of the world’s largest solar projects, produces 1,177 megawatts.

The capital cost of the venture is 1.7 billion riyals ($470 million), Kaabi said, with state firms taking a 60 per cent stake and foreign investors 40 per cent.

Marubeni will take 51 per cent of the minority holding, while Total will have 49 per cent.

“It’s a pilot project, you have to assess how successful it is,” added Kaabi.

The Arab Gulf countries which heavily depend on oil and gas have invested tens of billions of dollars in clean energy projects, mainly in solar and nuclear.

But critics say many such projects are slow to get off the drawing board.

The United Arab Emirates said last week its first nuclear power plant would start operating within months after repeated delays to meet safety and regulatory conditions.

The UAE will have the first operational nuclear reactor in the Arab world.

Saudi Arabia, the world’s top crude oil exporter, has said it plans to build up to 16 nuclear reactors, but the projects have yet to materialise.

Critics say the addiction to oil is hard to kick, particularly when supplies remain abundant and the high costs of investment in infrastructure needed to switch to renewable.

BEIJING — The European Union will challenge the China-US trade agreement at the World Trade Organisation (WTO) if it creates "distortions" in the market that harm EU companies, the bloc's envoy to Beijing said on Friday.

Ambassador Nicolas Chapuis told reporters the 28-nation EU "will monitor the implementation" of the "phase one" deal that was signed on Wednesday by President Donald Trump and Chinese Vice Premier Liu He.

"In our opinion, quantitative targets are not WTO-compatible if they lead to trade distortions," Chapuis said. "If it were to be the case, we will go to the WTO to settle this matter."

He said that during a meeting at the Chinese foreign ministry, he was given "formal assurances that in absolutely no way would European businesses be affected by the US-China deal".

The WTO's principle of most-favoured-nation treatment says countries cannot discriminate between trading partners.

Under the deal, China agreed to import an additional $200 billion in US products over two years — above the levels purchased in 2017 — including an extra $32 billion in agricultural goods.

Beijing also pledged to improve protections of US intellectual property.

The US said it would slash in half tariffs of 15 per cent that were imposed on about $120 billion worth of Chinese consumer goods such as clothing in September.

But punitive border taxes will remain on two-thirds of more than $500 billion in imports from China.

When questioned on the matter, Chinese foreign ministry spokesman Geng Shuang said that the deal "is in line with WTO rules and market principles".

Paul Tan of Rajah & Tann law firm in Singapore, who specialises in international dispute resolution, told AFP the deal "may not violate WTO rules because the type of goods being bought from the US could be different from other countries', or even unavailable".

"I don't think the trade deal reversed the increase in tariffs on US goods after the trade war broke out, for example, so I doubt this could be read as more preferential treatment," he said.

Trade squabbles 

China's agreement to buy more from the US in effect cushions some of the impact from increased tariffs over the past two years, Tan added.

He noted, however, that such bilateral trade deals seem to be the US administration's preferred method of developing economic relations with its major trading partners, rather than through the WTO — meaning further trade disputes with the US will have to be resolved outside the global trading system.

Kerstin Braun, president of Stenn Group, said on Thursday: "With a weakened WTO and the general trend away from multilateral trade agreements, we're only going to see more trade squabbles."

The current crisis facing the WTO could also mitigate the EU's threat, with Washington having recently forced the body's appeals unit to suspend operations.

The US has long-standing and wide-ranging concerns about the WTO, with its allegedly soft stance on China a main criticism.

Separately to the US-China trade negotiations, the EU has also been trying to reach an agreement with Beijing on investments for almost seven years.

Some of the EU's demands are similar to those of the US, including respect for intellectual property and the end of forced technology transfers by foreign firms operating in China.

Chapuis said discussions on this deal had entered a "crucial stage" and that progress was being made each month, with the ambition to reach an agreement by the end of the year.

A draft deal is expected to feature prominently at a China-EU summit scheduled for March in Beijing with the new EU leaders.