Business

TOKYO — Japan is bracing for its first sales tax rise in years, with last minute shoppers buying up a host of goods from gold to ice cream, as the government tries to tackle its crushing national debt.

Millions of shoppers are making a mad dash to stores ahead of Tuesday’s tax rise to 8 per cent from the current 5 per cent amid fears the increase could spark the return of a protracted economic slump.

The last time Japan brought in a higher levy in 1997, it was followed by years of deflation and tepid economic growth.

The upcoming hike has created a tricky balancing act for Prime Minister Shinzo Abe as he tries to nudge the world’s number-three economy out of the cycle of falling prices and lacklustre growth with a growth blitz dubbed Abenomics.

On Friday, fresh data showed Japanese consumer prices rose again in February, suggesting Tokyo’s efforts to slay 15 years of deflation was gathering steam.

But the increase was largely driven by rising post-Fukushima energy import costs, rather prices going up on the back of strong, across-the-board consumer demand — dubbed “good” inflation by some economists.

A key worry is that Japan’s last tax rise deterred consumers and foreshadowed the drop into a cycle of falling prices — although other factors, including the Asian financial crisis, were also blamed. The slowdown saw Japan’s powerhouse economy descend into a protracted slump.

Opinion is mixed over whether history will repeat itself.

Tokyo’s special budget to counter a tax-linked slowdown and the Bank of Japan’s unprecedented monetary easing were likely to offset a drop in spending, according to some analysts.

“Daily necessities may not be affected very much by the tax hike, but demand for cars, furniture and houses is likely to drop temporarily,” said Kenji Yumoto, vice chairman of the Japan Research Institute.

“We’ll see whether the inflation is good or bad only after we see the impact of the tax hike. If demand later recovers, that could lead to good inflation,” he added.

Few shoppers seemed inclined to wait for prices to go up in a country where consumers have become used to paying pretty much the same, year after year, for their televisions, beer and sushi.

Falling or static prices may sound great for household budgets, but Japanese wages have barely moved over the years and the cycle has meant shoppers tended to hold off buying in the hope of getting goods cheaper down the road. That, in turn, hurt producers and slowed economic growth.

Shoppers go for gold

The tax rise — a seemingly modest increase compared with many countries’ consumption levies — has ushered in some less-than-typical shopping habits.

Staff at jewellery chain Tanaka Kikinzoku watched wide-eyed as gold sales surged fivefold this month from a year ago with customers converging on a shop in Tokyo’s glitzy Ginza district so they could buy 500 gramme bars for 2.3 million yen ($22,500) apiece.

“We’ve seen unusual demand for gold,” Tomoko Ishibashi, a spokeswoman for parent company Tanaka Holdings, told AFP. “Some customers bought now to avoid the extra tax levy from April 1, but that’s not the only factor.”

With prices on the rise across the nation of 128 million, some gold-hungry customers may be betting on the perceived safety of the yellow metal, she said. “Gold is known for its price stability and people in general aim to hold it for a long period time.” 

While some firms are absorbing the higher tax fearing a drop in customer traffic, many others are raising prices as a sharply weaker yen has jacked up their own import costs.

Beverage giants Asahi and Suntory are raising the price of vending machine bottled drinks, while QB House, a 1,000 yen-a-head haircut chain, said prices will go up a full 8 per cent to 1,080 yen. The company reasoned that it kept its thrifty rates capped despite the last tax rise, when the levy rose to 5 per cent from 3 per cent.

The kids — and adults — who depend on Japan’s ubiquitous vending machines for their ice cream fix are sure to be disappointed as some of the sweet treats’ prices rise by 10 yen to 160 yen at 20,000 locations operated by Ezaki Glico.

But the confectioner insisted customers will not be short-changed.

“This is not just a price hike,” a company spokeswoman said. “We will update our products with higher quality or more volume.”

AMMAN — Arab Bank will be distributing cash dividends to shareholders at a rate of 30 per cent following the approval of shareholders during an ordinary general assembly meeting last week. The dividends amount to JD160.2 million taking into consideration that between 2009 and 2013, cash dividends distributed by the bank totalled JD667.5 million. Moreover, shareholders approved during an extraordinary session the distribution of a bonus share for every 15 shares held by investors. Subsequently, the bank’s capital will increase to JD569.6 million. In a statement issued by the bank on Saturday, the general assembly also elected a new board of directors for the coming four years. Sabih Al Masri was elected chairman and Samir Qawar vice chairman. Members comprise the Saudi ministry of finance, Jordan’s Social Security Corporation, Abdul Hamid Shoman Foundation, Nazek Al Hariri, Mohammad Al Hariri, Omar Razzaz, Bassam Kanaan, Wahbeh Tamari and Abbas Farouq Zueitar. 

BASRA, Iraq — One of the biggest undeveloped oilfields in the world has begun commercial production in south Iraq, officials said Saturday, part of ambitious plans by Baghdad to dramatically ramp up output.

The announcement was made during a ceremony attended by Oil Minister Abdul Karim Al Luaybi and Deputy Prime Minister Hussein Al Shahristani, as well as officials from Russian energy giant Lukoil, the principal firm developing the enormous West Qurna-2 field.

It comes just weeks ahead of parliamentary elections, with the country looking to fund reconstruction of its dilapidated infrastructure and economy by upping crude sales.

"Production started today," said Nasir Hashim Fakhr, the Iraqi oil ministry official charged with the development of West Qurna-2 field in the southern Basra province.

Fakhr told reporters initial production was about 120,000 barrels per day (bpd), but that output would rise to 420,000 bpd by the end of the year.

Lukoil President Vagit Alekperov said in a statement that the target was initially hit on Friday at West Qurna-2, one of the world's biggest undeveloped oil fields with known reserves of 12.9 billion barrels.

The Russian firm had initially partnered with Norway's Statoil on the West Qurna-2 field, signing a 20-year deal in early 2010 under which they were to increase production at the field to 1.8 million bpd, with fees of $1.15 per barrel extracted.

In May 2012, however, the Norwegian company sold its stake to Lukoil, and the production target was later lowered to 1.2 million bpd.

Iraq has proven reserves of 143.1 billion barrels of oil and 3.2 trillion cubic metres of gas — both among the highest such deposits in the world.

Baghdad is heavily dependent on oil exports for government revenue, and the authorities are seeking to dramatically ramp up sales.

The country is looking to increase its production capacity to 9 million bpd by 2017, a target the International Monetary Fund and International Energy Agency have warned is too ambitious.

It currently produces about 3.5 million bpd, with exports in February reaching 2.8 million bpd, the highest such figure in at least a quarter century.

NOVO-OGARYOVO, Russia — President Vladimir Putin said on Thursday that Russia would develop its own credit card system to reduce reliance on Western-based companies and soften the potential blow from US and European union (EU) sanctions.

Putin voiced his support for plans described by senior officials to create a domestic-based system in response to restrictions placed on Russian banks last week by Visa and MasterCard, which are widely use by Russians. 

"We certainly must do this, and we will do it," Putin told senior Russian lawmakers during a meeting that mainly focused on efforts to integrate the Crimea region after he signed legislation to make it part of Russia last week.

Visa and MasterCard last week stopped providing services for payment transactions for clients at Bank Rossiya, under US sanctions over what the West says is Russia's illegal annexation of Crimea from Ukraine.

The two payment systems also suspended services for clients at several other banks whose shareholders are on the US sanctions list. They resumed services after the US government said this did not mean the banks were subject to sanctions.

"It is really too bad that certain companies have decided on ... restrictions," Putin said, without naming Visa or MasterCard. "I think this will simply cause them to lose certain segments of the market — a very profitable market."

Russia has been largely integrated into the global economy since the 1991 collapse of the communist Soviet Union, but the biggest confrontation since the Cold War has led officials to look for ways to reduce reliance on the West.

After hitting Russian officials and lawmakers with visa bans and asset freezes over the annexation of Crimea, the US and EU are threatening measures affecting entire economic sectors if Russia escalates the crisis.

Western states have emphasised they do not recognise Crimea as being part of Russia, but Putin — his popularity boosted by the acquisition — has pressed ahead with steps to integrate the Black Sea Peninsula. 

"We must do everything as swiftly as possible so that those who live in Crimea... feel like fully-fledged citizens of the Russian Federation," Putin told the senior lawmakers.

Separately, Russian officials have dramatically reduced growth forecasts for this year and acknowledged the annexation of Crimea will spur capital outflows and hurt investment, but they have not ripped up the old script entirely.

At an investment conference on Thursday, Russia's central bank head and finance and economy ministers were sanguine, boasting they had ways to protect the economy against the fallout from the worst East-West standoff since the Cold War.

Most would not have to be used, they said, and the crisis over Crimea could eventually help the economy become more self-sufficient, a message which chimes with Putin's longstanding drive to bring money home from abroad.

But while sticking to a protocol agreed last week with Putin for all public comments to refer to economic and financial stability, Russia's three leading financial officials were clearly making preparations for the worst.

Having already stopped referring to the official growth forecast for 2.5 per cent this year, Economy Minister Alexei Ulyukayev said it could instead slow to 0.6-0.7 per cent if capital flight reached $100 billion this year. 

The economy ministry has estimated capital outflows of up to $70 billion in the first quarter alone.

"[With] an outflow of $150 billion, growth becomes negative," he said, suggesting Russia could tumble into recession for the first time since the aftermath of the global financial crisis in 2008-09.

In the first estimate by a leading international body, the World Bank said on Wednesday Russia's economy could contract markedly this year and see record capital outflows of $150 billion if the crisis over Crimea deepens.

It said Russia's gross domestic product (GDP) could shrink by 1.8 per cent, hurt by uncertainty over future measures the West may take to punish Russia for annexing Crimea.

Economists have also said Russia's economy would suffer badly if the price of oil, its main export item, were to fall.

A Reuters poll of analysts on Thursday showed that increasing oil supplies coupled with sluggish global demand will push oil prices lower in 2014, with further falls expected in 2015 and 2016. 

Russia's former finance minister, Alexei Kudrin, agreed, saying it was not the sanctions themselves that were damaging the economy but the expectation of more, possibly targeting trade or finance, and also how Moscow would retaliate.

"All this affects the amount of capital outflows and investments. The general atmosphere of uncertainty about Russian policy in these circumstances is also a deterrent," he said.

"My forecast for economic growth is about zero, plus or minus 0.5 per cent," he added, pegging outflows at $150-160 billion.

He noted that this was what it cost to pursue an independent foreign policy and society was so far prepared to agree to such a cost.

"We are paying hundreds of billions of dollars for this, hundreds of billions, and we will see lower GDP growth, investment and revenues," Kudrin indicated.

For now, most officials are at least publicly backing Putin's decision to pursue his strident foreign policy, forcing their financial colleagues to come up with ways to plug the gap.

Ulyukayev urged a loosening in budget funds to help spur investment, possibly from oil revenues.

Finance Minister Anton Siluanov said he was ready to offer companies the same emergency measures adopted during the 2008-2009 financial crisis when the government spent billions of dollars, or about 8 per cent of GDP, bailing out Russia's major banks and companies.

He suggested using funds from the National Wealth Fund, a sovereign fund financed from oil taxes designed to support the pension system, which as of March 1 stood at $87.3 billion.

Central Bank Governor Elvira Nabiullina also promoted a plan to ease borrowing at home, pointing to three-year refinancing for banks secured by state-backed investment projects as a way of reducing reliance on Western finance.

But for the time being, the overall message was relatively upbeat.

"We expect that one of the consequences of these recent events could be an increase in demand for credits inside the country, if access to lending abroad is reduced for companies and banks," Nabiullina said.

ANKARA — Iran aims to increase its gasoline imports over the next year, a senior Iranian oil official said on Thursday, as the country has stopped using domestic petrochemical plants to produce the fuel.

Imports are a sensitive subject for energy-rich Iran as they have been a target for US sanctions aimed at persuading Tehran to curb its nuclear activities.

"Iran's fuel imports will surely increase this [Iranian] year," said the senior official, who asked not to be named.

The Iranian year started on March 21.

He refused to reveal the amount or the possible suppliers, but media reports suggest that the import of gasoline will be around 11 million litres.

"Iran will triple gasoline imports in the next Iranian calendar year," Iran's semi-official Mehr news agency quoted the head of the National Iranian Oil Products Distribution Company, Mostafa Kashkouli, as saying on March 4. "It will be around 11 million litres."

However, Iran's Oil Minister Bijan Zanganeh said in September that Iran will import several million litres a day of gasoline to fill the gap between domestic supply and consumption, according to the oil ministry's SHANA website.

Iran has been trying to side-step sanctions on its oil industry by becoming self-sufficient in gasoline production as it produces only 60 per cent of its domestic gasoline demand and imports the remaining 40 per cent from friendly powers.

Iran lacks refining capacity — in part due to a lack of foreign investment — forcing it to import 40 per cent of its domestic gasoline demand.

US-led sanctions on foreign companies that help to supply fuel to Iran have scared off Iran's regular gasoline suppliers, hitting what is seen as the Islamic Republic's Achilles' heel, its lack of refining capacity.

The National Iranian Oil Co.'s director of international affairs in 2010, Ali Asghar Arshi, said Iran had become self-sufficient in producing gasoline and also other top oil ministry officials were quoted by Iranian media as saying that "Iran won't have to rely on imports anymore".

Many analysts were sceptical, saying it was part of the country's "political and psychological" propaganda to cope with sanctions.

Iran's plan to increase imports follows an interim deal agreed in November with world powers under which Tehran has shelved higher-grade uranium enrichment and obtained modest relief from punitive sanctions in return. The interim accord went into effect on January 20.

Alarmed over high pollution levels, Hassan Rouhani's government has repeatedly said it wants to halt production of gasoline from petrochemical plants, which started in 2010.

Iran and major powers are seeking a final settlement by a July deadline under which the West wants Iran to significantly scale back its nuclear programme.

Separately, the International Monetary Fund (IMF) said recently that Iran's economy faces deep structural weaknesses as intensified nuclear sanctions have added to other domestic challenges to the government.

In its first review of the Iranian economy in nearly three years, the IMF said the country needs to respond with a "prompt and vigorous" reform programme to prevent further deterioration.

A combination of shocks, including the start of subsidy reforms, poorly funded social programs, and the intensification of trade and financial sanctions, had "weakened the economy", the IMF added.

"Inflation and unemployment are high, while the corporate and banking sectors show signs of weakness," it indicated.

"Iran now stands at a crossroad... The new authorities should embark on a prompt and vigorous implementation of fundamental reforms to the frameworks supporting product, labour, and credit markets," the IMF concluded

GENEVA/WASHINGTON — China has lost a dispute at the World Trade Organisation (WTO) over limits on rare earth and metals exports, handing Europe and the United States a victory over what they see as Beijing's unfair trade practices.

"Today's ruling by the WTO on rare earth shows that no one country can hoard its raw materials from the global market place at the expense of its other WTO partners," said European Union (EU) Trade Commissioner Karel De Gucht. 

China produces more than 90 per cent of the world's rare earths, key elements in defence industry components and modern technology from iPhones and disk drives to wind turbines.

China imposed strict rare earth export quotas in 2010, saying it was trying to curtail pollution and preserve resources.

Prices of the prized commodities soared by hundreds of per cent and the United States, EU and Japan complained that the export restrictions gave Chinese companies an unfair competitive edge. 

China said limits on exports of rare earths, as well as the metals tungsten and molybdenum, were needed to prevent over-mining.

Any of the parties in the case can appeal within 60 days.

The US said the export limits allowed China to artificially increase world prices for raw materials crucial to make products like hybrid car batteries, wind turbines and energy-efficient lighting, while artificially lowering prices for Chinese producers.

"China's decision to promote its own industry and discriminate against US companies has caused US manufacturers to pay as much as three times more than what their Chinese competitors pay for the exact same rare earths," US Trade Representative (USTR) Michael Froman said in a statement.

Rare earth industries

Demand for rare earths comes from a variety of industries. General Electric uses rare earths in wind turbines. Toyota and Nissan use them for their hybrid and electric cars, while Blackberry and Apple  need them for smartphones and tablet computers. The USTR cites estimates that industries using rare earths contribute more than $300 billion to the US economy. 

Shares of companies mining or exploring for new sources of rare earths soared in 2010 on speculation that China's crackdown could boost demand for alternative sources, but a slump in prices recently as new supply has come on board from Australia has weighed on earnings of producers like Molycorp Inc.

China had been widely expected to lose the case, after a successful challenge two years ago to China's export restraints on a different set of raw materials used in the steel, aluminum and chemical industries, including bauxite and magnesium.    

China's ministry of commerce said the head of its treaty and law department welcomed the WTO's recognition of its efforts to conserve resources and protect the environment, but regretted that the panel found China's export duties, quotas and quota administration breached WTO rules.

"China believes that these regulatory measures are perfectly consistent with the objective of sustainable development promoted by the WTO," it said in a statement, adding that China was currently assessing the WTO report. 

The European Commission said no-one disputed China's right to put in place environmental and conservation policies.

MOSCOW — Egypt has resumed talks about the creation of a free trade zone with the customs union of Russia, Belarus and Kazakhstan, Egyptian and Russian officials said on Wednesday.

Russia is increasing efforts to strengthen relations with large importers of its products as the United States and European Union (EU) threaten steeper sanctions over Moscow's intervention in the crisis in Ukraine.

In the biggest East-West confrontation since the Cold War, the US and EU have imposed visa bans and asset freezes on some of President Vladimir Putin's closest political and business allies after Moscow annexed Ukraine's Crimea.

"There were talks about this [creation of the free trade zone with Egypt] before 2011... Now we have agreed to resume these negotiations and to discuss sectors of cooperation," Russian Agriculture Minister Nikolai Fydorov said.

"The final decision will be made after the [presidential] election campaign in Egypt, official documents will be appearing after it," he told reporters in Moscow after the meeting of the Russian-Egyptian commission for trade development.

Egyptian Industry and Investment Minister Mounir Fakhry Abdel Nour said the agreement on free trade with the customs union could contribute to expanding cooperation between two countries.

He added that the officials have also discussed a number of joint projects, including supplies of Russian liquefied natural gas and other commodities.

Russian state nuclear firm Rosatom is considering taking part in the construction of a nuclear power plant in Egypt, according to officials.

They have also agreed to revive Russia's participation in modernisation of assets dating back to the Soviet era, Fyodorov noted. 

He mentioned an aluminium plant, a hydro power plant, and projects related to the light metro in Cairo and grain storage. He did not specify what form Russia's involvement could take.

Wheat supplies

Egypt is already the largest importer of Russian wheat, buying one fifth of the country's exports of this commodity so far in 2013/14. It bought 2.6 million tonnes of Russian wheat between July 1 and the end of February.

"You [Russia] have expressed your wish to expand exports, primarily of wheat... and we want to develop exports of vegetables and fruit. It would help widen our cooperation," Abdel Nour told the meeting.

Officials did not provide any other details on how Russian wheat exports could be increased.

It is unlikely that the countries will reach a major long-term wheat supply deal — a possibility the market has repeatedly speculated on, although there might be other ways of a deeper cooperation, a trader said.

"Egypt has often talked about these long term wheat deals before but no one believes anything practical will come out of it as it doesn't make sense. Why would you lock yourself into a deal with certain prices and what if market prices go down after that, you are stuck paying the higher price?" the trader added.

"What is more realistic is that they discuss together whether or not the Russian government can perhaps encourage Russian firms to participate more directly in GASC [Egyptian state wheat buyer] tenders to increase the amount of Russian offers," he indicated

AMMAN — Amman Chamber of Commerce (ACC) President Issa Murad on Tuesday stressed the importance of increasing economic, commercial and investment cooperation with Chile. At a meeting with Chile’s Ambassador to Jordan Eduardo Escobar Marin, Murad highlighted the need to capitalise on the distinguished relations between the two countries to achieve this goal. Murad indicated that commercial relations between Jordan and Chile were still below the desired aspirations, noting that the private sector should work to stimulate further cooperation and increase joint trade exchange. Marin stressed his country’s commitment to boost its cooperation with Jordan, especially in economic and commercial areas, in a manner that serves the joint interests of the two countries. 

WASHINGTON — The dark world of cybercrime has evolved from one of rogue individuals to a functioning market-based economy with its ups and downs, code of conduct and "innovation".

A study by Rand Corp. and commissioned by the security firm Juniper Networks found a well-organised, multibillion-dollar underground economy that has become "a playground of financially driven, highly organised and sophisticated groups”.

The evolution of cybercrime creates new challenges for security professionals trying to protect computer networks, says Nawaf Bitar, Juniper's general manager for security.

"We have long suspected that cybercriminals were sophisticated and that they had an organisational structure, but no one had studied this," Bitar told AFP. "The success of this market is driven by accelerated economics, and the way to address this is through economics."

The report says the black markets "are growing in size and complexity" and that this activity "mirrors the normal evolution of a free market, with both innovation and growth."

Juniper's security vice president, Michael Callahan, said this cyber underground has all the characteristics of an economy, including its own currencies — chiefly cryptographic payment forms such as Bitcoin.

According to Callahan, the underground economy is characterised by specialisation and "resilience", so that if one market participant leaves, another steps up.

"We saw this when [the black market bazaar] Silk Road went down, and within a day other participants started filling that gap," Callahan said. "It's one of those signs this is a mature economy." 

'Honour among thieves'  

The report notes that, just as in some organised crime groups, there is a code of conduct that helps reassure customers.

"You have honour among thieves," Callahan indicated. "They work to a level of conduct. They know it is in all of their best interests to follow the rules. Like in other markets, these people know that your reputation is key."

The report suggests that about 30 per cent of the sellers of financial data are "rippers", who fail to deliver promised goods or services.

These abuses generally occur in the "lower" levels of the black market that are easiest to access.  But these rippers "tend to get reported and then often quickly removed", the report said.

The study found these markets span the globe from China to eastern Europe to Latin America, with many US-based players and "more cross-pollination between these cybercriminals than ever before".

The cybercrime world features "storefronts" like other forms of e-commerce, with hacker tools and services bought and sold.

The tools available include those used in the attack on US retail giant Target, where upwards of 110 million customers may have had their personal data stolen.

For those who lack technical savvy, new services are offered. Rand found one can obtain a Distributed Denial of Service (DDoS) attack — in which hackers overwhelm a server to interrupt access — for as low as $50 for a 24-hour attack.

'Active resistance'       

According to Bitar, the cybersecurity community needs to shift its focus because of the new threat, because the traditional methods of using firewalls and other defensive measures are not enough.

"We need to use active resistance rather than passive resistance," he said. 

This could involve setting traps, using encryption and delivering bogus information that disrupts efforts by hackers and attacks.

But he strongly opposed the idea of "hacking back" at the attackers.

"I believe that is wrong. You can harm innocent bystanders," he said.

AMMAN — Bank al Etihad on Monday announced that its internal auditing process has unveiled an embezzlement case concerning withdrawal of JD207,000 using two fake credit cards issued by resigned employees. In a statement to The Jordan Times on Monday, the bank said the employees, who resigned in October 2013, have withdrawn the money from other banks' ATMs and that their cash withdrawals have no impact whatsoever on clients' accounts, adding that it has filed a lawsuit to the concerned agencies against the employees.