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Business sentiment in Japan takes a dip on a stronger yen, trade battles

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Japanese business sentiment worsened for the first time in two years in the three months to March, a closely watched central bank survey showed on Monday, suggesting the strong yen is taking a toll on business confidence despite an otherwise steady economic recovery.

Simmering fears of a trade war, triggered by U.S. President Donald Trump’s move to impose tariffs on Chinese goods, could further undermine corporate morale if threats of retaliation
escalate.

The Bank of Japan’s quarterly “tankan” survey showed the headline index for big manufacturers‘ confidence declining by 2 points to plus 24 in March, compared with a median market forecast of plus 25.

Non-manufacturers’ sentiment worsened by 2 points to plus 23 in March, against a median forecast of plus 24, deteriorating for the first time in six quarters.

Both big manufacturers and non-manufacturers forecast business conditions to sour three months ahead, the tankan showed on Monday. The survey also showed big firms plan to raise their capital spending by 2.3 percent in the current financial year from April, versus the median estimate for a 0.6 percent gain.

Global markets were shaken last month when Trump moved to impose tariffs on Chinese goods and Beijing retaliated, but fears of a full-blown trade war have eased on hopes that negotiations can bring a compromise.

Japanese policymakers fret that a strong yen and trade frictions could deal a heavy blow to the export-reliant economy, which has benefited from solid global demand. Japan’s economy has grown for eight straight quarters, its longest continuous expansion since the 1980s bubble economy, moving Prime Minister Shinzo Abe’s revival plan a step closer to vanquishing decades of stagnation.

But slow wage growth and companies’ reluctance to raise prices have kept inflation well below the Bank of Japan’s elusive 2 percent target.

The tankan’s sentiment indexes are derived by subtracting the number of respondents who say conditions are poor from those who say they are good. A positive reading means optimists
outnumber pessimists.

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U.S. sends more firepower to Middle East as troops withdraw from Afghanistan

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A U.S. Air Force F-15E Strike Eagle piloted by a member of the 494th Expeditionary Fighter Squadron takes off from Al Dhafra Air Base, United Arab Emirates, in support of regional security operations, April 30, 2021.

Staff Sgt. Zade Vadnais | U.S. Air Force photo

WASHINGTON – The Pentagon has ramped up its military assets in the Middle East as U.S. and NATO coalition forces begin the colossal task of withdrawing from Afghanistan.

This week, two more U.S. Air Force B-52 Stratofortress strategic bombers arrived at Al Udeid Air Base in Qatar, bringing the total number of B-52s on standby to respond to a Taliban attack to six.

“We have made it exceedingly clear that protecting our forces and the forces of our allies and partners as they too withdraw is a priority, it’s a main priority,” Pentagon spokesman John Kirby told reporters Wednesday.

“We have made plans to introduce additional ground force capabilities to, again, make sure that this is safe and orderly,” Kirby added. The Pentagon also extended the deployment of a U.S. Navy carrier strike group in the region and deployed a dozen F-18 fighter jets to provide additional support.

Kirby has previously said that U.S. Central Command, the combatant command that oversees American operations in the Middle East, will continue to assess the need for additional military capabilities as the departure of U.S. and coalition forces proceeds.

A B-52H Stratofortress aircraft assigned to the 5th Bomb Wing, Minot Air Force Base, North Dakota, arrives May 4, 2021, at Al Udeid Air Base, Qatar.

Staff Sgt. Greg Erwin | U.S. Air Force photo

“The President has decided to end America’s involvement in our longest war and we’re going to do just that. And so far, less than one week in, the drawdown is going according to plan,” Secretary of Defense Lloyd Austin told reporters at the Pentagon on Thursday.

“Our focus is on making sure that we can retrograde our resources, our troops, our allies in a safe and orderly and responsible fashion,” Austin said, adding that in the future the Defense Department, hopeful of congressional support, plans to provide financial aid to Afghan forces.

Last week, the White House confirmed U.S. troops had begun the withdrawal process from Afghanistan and that the Pentagon proactively deployed additional troops and military equipment to protect forces in the region.

“Potential adversaries should know that if they attack us in our withdrawal, we will defend ourselves, [and] our partners, with all the tools at our disposal,” White House deputy press secretary Karine Jean-Pierre told reporters traveling on Air Force One.

“While these actions will initially result in increased forces levels, we remain committed to having all U.S. military personnel out of Afghanistan by Sept. 11, 2021,” she said, adding that the Biden administration is intent on a “safe and responsible” exit from the war-torn country.

Aircrew assigned to Al Udeid Air Base, Qatar, carry their gear into a C-17 Globemaster III assigned to Joint Base Charleston, South Carolina, April 27, 2021.

Staff Sgt. Kylee Gardner | U.S. Air Force photo

In April, Biden announced a full withdrawal of U.S. troops from Afghanistan by Sept. 11, ending America’s longest war.

The removal of approximately 3,000 U.S. service members coincides with the 20th anniversary of the Sept. 11 terrorist attacks, which spurred America’s entry into lengthy wars in the Middle East and Central Asia.

Biden’s withdrawal timeline breaks with a proposed deadline brokered last year by the Trump administration with the Taliban. According to that deal, all foreign forces would have had to leave Afghanistan by May 1.

Since Biden’s decision to exit the country, the U.S. has removed the equivalent of approximately 60 C-17 Globemaster loads of material out of Afghanistan, according to an update from Central Command. More than 1,300 pieces of equipment, which will not be left to the Afghan military, have also been handed over to the Defense Logistics Agency for destruction.

The U.S. has also officially handed over one facility to the Afghan military. So far, Central Command estimates that the U.S. has completed between 2% to 6% of the withdrawal process.

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World must cut methane emissions to avoid worst of climate change, UN says

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Flames from a flaring pit near a well in the Bakken Oil Field. The primary component of natural gas is methane, which is odorless when it comes directly out of the gas well. In addition to methane, natural gas typically contains other hydrocarbons such as ethane, propane, butane, and pentanes.

Orjan F. Ellingvag | Corbis News | Getty Images

A landmark United Nations report has declared that drastically cutting emissions of methane, a key component of natural gas, is necessary to avoid the worst impacts of global climate change.

The report, published Thursday by the Climate and Clear Coalition and the U.N. Environment Programme, represents a shift in the worldwide conversation on how to best address the climate crisis, which has focused on longer-term carbon dioxide reduction.

Methane is 84 times more potent than carbon and doesn’t last as long in the atmosphere before it breaks down. This makes it a critical target for reducing global warming more quickly while simultaneously working to reduce other greenhouse gases.

More than half of global methane emissions come from oil and gas extraction in the fossil fuel industry; landfills and wastewater from the waste sector; and livestock emissions from manure and enteric fermentation in the agricultural sector.

The world could slash methane emissions by up to 45% this decade, or 180 million tons a year, according to the U.N.’s Global Methane Assessment. Such a target will avoid nearly 0.3 degrees Celsius of warming by 2045 and help limit global temperature rise to 1.5 degrees Celsius, a goal of the Paris climate accord.

The report comes after methane emissions surged to record highs last year despite worldwide lockdowns during the coronavirus pandemic, according to research from the National Oceanic and Atmospheric Administration. Methane emissions are also rising faster than ever since record keeping began in the 1980s.

“Cutting methane is the strongest lever we have to slow climate change over the next 25 years and complements necessary efforts to reduce carbon dioxide,” Inger Andersen, Executive Director of the U.N. Environment Programme, said in a statement.

“The benefits to society, economies, and the environmental are numerous and far outweigh the cost,” Andersen said. “We need international cooperation to urgently reduce methane emissions as much as possible this decade.”

The fossil fuel industry has the greatest potential for reducing global emissions at little or negative cost by repairing leaks from oil and gas infrastructure, the report said. It added that companies who prevent leaks and capture methane could profit while curbing methane release.

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The report also pointed to the public health benefits of reducing methane, which is responsible for creating ground-level ozone, a dangerous air pollutant.

The 45% methane emissions reduction would prevent 255,000 premature deaths, 775,000 asthma-related hospital visits and 73 billion hours of lost labor from extreme heat and 26 million tons of crop losses each year, according to the report.

“We must tackle emissions not only from the energy sector, but also from landfills, agriculture, and abandoned coal mines,” Jutta Paulus, a Green Party member of the European Parliament, said in a statement.

“Setting aside dedicated funds for these super-emitters will be well-invested money on the path to reach our climate targets in 2030,” Paulus said.

A new study published in the journal Environmental Research Letters also said that cutting methane emissions from the oil and gas sector, agriculture and other human sources could slow global warming by as much as 30%.

Oil and gas extraction, processing and distribution account for 23% of emissions while coal mining comprises roughly 12% of emissions, the report said. Agriculture and livestock emissions from manure and enteric fermentation account for about 32% of methane emissions.

CNBC has reached out to the American Petroleum Institute, the oil and gas industry’s largest trade group, and the American Farm Bureau Federation, a lobbying group for the U.S. agricultural sector, for comment on the U.N. report.

Countries such as Russia, France and Argentina called for curbing methane emissions at the global leaders’ climate summit hosted by President Joe Biden last month.

In the U.S., the Senate recently restored an Obama-era regulation designed to reduce methane emissions from oil and gas fields by requiring companies to monitor and repair methane leaks from pipelines, storage facilities and wells.

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Bailey says inflation ‘will be a bit bumpy’ this year

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LONDON — The governor of the Bank of England on Thursday warned inflation was likely to be “a bit bumpy” this year, but insisted there was little reason to panic over the medium term.

His comments come shortly after the central bank upgraded its outlook for the U.K. economy. The central bank now believes the U.K. is on track for growth of 7.25% this year, slightly above analyst expectations and up from a previous estimate of 5%.

The U.K.’s comparatively quick vaccination rollout, a decline in the number of Covid-19 cases nationwide and the gradual easing of restrictions on economic activity were cited as reasons that led the central bank to revise its 2021 growth forecast.

On inflation, the BOE said it expects the consumer prices index to temporarily climb above its 2% target toward the end of this year, predominantly driven by developments in commodity prices.

It sees inflation returning to around 2% over the medium term.

“We think currently the policy setting is appropriate. We have got a forecast that has a very substantially strong bounce back but thereafter it comes back more into balance,” Andrew Bailey, governor of the BOE, told CNBC’s Joumanna Bercetche on Thursday.

Andrew Bailey, governor of the Bank of England, poses for a photograph on his first day in the post at the central bank in the City of London, U.K., on Monday, March 16, 2020.

Jason Alden | Bloomberg | Getty Images

“There will be an upturn in inflation this year because there are so-called base effects. Energy prices were very low this time last year and that’s coming out, so these effects will take place,” he continued.

“Inflation is going to be a bit bumpy this year in that sense as these base effects come in and out. At the moment, we are not seeing evidence that alarms us in terms of will this become embedded in higher inflation. But we will watch it very carefully,” Bailey said.

The U.K. economy contracted 10% in 2020 as a result of the coronavirus pandemic — the worst annual performance in more than three centuries.

It was more severe when compared with most other European economies, partly due to a slower move to implement strict public health measures to curb the spread of the coronavirus.

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