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Bank of Japan keeps monetary policy, tweaks view on global economy

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The Bank of Japan kept monetary policy steady on Friday but tempered its optimism that robust exports and factory output will underpin growth, a nod to heightened overseas risks that threaten to derail a fragile economic recovery.

Factories across the globe slammed on the brakes last month as demand was hit by the U.S.China trade war, slowing global growth and political uncertainty in Europe ahead of Britain’s departure from the European Union.

In a nod to the increased risks, the BOJ cut its assessment on overseas economies to say they are showing signs of slowdown. It also revised down its view on exports and output.

“Exports have shown some weaknesses recently,” the central bank said in a statement on its policy decision, offering a bleaker view than in January when it said they were increasing as a trend.

At a two-day rate review ending on Friday, the BOJ maintained a pledge to guide short-term interest rates at minus 0.1 percent and 10-year government bond yields around zero percent. The widely expected decision was made by a 7-2 vote.

The central bank also stuck to its view Japan’s economy is expanding moderately, but added a phrase that “exports and output have been affected by slowing overseas growth.” In January, it said only that the economy was expanding moderately.

“The sharp deterioration in exports and industrial production should be a serious source of concern for the BOJ. I think the BOJ is doing some thought experiments about what they can do,” said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management.

“For now you can still make the argument that current economic weakness is temporary, but this is becoming an increasingly closer call. The next three months are critical.”

Japan’s exports posted their biggest decline in more than two years in January as China-bound shipments tumbled. Factory output also posted the biggest decline in a year in that month, a sign slowing global demand was taking a toll on Japan Inc.

Many in the BOJ expect Japan’s economy to emerge from the current soft patch in the second half of this year, when Beijing’s stimulus plans could lift Chinese demand and underpin global growth, sources have told Reuters.

But there is uncertainty on how quickly global demand could rebound, adding to woes for Japanese companies already feeling the pinch from slowing Chinese demand, analysts say.

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Jakarta governor says six dead in Indonesia post-election unrest

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Police fired tear gas during a clash with protesters in Jakarta, Indonesia on Wednesday 22 May 2019.

Eko Siswono Toyudho | Anadolu Agency | Getty Images

Six people died in civil unrest that gripped parts of Jakarta on Tuesday night after the election commission confirmed that President Joko Widodo won last month’s election, the governor of the Indonesian capital said.

Protests on Tuesday by supporters of Widodo’s challenger for the presidency, former general Prabowo Subianto, started peacefully but turned violent in the evening, forcing police to fire tear gas to disperse the crowd.

“As per 9 o’clock this morning, there were 200 people hurt being brought to five hospitals,” Governor Anies Baswedan told broadcaster TVOne. “The number of people dead was six.”

He said hospitals were conducting post-mortems to determine the cause of the deaths.

Hundreds of protesters were still locked in a tense stand-off with police in central Jakarta on Wednesday after a night of violence. Television footage showed smoke billowing from behind dozens of protesters in streets of the Tanah Abang district, with some throwing firecrackers and tearing down public fences.

News agency Antara reported that a small number of protesters had attempted to storm a nearby police station and were using tables as barricades.

Several office buildings and embassies in downtown Jakarta were closed on Wednesday, as were train stations in the area.

A separate crowd in front of the election supervisory body threw rocks and firecrackers at police around dawn, and dozens of chanting protesters joined them during the morning.

Hundreds of police in riot gear blocked the usually busy Sarinah intersection to hold back a crowd they said was expected to swell further in the afternoon.

“We will keep going with these protests until he (Widodo) falls,” said Afi Sikumbang, 58, a Prabowo supporter.

The General Election Commission (KPU) on Tuesday confirmed unofficial counts by private pollsters in the April 17 election, which gave Widodo a 55.5% share of votes against 44.5% for Prabowo.

Widodo won more than 85 million votes of a total of 154 million cast in the world’s third-largest democracy, but Prabowo told reporters he believed there had been widespread cheating.

The retired general pledged he would “continue to make legal efforts in line with the constitution to defend the mandate of the people”, with his legal director stating the campaign planned to contest the result in the Constitutional Court.

On Monday, an election supervisory agency dismissed claims of systematic cheating, citing a lack of evidence. Independent observers have said the poll was free and fair.

Widodo was congratulated for winning the election by former president and Democratic Party chairman Susilo Bambang Yudhoyono, who is part of the coalition backing Prabowo.

The National Mandate Party (PAN), which is also part of the Prabowo coalition, has also acknowledged the results of the election, which are being rejected by Prabowo’s Great Indonesia Movement (Gerindra).

Presidential Chief of Staff Moeldoko told reporters on Wednesday he believed there was “a systematic effort by a certain group, outside of the terrorist group, that is riding on the situation to muddy the situation”, adding that authorities have seized two pistols from people involved in riots.

“We know who is behind this, it is a matter of time,” he said, adding that security was under control.

Escalation

Police spokesman Dedi Prasetyo told Reuters on Wednesday that Indonesian police had arrested at least 20 people for provoking the riots and were checking on reports of casualties.

He stressed that security officers on the ground, which include military personnel, were not equipped with live bullets.

News website Tirto reported a man died of bullet wounds in Tanah Abang, quoting a doctor at a hospital near the site.

Indonesian authorities say 40,000 police and army personnel are on duty across Jakarta to maintain security.

Australia, the United States, and Britain issued travel advisories warning of an increased risk of violence across Indonesia and advising citizens to stay away from protests.

The Indonesian rupiah fell 0.2% on Wednesday. The main stock index gained as much as 0.3% earlier in the session but gave up its gains to trade 0.2% lower.

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Asia stocks edge up as US-China trade tensions linger

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Markets in Asia mostly traded higher on Wednesday afternoon as trade tensions continued to linger between the U.S. and China.

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TransferWise valued at $3.5 billion after $292 million secondary sale

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TransferWise co-founders Taavet Hinrikus and Kristo Kaarmann.

TransferWise

TransferWise, the money transfer company that’s taking on Western Union, is valued at $3.5 billion after a new investment round, making it Europe’s most valuable financial technology start-up.

In lowering fees and adding a slick online platform to help consumers move money globally and track their transfers, the London-based company is taking a modern approach to a staid business that’s been dominated by giants like Western Union and MoneyGram.

The company says it’s been pushing for more transparency around the fees banks and currency exchange services charge their customers for transferring money abroad.

“Eight years ago we had a dream, and in a way the whole world was against us,” said TransferWise co-founder and Chairman Taavet Hinrikus in an interview. “And we’ve been able to step by step build the business and also change the environment around us to be much more consumer friendly.”

TransferWise isn’t adding fresh cash to its balance sheet with the investment, but instead giving employees and early investors the chance to sell some of their stake in a $292 million secondary deal.

European private equity group Vitruvian Partners and U.S. investment firms Lone Pine Capital and Lead Edge Capital bought shares from existing investors, while early investors Andreessen Horowitz and Baillie Gifford increased their holdings in the company. Funds managed by BlackRock also contributed to the round.

“We have been a profitable company for the past two years, we have a significant amount of cash sitting on our balance sheet,” Hinrikus said. “The company does not need any cash.”

TransferWise booked a net profit of £6.2 million ($7.9 million) for the fiscal year ending March 2018, while annual revenue almost doubled to £117 million. The company says it’s signing up 10,000 new business customers a month, and now has 5 million total customers, processing £4 billion in monthly transactions.

The latest fundraising means TransferWise is now the most valuable fintech start-up in Europe, surpassing British digital lender OakNorth, which was last valued at $2.8 billion.

Hinrikus said the company isn’t in a rush to go public.

“While we believe we’ll be a public company eventually, that doesn’t help us do what we want to do in the next couple of years,” he said.

For now, the company is focused on growth. TransferWise currently has more than 1,600 employees worldwide and will hire 750 more over the next 12 months, Hinrikus said.

WATCH: How TransferWise has integrated its product into bank apps

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