Market Rumours

2010/04/20 11:54DJ Bernanke, Shirakawa To Speak At Conference In Tokyo May 26
TOKYO -U.S. Federal Reserve Board Chairman Ben Bernanke and Bank of Japan Gov. Masaaki Shirakawa will make opening remarks at an international conference in Tokyo held by the Japanese central bank on May 26, the BOJ said on Tuesday. Shirakawa and Bernanke are scheduled to deliver speeches at the opening of the two-day conference, the bank said.

2010/04/20 10:48DJ Japan Kan: To Achieve Positive CPI Within This Year Seems Difficult
TOKYO -Japan's Finance Minister said Tuesday that he hopes to push the country's consumer price index above zero from its current negative level within this year, but added that to achieve such a goal may be difficult.'My previous remarks to parliament about pushing the price level above zero within this year reflected my hopes. But I also said that, as the formal government position, it seems difficult to achieve within this year or over the coming year,' Naoto Kan told a parliamentary committee.

2010/04/20 09:59=DJ FED WATCH: SF Fed Downplays Long-term Jobless, Unemployment Insurance Link
NEW YORK -Those who believe the nation has made it too easy to be without a job are basically wrong, a new paper from the Federal Reserve Bank of San Francisco argues.The research, published by the bank Monday, takes a look at the connections between extended periods of joblessness and the unemployment insurance system. The now ending recession has been defined by huge levels of unemployment, and the long periods of time that many are out of work.Congress has had to extend unemployment benefits on several occasions, but those actions have become more difficult and partisan. It's been a theme in some political circles that long-term unemployment insurance makes it too easy to stay unemployed. Sen. Jon Kyl (R., Ariz.) was widely quoted this spring as saying unemployment insurance creates a 'disincentive' to find new work.That's essentially wrong, economists Rob Valletta and Katherine Kuang write. They say the record high duration of unemployment has a 'quite small' relationship with the maximum amount of time one can draw unemployment benefits. 'Extended [unemployment insurance] benefits have had a relatively modest effect' on the jobless rate. 'We calculate that, in the absence of extended benefits, the unemployment rate would have been about 0.4 percentage point lower at the end of 2009, or about 9.6% rather than 10.0%.'The paper notes the economic crisis of the last few years has generated an 'unprecedented' level of unemployment duration. Those unemployed for more than six months hit 4.3% in March, 'well above' the previous high of 2.6% in 1983. The economists note that the current situation is all the more striking because the unemployment rate peak was quite a bit higher in that downturn, relative to what's been seen in this episode.The paper does warn, however, that if the current situation persisted it could create a permanent increase in the unemployed rate, although the researchers consider such an outcome 'unlikely.'Extended periods of unemployment are costly both to the government and to those without the jobs. Aside from the difficulty of paying for benefits in a time of huge deficits, joblessness lowers taxes receipts, dramatically depresses household income, and can lead to all manner of negative impacts on a worker's future ability to be hired. Skills atrophy, habits change, and workers can find it increasingly difficult to make their way back into the labor force.Economists and policy makers have been cheered by recent data that has showed the economy starting to add jobs in some strength. The unemployment rate in March was steady at 9.7% but the nation added 162,000 jobs, in what most believe is a turning point.But it will be a hard slog to make a big dent in the labor market given the economy's moderate rate of growth. The broadest government measure of unemployment, which counts the unemployed, those marginally attached to the labor force, and those working part-time involuntarily, has been rising this year, hitting 16.9% in March. While that remains under that measure's peak, it's a sign of the sickly underlying state of hiring.San Francisco Fed chief Janet Yellen warned earlier this month the unemployment rate may only tick down to 9.25% by year's end, before heading to a still high 8% by the end of 2011. If she's right, that suggests the problem of extended unemployment will be an enduring one. Economists and legislators alike will have to confront again the issue of unemployment insurance, both as a lifeline and as coddling element.

2010/04/20 09:40*DJ Japan Fin Min Kan: Hope To Push CPI Above Zero Within This Year

2010/04/20 09:38DJ Japan Finance Minister Kan: Forex Rates Should Be Set By Markets
TOKYO -Japanese Finance Minister Naoto Kan said Tuesday that market forces should determine foreign exchange rates, effectively brushing aside calls by some ruling party lawmakers for efforts to lift the dollar to around Y120.'As finance minister, I am always supposed to say that markets should determine foreign exchange rates,' Kan said at a news conference after a regular Cabinet meeting.He said he wouldn't comment on recent proposals by a group of about 130 Democratic Party of Japan lawmakers that included calls for the government and the Bank of Japan to use their fiscal and monetary policy powers--including guiding foreign exchange levels--to combat deflation.But Kan said another proposal by the group that the government set an annual inflation target of over 2% was't unreasonable, and is worth considering.

2010/04/20 08:45DJ BOJ Shirakawa: Risk Of Double-Dip Recession Greatly Receding
TOKYO -Bank of Japan Gov. Masaaki Shirakawa said Tuesday that the risk of the Japanese economy slipping into a double-recession is receding greatly."Although the economic recovery is expected to be mild, the risk of a once-feared double-recession is greatly receding," Shirakawa told a parliamentary committee.Shirakawa also said the BOJ will patiently continue its very accommodative policy to beat deflation.The governor's words on the economic outlook and policy stance are in line with his recent remarks.

2010/04/20 07:33DJ Fed's Duke Sees Rise In Bank Loans To Small Firms Later This Year
WASHINGTON -U.S. bank loans to small companies should rise later this year thanks to a stronger economy, a top Federal Reserve official said Monday.Fed Board Governor Elizabeth Duke said although access to credit for many small firms remains restricted, she's optimistic that loans will increase in the near future."Notably, overall economic conditions, the most important determinant of the demand for and availability of small business lending, have improved considerably since the early and middle part of last year," Duke said in prepared remarks at an economic development forum.To be sure, the Fed official said the U.S. economy still faces considerable challenges, especially due to a high unemployment rate and a still weak commercial real estate sector.So far, most of the stabilization in the unemployment rate has come from a sharp reduction in layoffs, Duke said. "We have not yet seen any substantial improvement in hiring rates," the Fed official said, adding she expects employers to continue to add jobs cautiously.Following the worst recession since the 1930s Great Depression, almost one in 10 Americans don't have a job. The March jobs report showed some improvement in the U.S. labor market, but the Fed expects the unemployment rate to remain above 9% until the end of this year. Hit hard by the loss of businesses and employment, much retail, office, and industrial space stands vacant, Duke noted. A turnaround in commercial real estate is therefore likely to lag the improvement in overall economic activity.However, the Fed official added the sector's performance will gradually begin to improve as the economy continues to strengthen.

2010/04/20 06:40DJ EU Group To Mull Updating State Aid Rules For Airlines
BRUSSELS -The European high-level group convened to discuss the economic impact of the volcanic eruption on Europe's airline industry will look at updating state aid rules to clarify how airlines impacted by flight plans can benefit from government help, the European Commission's competition spokeswoman Amelia Torres said Monday.The commission has rules that allows member states to compensate companies for damage caused by natural catastrophes, Torres said.These could be applied to compensate airlines in these exceptional circumstances, she said.We are ready, if need be, to update existing guidelines put in place following the attacks of Sept. 11, 2001 to "provide guidance" to our member states rapidly, Torres said.However, the commission wasn't aware of any airline having so far requested to receive government support, she said.

2010/04/20 06:07=DJ Fed's Bernanke: Fed Had Limited Oversight On Lehman
WASHINGTON -The Federal Reserve was not aware of the use of controversial repurchase agreements undertaken by Lehman Brothers Holdings Inc. ahead of its bankruptcy at the height of the financial crisis, Chairman Ben Bernanke said in remarks prepared for a Tuesday U.S. House hearing.Bernanke, in testimony for the House Financial Services Committee, said the Fed had limited oversight of the firm, with no authority over Lehman's risk management or disclosures. That meant Fed regulators were not aware of the so-called 'Repo 105' transactions.'Indeed, according to the bankruptcy examiner, Lehman staff did not report these transactions even to the company's board,' Bernanke said in the remarks.He also reiterated that the government had no choice but to let Lehman declare bankruptcy in September 2008 after the firm and federal officials were unable to arrange financing or an acquisition of the bank.'At that time, neither the Federal Reserve nor any other agency had the authority to provide capital or an unsecured guarantee, and thus no means of preventing Lehman's failure existed,' Bernanke said.The lesson of the Lehman collapse, he continued, is that lawmakers need to subject large, interconnected firms to 'robust consolidated supervision' and have the ability to resolve them if they start to falter.'Such a regime would both protect our economy and improve market discipline by ensuring that the failing firm's shareholders and creditors take losses and its management is replaced,' Bernanke said.

2010/04/20 04:17DJ Fed Paper Urges Better Data Use To Help Prevent Future Crises
WASHINGTON -Regulators should adopt a more dynamic approach in using economic data in order to help prevent a new financial crisis, a U.S. Federal Reserve paper said Monday.The paper, which was co-authored by Fed Vice Chairman Donald Kohn, argues that combining macroeconomic data showing trends like the large rise in household debt with specialized data, such as borrowers' solicitations showing the rapid decline of underwriting standards, may have helped supervisors spot the crisis earlier.Supervisors should act like intelligence analysts, who begin by looking at grainy satellite images, which the paper compares to aggregate data. The supervisor should then follow up by bringing other resources to better understand the full picture, the paper says."We believe that such coordination, with the analysis of aggregate data leading to the identification of those areas where work with more-specialized data should be targeted, should be a key aspect of the paradigm in future financial stability work," the paper says.The 42-pages paper will be presented at the fifth European Central Bank conference on central bank statistics, which is slated to take place in Frankfurt on Thursday and Friday.In the wake of the crisis, financial supervisors and policymakers are working to expand and improve data collection. But that is only part of the process in developing early-warning system to prevent future crises, the Fed paper argues."More fundamental, in our view, is the need to use data in a different way - in a way that can deliver more flexibility in targeting than static data collection can allow," the paper says.An approach relying on expanded collection of aggregate data followed by more-targeted and specialized information "could have been helpful in the period leading up to the recent crisis," according to the Fed paper.