Japan economy shrank less than thought after quake

Japan's economy shrank less than expected in the April-June quarter, data showed Monday, fuelling hopes that its recovery from the March 11 quake and tsunami disasters is on track.

Finance Minister Yoshihiko Noda said Asia's second-biggest economy looks likely to grow again in the July-September quarter, although he warned of the risk posed by the strong yen, which hurts Japan's exporters.

The Cabinet Office said Japan's economy shrank an annualised 1.3 per cent in the first full quarter since the nation's worst post-war disaster -- beating bleak market expectations of a 2.7 per cent contraction.

The figures highlight that Japan's economy has started to bounce back from the calamity, which killed more than 20,000 people, wiped out entire towns along the Pacific coast and sparked a nuclear emergency.

"It was negative growth, but not bad data," said Mitsumaru Kumagai, chief economist at the Daiwa Institute of Research. "Our basic expectation now is to see gradual growth on the back of reconstruction demand."

On-quarter, Japan's gross domestic product (GDP) shrank by 0.3 per cent in April-June, after a 0.9 per cent contraction in the January-March period and shrinkage of 0.6 per cent in the previous quarter.

Exports plunged by an annualised 18.1 per cent in the second quarter, when tsunami damage to factories in Japan's northeast still hobbled supply chains, especially in the crucial auto and electronics sectors.

As the scale of the disaster weighed on the nation, private consumer spending, nearly two-thirds of Japan's GDP, fell 0.1 per cent on-quarter.

However, rebuilding efforts also stimulated the economy. Government consumption rose 0.5 per cent and public investment increased 3.0 per cent due to relief and reconstruction projects for the quake-hit areas.

Corporate investment grew by 0.2 per cent, said the data, which follows recent figures showing increases in industrial production and machinery orders, a key indicator of capital spending.

Kumagai said that "despite the damage done to supply chains, consumption of durable goods, such as televisions and air-conditioners, did not fall," he said. "Exports did fall, but not as sharply as expected.

"For July-September, it is reasonable to assume a return to growth."

Finance Minister Noda also said: "There is a strong possibility the economy will return to growth in the July-September period.

"But there are factors posing downside risks to the economy, such as the yen's strength," he added at a news conference.

Recent global market turmoil sparked by the eurozone debt crisis and the uncertain US economic outlook has prompted investors to flock to the yen, which is considered a safe-haven currency.

The heavy buying has sent the yen soaring to near its post-war high of 76.25 to the dollar -- a trend that hits Japan's export sector by making its goods less competitive abroad and eroding repatriated overseas profits.

Japan's government intervened in the forex market earlier this month in a bid to tame the yen's rise, and has signalled it is ready to do so again, as businesses have threatened to move factories abroad.

Japanese electronics companies record large losses

Four of Japan's leading electronics companies lost more than $1.5 billion in the first quarter of the 2011 fiscal year, which ended June 30.

The companies partly blamed the losses on the earthquake, tsunami and nuclear disaster that hit Japan in March.

Electronics giant Sony, who reported losing $191 million, said in its financial report that the losses were "due mainly to the negative impact of the Great East Japan Earthquake as well as the deterioration of the electronics business environment."

Panasonic reported $390 million in losses for the first quarter. Sharp reported a loss of $630 million. Nintendo reported a loss of $327 million.

The governor of the region where many of these manufacturers are based blamed the losses on a weak dollar.
"With a strong yen below 80 and a weak dollar, times are very hard for manufacturers in Japan," Aichi Gov.
Hideaki Oomura said. "And if manufacturers in Aichi are having trouble, then the whole Japanese economy is in trouble."

But not all companies were down.

Softbank reported $1.21 billion in profits, attributed to the company's work with products like the iPhone. Toshiba also reported $6 million in profits.

-cnn

Japan Bans Beef Shipment from Fukushima

Japan announced Tuesday it is banning all shipments of cattle raised in the Fukushima Prefecture amid fears that the meat may have been contaminated from radiation at the crippled Fukushima Daiichi plant.

Chief Cabinet Secretary Yukio Edano made the announcement.

Last week, a Japanese health official downplayed the dangers after cesium contaminated meat from Fukushima cows was delivered to Japanese markets and probably ingested.

"If we were to eat the meat everyday, then it would probably be dangerous," Goshi Hosono, state minister in charge of consumer affairs and food-safety, said at a news conference on July 12.

"But if it is consumed only in small portions, I don't think it would have any long-lasting effects on the human body."

When the Fukushima Prefectural Government investigated the farm that was the source of the meat, it found cesium in cattle feed such as hay, with radiation levels as much as 57 times higher than the ceiling set by the Japanese government.

Up until now, cattle in Fukushima were only subject to a screening test, to inspect for radioactive particles adhering to the skin, and farmers were ordered to self-report how it the cattle feed was being stocked.

Yutaka Kashimura, Fukushima Prefecture's officer in charge of the livestock division, told CNN that the farmer may have given the cows hay that had been exposed to soil containing high levels of radiation. The farm is situated about 30 kilometers (18.6 miles) from the damaged Fukushima nuclear plant.

Four months after Japan's devastating earthquake and tsunami on March 11, operators at the Fukushima Daiichi nuclear power plant are still grappling with the crisis the disaster unleashed but say they are making slow progress.

The March 11 quake led to meltdowns at Fukushima Daiichi's three operating reactors when the tsunami knocked out their coolant systems, causing the worst nuclear accident since Chernobyl.

SBS Transit, SMRT Submit Applications for fare Adjustment - Singapore

The two public transport operators, SBS Transit and SMRT, have submitted applications to the Public Transport Council (PTC) seeking bus and rail fare adjustments.

Both cited cost pressures despite increased efforts to lower costs and increase productivity.

SMRT is asking for the maximum fare adjustment of 2.8 per cent.

This is based on the annual fare adjustment formula that takes into account the consumer price index (CPI), wage index and productivity gains.

It said the cost pressures were mainly from escalating energy and manpower costs.

SMRT said its energy cost increased 17.5 per cent to S$122.4 million for the financial year ended March.

SBS Transit said it has been investing in new buses as part of a fleet renewal exercise, which began in 2006.

In the last year alone, orders were placed for another 600 buses costing S$268 million, which are scheduled for delivery in 2011 and 2012.

SBS Transit said more details of the application, which is subject to the approval of the PTC, will be announced at a later date.

Responding to the fare review proposals from the public transport operators, the new Chairman of the Government Parliamentary Committee for Transport, Cedric Foo, said he would like the Transport Ministry to review the fare adjustment formula.

Mr Foo told MediaCorp this includes how the government can assist the needy in coping with public transport costs.

Mr Foo, who is also Member of Parliament for Pioneer, said the fare formula has been in place for more than five years, and sufficient experience has been gained on how the formula had or had not worked.

Turning to SBS Transit's and SMRT's proposals for a fare increase, Mr Foo said applying for a fare adjustment is the first step towards any actual fare revision, if any.

And Singaporeans must await the PTC's deliberations and decision on whether such increases are justified.

He added that the timing of this year's fare revision was delayed from July to the third quarter because of the opening of the Circle Line in the third quarter. And the Ministry had explained earlier that it wanted to do the review only after the Circle Line is opened, to avoid the possibility of two adjustments in a single year.

-cna

New Call Telecom Mumbai call centre moves to Burnley

A telecommunications company is moving one of its call centres from India to Lancashire in a move that is expected to bring 100 jobs to the area.

New Call Telecom transferred its business to Mumbai three years ago, but increased costs has prompted it to move to Burnley.

The move will initially create 25 jobs which over the year will increase to 100, the company said.

Salaries are expected to be around the £14,000 mark.

Chief Executive Nigel Eastwood said: "Employees (in the UK) are loyal, unemployment rates are quite high.

"In contrast, in India jobs are plentiful and we suffer a lot from attrition.

"A similar call centre down the road may offer a more lucrative salary and pull staff away and we need to keep going out there for retraining."

'Pleasant' accent
He added that over the last year he had seen a growing trend in India for prices to increase in real estate, salaries and accommodation.

The price of the Burnley premises, which already have the necessary technology, contributed to the firm's decision to move.

Mr Eastwood said another draw for the company is that the east Lancashire accent is "quite pleasant and easy to understand".

He said: "The average call handling time in the UK should be reduced because people get their point across on the first pass, that makes us more efficient."

The new call centre is planned to be fully operational by mid-August.

Yahoo! criticised over e-mail 'snooping' for advertising

A leading consumer group has accused Yahoo! of scanning through personal e-mails for information to use to sell advertising.

The world's largest e-mail provider says signing up to its new service means scanning technology will be used to block spam, and eventually to offer adverts relevant to the user.

But Sarah Kidner fom watchdog Which? Computing says "This is a blatant intrusion of privacy".

A Yahoo! spokesperson said, a box will appear 'asking for users' consent'.

"To look for keywords and links to further protect you from spam, surface photos [photos sent from friends which then won't go straight to spam] and in time, serve users with interest-based advertising."

Users could then see pop-up ads that are relevant to keywords in e-mails both being sent and received.

Trust issues
"People should have the right to send messages without Yahoo! snooping through them," said Sarah Kidner editor of Which? Computing.

Yahoo! is among a number of e-mail service providers which scans content.

Google mail, on its website, says it looks at the text of Gmail messages to filter spam and detect viruses.

"Google also uses this scanning technology to deliver targeted text ads and other related information."

Sarah Kidner editor of Which? Computing.
The sifting is done by computers and creates profiles of customers about their likes and dislikes.

However, competitors Microsoft which runs Hotmail in a statement said it 'puts online privacy as a top priority.'

"Not only does Windows Live Hotmail not read users' e-mails, but we protect your inbox from anyone else accessing your e-mail with advanced security features."

Yahoo! says it began to offer its users the chance to sign up to its New Mail service in June to provide a 'faster, more social and safer experience'.

"If you prefer not to consent, you can remain on our existing mail, although we will, as Yahoo! and other free webmail service providers do, continue to machine scan e-mails to protect against spam.

The email service says it's easy for users to opt-out of internet-based advertising by visiting

Video Chat on Facebook available by Next Week In Partnership With Skype

Earlier this week while visiting Seattle, Facebook CEO Mark Zuckerberg tipped off Seattle press that the company would be launching an “awesome” new product next week that has been built by Facebook’s Seattle team. The press invitations to that event went out today, saying nothing more than “Please join us for an event at Facebook” on July 6.

So what is the new product? MG Siegler speculates here that it might have a desktop component given all the desktop software hiring going on in Seattle.

And he’s right. This isn’t the main project that team is working on, but next week, says a source with knowledge of the partnership, Facebook will launch a new video chat product, powered by Skype, that works in browser. Suddenly those chat icons in the invitation have a lot more meaning.

The product has been built on Skype and will include a desktop component. It’s not clear to me whether that means it will just work if a user has Skype already installed on the computer, or if additional software will need to be downloaded even if the user already uses Skype. But it’s clear that there’s very deep integration between the products, and from the user’s perspective, the product will be an in browser experience.

Facebook and Skype have already been working together, including integration of various Facebook features into the Skype service.

But this is something else entirely. The partnership could substantially increase Skype usage. Facebook has more than 750 million active users. Currently Skype has just 170 million. And it will certainly help Facebook become even stickier for users as they start to have voice and video chat as an option to communicate.

And this also brings Facebook even closer to Microsoft, which is a Facebook shareholder and has a pending acquisition of Skype. The guys in Redmond must be smiling today, something that happens far too infrequently at Microsoft HQ.

For China's Toymakers, an Unwanted Gift

Lucy Liang, a sales manager for Jiangsu Zhongxin Toys, disappointed potential U.S. and European clients who were inspecting pink and yellow teddy bears in the toymaker's stall at a trade fair in Canton last month. "My boss orders us to turn down all the orders for the good of the company" because China's yuan may rise, crimping profit margins, said Liang as she sipped pu-er tea in her stand. "Even first-class economists can't predict whether the yuan will appreciate or by how much. How could we?"

China's toymakers accept profits of as little as 3 percent to stay competitive. Such low margins, coupled with payment periods of three months or more, mean companies are particularly vulnerable to currency fluctuations, says Lin Songli, an analyst with Guosen Securities in Beijing. The yuan has gained 6.4 percent against the euro and 2.5 percent against the dollar so far this year. "If the yuan rises to 6 to the dollar, we're doomed," says Simon Pan, general manager of Zhejiang Huangyan Hongfan Toys Factory. The company is raising prices by 3 percent to 5 percent to offset the Chinese currency's gains, but further increases would mean losing customers, he said in an interview at his booth, which was filled with educational toys and brain-teasers destined for the U.S.

The pricing pressure could hurt in the U.S. "The prospect of a stronger yuan means American consumers will have to pay more for their Christmas trees and probably everything that is made in China starting 2011," Guosen's Lin said. Agrees Ben Cavender, an analyst at China Market Research Group: "If toymakers are forced to raise prices in order to compensate for a falling U.S. dollar—and to stay in business they will probably have to—it means higher prices for U.S. consumers in the coming holiday season."

China has held the yuan's rise to about 2 percent since a June pledge to introduce more flexibility, sparking criticism that China gives an unfair advantage to its exporters. Premier Wen Jiabao has said a rapid climb for the yuan would cause social and economic turmoil.

Some companies say they've already been pinched by the yuan's gains as clients from the U.S., Europe, and Japan continue to expect cheap prices when buying in China. "Since the government revalued the yuan, we have been declining long-term orders—anything beyond six months—because we might even lose money by then," says Lin Ying, a sales manager at Guangdong-based Shantou Meichang Plastic Factory, which makes plastic blocks and beach toys. "If the yuan keeps rising, life would certainly be even harder for us," she says.

Customers expect the same prices as last year, says Susie Ying, general manager for Shanghai Master Plastic Products. The maker of pools and beach toys had to raise prices 15 percent, even as "most of our customers can only accept a 7 percent to 8 percent rise," Ying says. Her company is focusing on more expensive items because margins tend to be higher. "From the purchase orders we received, high-value toys have taken the lead on demand," says Karson Choi, executive director of Early Light International, a Hong Kong-based toymaker whose clients include Mattel (MAT).

Dalian Ponytoy, which sells rideable toy horses and zebras for $200, wholesale, says it's also hurt by gains in the Chinese currency. "Two months ago the dollar-yuan exchange rate was 6.8, now it's 6.65," says General Manager Tony Nie. "This has a huge impact on us. A few years ago the exchange rate was 8 yuan to the dollar."

Almost 70 percent of exporters project a decrease in orders if the yuan strengthens by an additional 2 percent against the U.S. dollar, according to a survey of 239 Chinese suppliers by Global Sources (GSOL), which matches buyers and sellers of manufactured goods. "Many companies, particularly those in labor-intensive industries [like contract toymaking], are running on paper-thin margins and have no room to absorb currency-exchange losses," says Craig Pepples, Global Sources' chief operating officer. In contrast, Mattel, the world's largest toy company, posted a profit margin of 9.7 percent last year, while No. 2 Hasbro (HAS) had 9.2 percent, according to data compiled by Bloomberg.

Zhejiang Sunny Import & Export, which sells wooden blocks that can be rearranged to resemble vehicles and robots, has tried to hedge against currency losses. It billed in euros, then lost money when the currency dropped against the yuan, says manager Liam Zhu. "We changed back to the U.S. dollar, but now the U.S. dollar is fluctuating and the renminbi [another term for yuan] is still appreciating," says Zhu.

The bottom line: The appreciation of China's currency is squeezing its small toy manufacturers, which already operate on tight profit margins.