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TOKYO (Reuters) — Major countries should support the dollar as the key international currency, although emerging nations may discuss a new global reserve currency on the sidelines of the G8 summit next week, a Japanese official said on Friday.China has asked for debate on a new global reserve currency when leaders from the Group of Eight (G8) meet with the G5 emerging economies next week in Italy, G8 sources told Reuters. News of the Chinese request pushed the dollar down to a three-week low on Wednesday.But Japan thinks it would be difficult for another currency to replace the dollar as the world’s reserve currency and it is against any move that would unnecessarily weaken the status of the dollar, said Yoichi Suzuki, director-general of the Japanese foreign ministry’s economic affairs bureau.”Japan’s stance is that major countries should support the dollar,” Suzuki, one of the country’s main coordinators for the G8 summit, told Reuters in an interview.”It won’t benefit any country to talk about ideas for a new global key currency, which would weaken the dollar,” said Suzuki.An idea, which China’s central bank has floated, that the International Monetary Fund’s Special Drawing Right (SDR) could eventually displace the dollar as the principal reserve currency was unrealistic, he added.Japan is interested in a stable dollar for its trade with other countries and because most of its 1 trillion foreign reserves, the world’s second largest, are in dollar assets.Suzuki said he would not be surprised if the G5 discussed the role of the dollar when they meet on the sidelines of the G8 summit in L’Aquila.On Thursday, Chinese Deputy Foreign Minister He Yafei said it would be “normal” if diversification of the currency system were discussed at next week’s summit.But Suzuki played down the idea, saying Tokyo does not expect the topic to be discussed at the meeting of G8 plus G5 emerging nations, including China, Brazil and India.Talks at the July 8-10 summit are expected to focus on the state of the world economy, financial regulation, climate change and trade and development.Tokyo will propose establishing principles and citing best practice to promote responsible investment in agriculture to cope with farmland acquisition or “land grabs” in developing countries, Suzuki said.”Agriculture investment in developing countries should not be done because of trying to avoid tough environmental standards in industrial nations,” Suzuki said, noting that Japan has been getting support for this initiative from G8 counterparts.By taking the lead on this proposal, Japan — the world’s largest net food importer — also hopes to gain support from developing countries that may have been hurt by irresponsible investment by foreign countries and companies, for Japanese firms’ overseas investment in agriculture, he said.On a call by French President Nicolas Sarkozy for the G8 to discuss regulating oil prices to prevent the wild swings of recent years, Suzuki said G8 officials have not been discussing it for the summit’s agenda.”Realistically, it would be hard to maintain oil prices at certain levels by intervening in the market. Japan thinks the most important thing would be to boost transparency of the market to avoid speculative moves,” he said.

Source:CNN

TOKYO (Reuters) — Japan ordered Citigroup to suspend sale promotions for a month at its retail bank for lax oversight against money laundering, in the struggling U.S. bank’s second brush with Japanese regulators in five years.The Financial Services Agency said Citigroup (C, Fortune 500) had not developed adequate systems to detect suspicious transactions such as money laundering, citing the same violation that led the regulators to close its private banking business in 2004.Citigroup, which has 35 branches and generates about 2 billion in revenue a year from its retail and corporate banking division, Citibank Japan, apologized for the breach, saying it stemmed from the way it reported suspicious transactions.”If Citibank cannot get its house in order, its operations in Japan may come under threat,” said Neil Katkov, head of Asia research for financial services consultancy Celent.0:00
/4:47Parsons on Citi’s predicament”We have seen banks in the U.S. shut down for alleged loose money laundering compliance, and this is a sign that Japanese regulators are getting tougher.”The suspension comes as Citigroup tries to sell assets in Japan, an integral part of its efforts to raise cash after suffering more than 85 billion in losses on toxic assets and receiving a U.S. government bailout.The bank agreed last month to sell its Japanese brokerage and investment banking assets to Sumitomo Mitsui Financial Group, Japan’s third-largest bank, for about 5.9 billion.It is also looking to sell its Japanese asset management arm, Nikko Asset Management, and telemarketer Bellsystem24 Inc, sources have told Reuters. The deals are expected to raise more than 1 billion each.The FSA said Citigroup had not made improvements since the last regulatory crackdown in 2004, which prompted then-chief executive Charles Prince to make a public bow of apology in Japan, a custom for Japanese executives showing remorse.The FSA said the lack of compliance showed Citigroup executives “… lack an understanding of the rules applied in Japan, such as laws and regulations, and an awareness of improvement”.Citibank Japan, which handles retail and corporate banking operations, had 299 billion yen in net assets and 1,548 employees as of the end of March, according to its web site.Citibank Japan promised to submit a plan to the Japanese regulator by the end of July to remedy the problems.While Citibank Japan cannot promote its retail products for the next month, customers can still initiate transactions with the bank, the FSA and Citigroup said in statements.

Source:CNN

Japan GDP shrinks at record pace
by Roland Buerk
BBC News, Toyko
Japan’s economy shrank less than previously thought in the first three months of the year, but still contracted at a record pace.Gross domestic product – the sum of the nation’s goods and services – shrank by 3.8%, equivalent to 14.2% over a year. Earlier it was estimated at 4%, but there have been brighter signs in recent weeks. Japan has been hit hard by the global downturn because it relied on consumers abroad to buy its cars and electronics. People in Japan are starting to hope that the worst might be over. The Government now says in the first three months of the year the economy shrank by 3.8%, less than was earlier estimated but still the worst on record. The reason for the revision is that capital expenditure – spending on factories and equipment – was cut by less than had been previously thought. Modest growth?In this quarter the world’s second largest economy is forecast to grow modestly. Firms are benefiting from increasing demand from China where the Government is spending nearly 600bn (365.5bn), some of it on infrastructure. And massive stimulus measures by Japan’s Government, including cash handouts, are starting to have an effect. But Japan’s exports are still around a third lower than a year ago and factories are being run far below full capacity. If companies continue to cut jobs and investments it could cause a fragile recovery to stall.
Source:BBC

Japan current account drops 55%
Japan’s current account surplus declined in April for the fourteenth consecutive month.The finance ministry said the April surplus dropped by 55% to 630.5bn yen (6.4bn; 4bn) from the same month a year ago as exports declined sharply. But with the rate of decline in exports slowing, some believe the world’s second-largest economy will continue to have a positive trade balance. The current account reflects Japan’s balance of trade with other nations. That also includes returns on investments made abroad. Japan’s trade performance “will likely continue to track this slight improvement in exports for the time being,” said Norio Miyagawa, an economist at Shinko Research Institute. Japan’s economy, which depends heavily on exports, has been hit hard by the global downturn. It shrank at its quickest pace since records began, as exports slumped during the first three months of 2009.
Source:BBC

Japan upgrades economic outlook
Japan’s central bank has upgraded its economic outlook, saying the worst of the recession might be over.The move came after the bank’s two-day policy meeting, at which it opted to keep interest rates on hold at 0.1%. While domestic demand is expected to remain low, the bank said exports, on which Japan is heavily reliant, were forecast to pick up. Data on Thursday showed Japan’s economy shrank in the first quarter at its fastest rate since records began. Output contracted by 4% during the first three months of the year, or by 15.2% on an annual basis, as exports fell, according to official figures. Recovering”The pace of deterioration in the Japanese economy will likely moderate,” the Bank of Japan said. “Going forward, although domestic private demand is likely to continue to weaken, exports and production, after levelling out, are expected to start recovering and public investment to increase.” The latest outlook is more optimistic than the bank’s forecast in April, when it said economic conditions had “deteriorated significantly”. While the bank did not provide new growth forecasts with numbers, it said it would expand the types of collateral on offer in order to encourage lending.
Source:BBC