theSun | THURSDAY OCTOBER 30 2008 23

business news

TOKYO/BEIJING: Japan

Japan mulls rate cuts,

could follow the United
States in cutting interest rates
this week, a source with
knowledge on the matter said,
in the latest steps to protect the
world’s two largest economies
from the global financial crisis.
A huge rescue package
agreed for Hungary
underlined the pain the worst
financial upheaval in 80 years
is causing as policy makers
around the world scramble to
contain the economic damage.
The Bank of Japan will
consider cutting rates at a
policy meeting tomorrow but
will watch market conditions
before deciding, the source
told Reuters yesterday.
Bets on a quarter-point cut
to 0.25% snapped the recent
surge in the yen, which has
hurt exporters and helped
hammer Japanese shares.
The Federal Reserve is
widely expected to cut US
rates by at least half a point
late yesterday to 1%, the
lowest level since June 2004.
The European Central
Bank and the Bank of England
are expected to follow suit
next week.
The prospect of a round
of global rate cuts helped lift
both the Dow Jones industrial
average and S&P 500 indexes
for their second-biggest points
gains ever on Tuesday.
Japan’s Nikkei share
average, which fell to a 26-year
low this week, set the tone
yesterday for most of Asia’s
Hungary in bailout
stock markets with a 7.7% rise
that built on Tuesday’s gain of
more than 6%.
The dollar soared more
than 6% against the yen on
Tuesday, its biggest one-day
gain since 1974, as news of a
possible Bank of Japan rate
cut emerged. It gave back
some of the gains yesterday.
“Although cutting rates
might not have much
stimulative effect on the
economy, it’s hard for the
bank to continue resisting
action when financial markets
are so unstable,” said Koichi
Haji, chief economist at NLI
Research Institute in Tokyo.
“Still, a rate cut would send
a message to the world that
Japan is cooperating with
other nations in tackling the
financial crisis,” he said. “Now
that the news is out, markets
would be hugely disappointed
if the BOJ didn’t cut rates.”
Governments have pledged
about US$4 trillion (RM14.2
trillion) to support banks and
restart money markets to try
to stem the crisis set off by the
bursting of the bubble in the US
housing market, but a growing
number of governments have
had to look for help of their
own as the financial woes
ripple outwards.
In the latest sign of the
extent of the damage, the
International Monetary
Fund, the European Union
and World Bank agreed to
a US$25.1 billion (RM89.11
billion) economic rescue
package for Hungary.
“The Hungarian
authorities have developed a
comprehensive policy package
that will bolster the economy’s
near-term stability and
improve its long-term growth
potential,” IMF managing
director Dominique Strauss-
Kahn said in a statement.
“At the same time it is
designed to restore investor
confidence and alleviate the
stress experienced in recent
weeks in the Hungarian
financial markets,” he added.
The agreement comes after
Iceland, a high-profile victim
of the global credit crisis,
raised interest rates by six
percentage points to 18% in an
attempt to defend its currency.
Iceland has been driven
close to collapse by bank
failures, and the central bank
said the dramatic rate rise was
part of a deal struck with the
IMF for a US$2 billion (RM7.1
billion) loan.
For its part, South Korea
said yesterday that it had
no plans to accept financial
support from the IMF
because it has enough foreign
exchange reserves.
The Fed said late
on Tuesday that it had
established a US$15 billion
(RM53.25 billion) temporary
currency swap line with New
Zealand to address pressures
in US dollar short-term
funding markets, the latest in
a number of such swap lines.
– Reuters

briefs
China cuts interest rates
for 3rd time in 3 weeks
BEIJING: China’s central bank cut banks’
benchmark lending and deposit rates
by 0.27 percentage point yesterday, the
third cut in six weeks. The cost of one-
year bank loans will fall to 6.66% from
6.93%, while the benchmark one-year
deposit rate falls to 3.60 from 3.87%, the
People’s Bank of China (PBOC) said.
The cut in interest rates takes ef-
fect today, the central bank said on its
website (www. pbc.gov.cn). The PBOC
gave no reason for the easing.
The central bank also cut interest
rates and reserve requirements on Sept
15 and Oct 8. The latter move coincided
with rate cuts by leading central banks
around the world. – Reuters
Airline Sterling says to
file for bankruptcy
COPENHAGEN: Icelandic-owned
Nordic budget airline Sterling said
it will file for bankruptcy today and
has grounded all its aircraft, leaving
thousands of passengers stranded
at airports across Europe.
The Denmark based carrier said
on its website talks had been con-
ducted with several potential inves-
tors, but it had been impossible to
make ends meet.
“The inevitable result is that Ster-
ling Airlines A/S has no option but to
file for bankruptcy,” it said.
The airline flew to some 40
destinations in Europe with a fleet
of around 27 Boeing 737 aircraft,
mainly from its hubs in Scandina-
vian capitals Copenhagen, Oslo and
Stockholm.
The airline has about 1,100 em-
ployees. – reuters
Venezuela to back new
Opec output cut
PUYO (Ecuador): Venezuela would back
an additional Opec production cut,
possibly of 1 million barrels per day,
if it were necessary to stabilize crude
oil prices, President Hugo Chavez said
yesterday.
His oil minister, Rafael Ramirez, pre-
dicted Opec will agree to a new cut at
its planned meeting in December after
the export group agreed last week to
reduce supply by 1.5 million barrels a
day but failed to lift prices.
The global financial crisis and
growing fears of a world economic
slowdown have pushed oil prices down
near 18-month lows.
“We would agree with new (produc-
tion) cuts until the price stabilises. If we
had to cut another million barrels per day
we would not have a problem,” Chavez
said at a press conference during a visit
to fellow Opec member Ecuador.
Worth
every
mouthful
pg 25
Meanwhile, oil firmed well above
US$64 (RM227.20) a barrel yesterday,
boosted by a 10% surge in US stock
markets that reflected expectations the
Federal Reserve was poised to cut inter-
est rates to spur economic growth.
US light crude for December delivery
was up US$2.23 at US$64.96 a barrel by
1010GMT. London Brent crude was up
US$2.30 a barrel to US$62.59. – Reuters
BP to cut more jobs
despite soaring profits
LONDON: British energy giant BP,
fresh from unveiling an 83% jump in
third-quarter net profits, is planning
to cut more jobs than previously
announced, the Financial Times
reported yesterday.
The business daily quoted BP chief
executive Tony Hayward as saying
he expected the total number of job
cuts would be “materially higher”
than the 5,000 already announced.
Hayward told the FT that he
would maintain a “continuous focus
to drive productivity and efficiency
into BP,” as the oil industry faces a
sharp slowdown in both global eco-
nomic growth and energy demand.
– AFP