30/05/2014 Asia Business Report

Only quotes or gists of the content are to be disclosed. Now on BBC News

all the latest business news live from Singapore. The sales tax of

fact `` affect. We look at how higher prices have affected spending

habits in Japan. India and the economy, how soon can the new

government help shore up growth? Welcome to Asia Business Report.

Thank you for joining us, I'm Rico Hizon. The figures have indeed

confirmed it. Japanese consumers held off on purchases after the

country raised its sales tax in April from 5% to 8%. Household

spending fell by more than 4%, when compared to the same period last

year. Meanwhile, inflation prices in Japan edged up one more than 3% to a

23 year high. That is something the government would be pleased about.

Rupert Wingfield`Hayes explains from Tokyo.

Sales tax went up for the first time in 17 years, and today for the first

time we get to see the result. Has inflation here in Japan gone up? The

answer is an emphatic yes. In fact, it has lept to well over 3%. For the

Japanese government that is good news, because it is intent on ending

20 years of falling prices and getting inflation back into the

Japanese economy, and it appears to be succeeding. It also means that

shops and businesses are willing for the first time in many years to put

their prices up. In fact, some are doing it by quite a lot. I had my

hair cut earlier this week and the price had gone up by 8%. So the

Japanese government is happy, businesses are happy, but how do

consumers feel? TRANSLATION: Before the tax rise I was worried, and I

stocked up on lots of household stuff. But after the tax rise, I

forgot pretty quickly, so now I am back to buying stuff just the same.

Before the tax rise, if my family and I went out to eat sushi, it

would cost about 10,000 yen. But now we end up spending a lot more, so

why have decided to stop going out for sushi. How consumers here in

Japan respond to these higher prices in the next few months is absolutely

key. If they look at the higher prices and say, there is nothing I

can do, and carry on spending, then it can create a positive cycle.

Higher prices should mean higher profits, higher profits should in

the end mean higher wages, and so it goes. But if on the other hand

Japanese consumers look at these higher prices and say, hey, these

prices are going up at my salary hasn't, I have to stop spending,

then it could have the opposite effect, and could push Japan back

into deflation. It is a high`risk plan. We spoke to Ed Rodgers in

Tokyo, who offered his analysis. You have to consider that April numbers

will be an aberration because of the effect of the buying before the

implementation of the sales tax increase. If we have numbers of

`4.4% going forward over the next couple of quarters, that would be

cause for concern, but we don't think that will happen. Of course

everyone right now is pinning their hopes on Shinzo Abe's next move, in

terms of restructuring the economy. The so called third arrow? Right,

the so`called third arrow that we have been calling a thousand darts

for over a year now. We think there will be a number of positive data

point for investors to look at, and say yes, change has come to Japan.

We don't know exactly which of these reforms will be enacted, many or all

of them. But between TPP, the labour reform, immigration reform, change

of corporate taxes, there will be multiple positive outcomes we

believe that the plans that will be put forward publicly, literally

within a matter of weeks by the TPP and by the government for structural

change. India's latest growth figures will be announced today.

Growth has been below 5% for the past 12 months, which is slower than

in previous years. But with the new government in power, could India's

economy soon turn a corner? We have more from Calcutta.

He is working on the only order that they have here at the moment. This

factory makes ovens and mixers used to produce biscuits. There is not

much bright news. With no demand from inside India, they are just

about getting by on some small orders from abroad. With 10% profit,

it is difficult to earn, because prices have increased, my costs have

doubled. The salary of my people that I was giving, it has doubled.

In that case, the cost also increased, power has increased.

Transport has increased. But if we raise the prices we will not get the

job. It has been the same story for many, big or small, they are all

going through a slump that has been particularly bad over the past year.

In the months running up to the election here, things have virtually

come to a standstill around the country. Businesses had stopped

expanding, everyone was waiting and watching to see what the results

would be. Now, India has a new government. Led by Narendra Modi,

whose party swept elections with a strong majority. Their promise of

speeding up growth makes many hopeful that things will be better.

Things are positive on the sentiment side, but the real challenge starts

now. The first priority from the government and the expectation is

that the growth side starts to see some revival. The investment

products which are being stopped because of lack of clearance will

start to see a revival, so essentially the ease of doing

business will start to pick up. But they can't afford to neglect

inflation either. Especially over food prices. One of the main reasons

the last government was voted out. Rains this year are expected to be

below normal, so the new government will need to strike the right

balance between keeping the cost of living down and getting growth to

pick up. Staying with India, the country's

largest car maker is hopeful the new government will help put economic

reforms on track to boost growth. That may then translate into higher

sales in vehicles at home. Tata earned close to what they earned in

the previous quarter in the last month. They say flat performances

are due to a big drop in sales in the home market.

US car manufacturer, Ford, has recalled 1.4 million cars in North

America due to potential power steering problems. The recall is for

sedans and sport utility vehicles many manufactured between 2008 and

2013. They will be recalling a number of sedans with floor mats

that could interfere with accelerator pedals. There have been

crashes related to this format malfunction.

Outside Sweden, Saab is a brand that is perhaps best known for cars, but

there is one part of Saab. It also builds fighter jets and weapon

systems. It is now looking towards Asia. Earlier, I spoke to the head

of Saab in Singapore, asking if tensions in the region have lead to

higher defence spending. Globally it has been decreasing. In this part of

the world it has increased to 3.6%. We think that we will see a slight

increase globally. Where do you see the spending taking place here in

Asia? Which countries? Countries buying more civil defence products,

weapon systems or fighter jets? The spending depends on what country you

look at. Large programmes like fighter jet programmes and big naval

programmes are expanding, and that is why it is important for us in the

industry to come up with more cost efficient solutions. Sport Today is

coming up next on BBC World News, tune in for the latest on the fate

of the NBA basketball team, the Los Angeles Clippers. According to the

LA Times, Steve Ballmer has emerged as the highest ever for the

Clippers. ``highest bidder. He apparently beat two other groups,

including one led by David Geffen, the media mogul, who made an offer

of $1.6 billion. Here is a quick look at the markets. Shares are

currently mixed in midmorning trade. Earlier they were in positive

territory inspired by a record close on Wall Street. Thank you for

investing your time with us. Have a great weekend everyone. The main

news stories. The African Union has begun a major

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