01/07/2014 Asia Business Report

telephone directories. Those are the headlines. Let's go to

Singapore for all the latest business news.

BNP Paribas pleads guilty to breaking US sanctions against

blacklisted countries. Can it survive the record fines? Japan pop

back biggest manufacturer turns pessimistic after a sales tax

increase `` Japan's. Welcome to Asia Business Report.

France's largest bank, BNP Paribas, is told it will be fined almost $9

billion for transferring funds to blacklisted countries. It is the

largest penalty for a case like this in US history. It is accused of

breaking sanctions against Iran, Cuba and Sudan between 2002`2009.

The record fine quadruples a similar penalty imposed on HSBC 80 years

ago. For more, I am joint by an author in Sydney `` HSBC are few

years ago. What do you make of this huge fine is that what will the

implications be? `` this huge fine? There will be some impact but there

will be relieved that the actual fine has been agreed to. There is no

more uncertainty. It will impact the profits of the bank this year

because, essentially, it equates to roughly what the bank makes in a

year. They will have to make a substantial write`down. It will be

extraordinary. The capital will be reduced. They are comfortably at

10%. We will have to wait and see what happens in the EU with their

asset quality review, whether there are implications from that. The

damage will come from the fact that they won't be allowed to clear US

dollar transactions begin in January next year for one year. It will have

franchise issues for them. It is unclear whether it will affect all

aspects of the operations of the bank. Those are some of the things

affecting BNP Paribas itself. There will be wider implications for the

banking industry generally. Let's look at some of those. What will

they be? Banks today are looking nervously at the outcome. It won't

be the last prosecution. There will be others. We have seen HSBC and ING

and Standard Chartered. All foreign banks interest `` interestingly.

There are wider investigations outside of these specific ones, to

do with the manipulation of different rates, like the foreign

exchange rates, the golden rates and so on. The bad news for the banks in

terms of prosecutions and fines they will have to pay an over and this

will affect the sector's profitability and ultimately their

sharemarket performance. This is the biggest fine ever by the US

regulator. Are there are concerns the regulator might have

extraterritorial reach beyond the US? This is the biggest issue about

the BNP Paribas and the previous fines. The US are taking their

legislation and applying it to other banks. They are using the primacy of

the US dollar and the fact that foreign banks have to clear their US

dollars through New York, which has been the weapon they have used. It

is a concerted are of US foreign and economic policy and we now risk

seeing retaliation. Immediately, it will be in trade talks between

Europe and America. Thank you. A financial expert in Sydney.

The Bank of Japan's quarterly survey shows business confidence worsened

among the largest manufacturers. It fell by five points in the three

months to June two plus 12, below market forecast for a plus 15.

Overall, there was optimism about the economy. It might be due to the

PM 's economic policies, which saw inflation rise 3.4% in May, its

fastest pace in 32 years. Household spending fell by 8%, and the sales

tax began biting. I asked an analyst what he made of the latest figures.

We are looking closely and this time it is because the sales tax and

consumption tax went up. We had a boom before, but we have negative

growth now. It is important what companies make out of that. We see

the relief that the impact wasn't a strong as expected. The forecast,

which has been negative, went down for this quarter, but they are

already in terms of outlook going up again. A split between

manufacturers, which has received a big hit, and a mob looted outlook on

the nonmanufacturers, which are seeing households affected in the

long`term. Certainly by the sales tax which took effect in April. What

does this say about the PM 's economics? His reform plan to

restructure the economy. Is it working? It is working so far. What

we see is that basically industry must take over. Last year, we had

this expansion in terms of money printing and monetary expansion and

fiscal expansion, optimism with talk of structural reforms. Now,

implementation has to come in. This depends on invest in `` investment

corporations. Companies are saying, we will invest more than 7%

traditionally this year. This is close to the number. Companies are

investing. They are optimistic that demand will increase again and that

business conditions are improving. It is interesting to see where

companies are headed next. Will this day to drive the central bank to

change their policy? No. The short`term engines of growth, the

government pushing the economy, talking up the economy, the Bank of

Japan printing more money, lowering the exchange rate, this is done.

Stable companies are expected to be stable. The question is, can they

sell overseas and in Japan's it depends on if they are investing and

coming up with new products `` Japan? They need to put money behind

their word and behind their plans. China's factory activity accelerated

to a six`month high in June, showing the economy is gaining strength. The

purchasing managers index rose to 51 last month, compared with 50.8 in

May, which was in line with market estimates. In Japan, no`frills air

travel is still a phenomenon which hasn't taken off. Today, the

Japanese online retailer Rakuten and air Asia are expected to announce

they are teaming up to launch a new airline in the market. Our

correspondent reports on what the deal would mean for the companies.

Air Asia is expected to it announce a less conventional approach to

entering the Japanese market by throwing in its fortunes with the

online retailer, Rakutan. It is the answer to Amazon and sells watches,

clothing, medical supplies. It has bought dozens of companies and made

a billionaire of the founder. Its most recent purchase is the Israeli

messaging service, Viper, for 900 million dollars `` Vibr. What might

they gain by linking? It could mean a boost to the online travel site of

Rakutan's, one of Japan's largest. It could mean a second chance in the

lucrative Japanese market for Air Asia. It is among the world's

largest. Last year, Air Asia pulled out of a venture with ANA. It is

clear the company has had a different approach with Air Asia

focusing on cost and 80 and ANA focusing on servers. They bought out

the 33% stake and rebranded the low`cost carrier as Vanilla Air.

Now, Air Asia will be in competition with the former partner. It will

compete with a number of other carriers, including Jet start Japan

and Peach. White one of the senior military

officials in China has been accused of accepting bribes and has been

expelled from the Communist Party. He is under investigation and will

face a military court. For the latest development in the crackdown

on corruption in government and the armed forces. Our correspondent has

more. China is turning its army into a

powerful fighting force. Until last year, one of the senior generals in

charge of that process was this man. He is retired. Authorities say he is

under investigation for corruption. The news was announced on national

TV. The general had taken bribes, and so had his family. He promoted

his friends. The Communist Party has expelled him. He now faces a

military court. The general wasn't just an army man. He was a

politician in the Communist Party's decision`making Politburo. He is

seen here alongside another corrupt official. He had powerful friends,

so the decision to investigate wasn't taken lightly. It was made by

the politburo at a meeting presided over by the President himself. The

president has promised to root out corruption in the Armed Forces and

elsewhere. Nervous officials will be wondering who is next. Michael

Bristow, BBC News. That is it for this addition of Asia

Business Report. You can follow us on Twitter. Thank you for watching.

I'm Adnan Nawaz. The top stories this hour: Israel has vowed to make

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