01/07/2014 Asia Business Report

telephone directories. Now on BBC News all the latest business news

live from Singapore. BNP Paribas pleads guilty to

breaking US sanctions against blacklisted countries. Can it

survive the record finds? Japan's business sentiment dips after a

sales tax increase. 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 a few years ago. For more, I

am joined by a financial author in Sydney. What do you make of this

huge fine, what will the implications be? There will be some

impact but they 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 beginning 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 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. `` are not. This is the

biggest fine ever by the US regulator. Are there 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 area 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 to 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 as

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 the 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 investment in 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

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? It depends on if they

are investing and coming up with new products. 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. GM is

recalling more than 8 million more cars. It has already issued several

major recalls which has cost the firm billions of dollars. The latest

recalls are over potentially dangerous ignition switches for all

car models made from 1997. 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 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 and medical supplies. It has bought dozens of companies and

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

Israeli messaging service, Vibr, for 900 million dollars. 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 their former partner. It will

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

and Peach. The social media site Facebook caused an uproar when it

was revealed that they allowed researchers to socially experiment

on users. It raises concern over laws regarding what companies are

able to do with the data of users. Earlier I asked a technology lawyer

how significant these new rules will be. It is about protecting our data

and it puts key obligations in place for companies that hold this data.

They should be getting your consent before they advertise to you or use

it. He should not be giving it to other people and they should be

giving you rights to access your data. Common sense legislation and

companies, most of them, will already be doing this. We know that

the regulation came into force in 2012 and it has taken years to come

into effect. I have been receiving loads of letters all about data

protection. It does appear that businesses have been getting ready

for this. The law was passed by Parliament in 2012 but it does not

come into effect until tomorrow. It was to give companies in Singapore

time to comply with the obligations and I have been receiving e`mails as

well from companies getting up to speed and telling customers how they

are complying with these new laws. 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

Hamas "pay" after three Israeli teenagers