:00:00. > :00:21.Exports out of Japan sink, as it grapples with a stronger yen.
:00:22. > :00:26.Economists say there is worse to come.
:00:27. > :00:29.And markets wobble in India, and the rupee is falling,
:00:30. > :00:31.as the search for a new central bank governor begins.
:00:32. > :00:43.We will be live to Mumbai for the latest.
:00:44. > :00:48.Also in the programme: This is the week that UK voters decide
:00:49. > :00:57.Data out today shows an 11% drop for the month of May,
:00:58. > :01:04.when compared to the same time last year.
:01:05. > :01:06.Weak demand from emerging markets is another reason why.
:01:07. > :01:08.Also, imports slowed too, falling by nearly 14%.
:01:09. > :01:11.So these latest trade figures leave Japan with a trade deficit amounting
:01:12. > :01:17.This comes just days after Japan's finance minister issued a note
:01:18. > :01:19.of caution on the country's currency.
:01:20. > :01:22.Last week the yen touched multi-year highs against the US dollar.
:01:23. > :01:30.A stronger currency is very bad news for Japan's exporters,
:01:31. > :01:32.as it makes their goods more expensive overseas,
:01:33. > :01:43.and this in turn hits the economy hard.
:01:44. > :01:51.Takuji Okubo, chief economist at Japan Macro Advisors.
:01:52. > :01:57.Thank you for joining us on World Business Report. First of all, just
:01:58. > :02:04.tell us about these trade numbers. Explain why they are quite bad in
:02:05. > :02:14.May. Sure, the exporter is down by 11%, but this has a lot to do with
:02:15. > :02:18.the yen appreciation. When measured, the yen is declining. But even in
:02:19. > :02:24.quantity terms, in volume terms, export is down 10%. So despite the
:02:25. > :02:29.moving yen, Japanese exporter is going nowhere. And just talked us
:02:30. > :02:32.through some of the reasons why some are saying it is to do with the
:02:33. > :02:37.currency, while others are saying it is to do with the earthquake that
:02:38. > :02:42.hit suppliers in the months before. There are lots of issues here. Sure.
:02:43. > :02:54.I don't think the earthquake has much to do with it. The economic
:02:55. > :02:59.area where the earthquake hit is not a industrial place. I don't think it
:03:00. > :03:05.has much to do with the decline. The decline has to do with the surging
:03:06. > :03:09.yen and a stagnant volume exports. So what do you think the Japanese
:03:10. > :03:14.authorities will do about this, in terms of the Japanese government or
:03:15. > :03:17.even its central bank. Right, so the Japanese government and specifically
:03:18. > :03:23.the bank of Japan, have been trying to weaken the yen through massive
:03:24. > :03:27.quantitative easing, but it seems that the market has started to
:03:28. > :03:33.speculate that there is actually very little more the Bank of Japan
:03:34. > :03:39.can do to weaken the yen and is Japan's monetary situation. So what
:03:40. > :03:43.do you think will be happening, because we were told that they are
:03:44. > :03:47.watching the situation very carefully and are ready to act if
:03:48. > :03:51.the yen strengthens further. Well that is what we call verbal
:03:52. > :03:56.interventions. So they can talk. But I think markets are clever, they can
:03:57. > :03:59.see through those talks and they see that it is difficult for the
:04:00. > :04:04.Japanese government to directly intervene in the exchange rate
:04:05. > :04:08.market, the US and Europe will definitely not support such a
:04:09. > :04:11.unilateral intervention and on the monetary policy side, the bank of
:04:12. > :04:14.Japan keep on saying there is more they can do but then when you really
:04:15. > :04:18.think about it there isn't really much rank of Japan can do at this
:04:19. > :04:25.point. So what is the outlook for the Japanese economy -- the bank of
:04:26. > :04:32.Japan. Well, the outlook I must say is rather negative. I expect the yen
:04:33. > :04:35.to continue to appreciate, that will damage corporate profits, that will
:04:36. > :04:38.in turn damage the stock markets, and that will in turn damage
:04:39. > :04:43.consumer confidence. So what I would say for Japan is I think Japan will
:04:44. > :04:50.continue to be stagnant, almost at zero growth. So it is relatively
:04:51. > :04:55.moderate downhill for Japan from now onwards. Thank you for your time.
:04:56. > :04:57.Interesting analysis, and of course it is something we will keep a close
:04:58. > :04:59.eye on on World Business Report. In other news: Xi Jinping
:05:00. > :05:02.has arrived in Poland, as part of a three-nation tour aimed
:05:03. > :05:04.at strengthening ties The Chinese President will be
:05:05. > :05:07.meeting with his counterpart in Warsaw, as well as
:05:08. > :05:10.the country's Prime Minister. The two sides are expected to sign
:05:11. > :05:13.agreements in areas such as finance, Before Poland, Mr Xi was in Serbia,
:05:14. > :05:22.and heads to Uzbekistan next. Brazilian prosecutors have made
:05:23. > :05:25.a formal allegation of tax evasion and money laundering against former
:05:26. > :05:27.tourism minister Henrique Alves. Mr Alves resigned on Thursday after
:05:28. > :05:30.being linked to a corruption scheme. Brazil's Attorney General presented
:05:31. > :05:32.evidence to the Supreme Court saying Mr Alves had a secret bank
:05:33. > :05:35.account in Switzerland. He is one of the more outspoken
:05:36. > :05:48.and colourful of central bankers, but the head of the Reserve Bank
:05:49. > :05:51.of India, Raghuram Rajan, There had been plenty
:05:52. > :06:03.of speculation about his future, and this weekend he announced
:06:04. > :06:06.he would not be signing up for a second term when his
:06:07. > :06:20.contract ends in September. Nice to see you. So in the past we
:06:21. > :06:25.have talked about this central banker, and how successful he has
:06:26. > :06:32.been. Why is he not staying in the job? Well, there are two issues. The
:06:33. > :06:36.first is that the current government, the Narendra Modi
:06:37. > :06:40.government, there were some voices within his ruling party that didn't
:06:41. > :06:45.want him to continue for various reasons. Number one, Raghuram Rajan
:06:46. > :06:49.was seen as a little outspoken. He spoke on issues which were outside
:06:50. > :06:54.his jurisdiction, issues relating to society. For example, there was this
:06:55. > :06:59.whole intolerance debate in India last year after a Muslim was lynched
:07:00. > :07:02.for allegedly eating beef. Even India's economic growth, India is
:07:03. > :07:05.one of the fastest growing economies in the world and Raghuram Rajan has
:07:06. > :07:08.questioned the reliability of those numbers, so he has always spoken out
:07:09. > :07:12.in that didn't go down well with some in the government. That was one
:07:13. > :07:18.reason. Raghuram Rajan, in a letter on the weekend, said that after due
:07:19. > :07:22.reflection and consideration, he took this decision. This letter
:07:23. > :07:29.indicates that he was open to continuing, maybe he didn't get
:07:30. > :07:34.agreement from the government, or they didn't agree with the terms he
:07:35. > :07:37.wanted. So no clarity what is the real reason, and many believe the
:07:38. > :07:42.government was also not keen on extending his term. What has the
:07:43. > :07:45.reaction been like? I understand the share markets haven't been too bad
:07:46. > :07:51.in terms of reaction, the rupee is weak, but talked us through the
:07:52. > :07:58.reaction. Well, even before Raghuram Rajan wrote that letter, investors,
:07:59. > :08:02.analysts, economists, industrialists also, were saying that Mr Rajan
:08:03. > :08:07.should get a second term. He has done a sterling job, a marvellous
:08:08. > :08:11.job, controlling inflation which was a big issue when he took office a
:08:12. > :08:16.few years back. The criticism against him was that he didn't bring
:08:17. > :08:20.interest rates down at a rapid pace, and that was to control inflation.
:08:21. > :08:24.But even then many felt that those were the right decisions and that is
:08:25. > :08:28.why they thought that given there is a lot of global uncertainty at this
:08:29. > :08:32.point in time, whether it is Brexit, or the Fed raising rates, or even
:08:33. > :08:36.domestic issues like that banking sector going through turmoil, it is
:08:37. > :08:40.important that Mr Rajan stays on to bring that stability to the market.
:08:41. > :08:44.Because remember, global investors and domestic ones really agree with
:08:45. > :08:48.this guy and believe in him. So if he goes the worry is that Indian
:08:49. > :08:53.markets could take a hit in the short term. OK, we shall keep an
:08:54. > :08:54.eye. Nice to see you, thank you for your time.
:08:55. > :08:56.Now, it is just three days until voters here in Britain decide
:08:57. > :08:59.whether the UK should remain in the European Union or leave,
:09:00. > :09:02.and we have been talking to small business leaders in the UK
:09:03. > :09:04.and Europe to find out what they believe is
:09:05. > :09:09.Guy Sainty runs the Stair Sainty Gallery in London,
:09:10. > :09:13.He feels that his business, and the London art market,
:09:14. > :09:15.is suffering because of EU VAT regulations.
:09:16. > :09:26.My name is Guy Sainty. My wife and I run the Stair Sainty Gallery, it
:09:27. > :09:30.specialises in European art from the 16th to the 20th century. Since
:09:31. > :09:36.2006, the European Union required that the UK introduce equal VAT for
:09:37. > :09:42.all works of art that come into this country from outside the European
:09:43. > :09:48.Union. It is 5% on the value of the import. Far fewer works are
:09:49. > :09:54.consigned from outside the European Union. This stuff is simply too
:09:55. > :09:59.expensive for us to handle works that are owned by, say, an American
:10:00. > :10:04.concern. It has meant that London is essentially being replaced by New
:10:05. > :10:11.York as the major art dealing Centre. If we leave the European
:10:12. > :10:19.Union, and we remove the burden of import VAT, this will transform
:10:20. > :10:23.London, to make it become the most important art centre in the world.
:10:24. > :10:24.That is one view, we are looking at all sides of the arguments on the
:10:25. > :10:25.BBC. You can hear from more businesses
:10:26. > :10:28.giving their views on what the EU Go to the BBC Business webpage,
:10:29. > :10:34.www.bbc.co.uk/businesstalks. Japan up over 2%, the yen a little
:10:35. > :10:39.bit weaker, and Japan not perturbed by that news about trade figures.
:10:40. > :10:43.Just a quick look at currencies we are watching. The Indian rupee
:10:44. > :10:48.earlier today was at a ten month low of the back of news the central bank
:10:49. > :10:52.governor is not renewing his turn. The pound very sensitive throughout
:10:53. > :11:00.the week. -- renewing his term. I will see you soon.
:11:01. > :11:04.40% of adults in the UK will be overweight by the year 2035,