20/06/2016 World Business Report

Exports out of Japan sink, as it grapples with a stronger yen.

Economists say there is worse to come.

And markets wobble in India, and the rupee is falling,

as the search for a new central bank governor begins.

We will be live to Mumbai for the latest.

Also in the programme: This is the week that UK voters decide

Data out today shows an 11% drop for the month of May,

when compared to the same time last year.

Weak demand from emerging markets is another reason why.

Also, imports slowed too, falling by nearly 14%.

So these latest trade figures leave Japan with a trade deficit amounting

This comes just days after Japan's finance minister issued a note

of caution on the country's currency.

Last week the yen touched multi-year highs against the US dollar.

A stronger currency is very bad news for Japan's exporters,

as it makes their goods more expensive overseas,

and this in turn hits the economy hard.

Takuji Okubo, chief economist at Japan Macro Advisors.

Thank you for joining us on World Business Report. First of all, just

tell us about these trade numbers. Explain why they are quite bad in

May. Sure, the exporter is down by 11%, but this has a lot to do with

the yen appreciation. When measured, the yen is declining. But even in

quantity terms, in volume terms, export is down 10%. So despite the

moving yen, Japanese exporter is going nowhere. And just talked us

through some of the reasons why some are saying it is to do with the

currency, while others are saying it is to do with the earthquake that

hit suppliers in the months before. There are lots of issues here. Sure.

I don't think the earthquake has much to do with it. The economic

area where the earthquake hit is not a industrial place. I don't think it

has much to do with the decline. The decline has to do with the surging

yen and a stagnant volume exports. So what do you think the Japanese

authorities will do about this, in terms of the Japanese government or

even its central bank. Right, so the Japanese government and specifically

the bank of Japan, have been trying to weaken the yen through massive

quantitative easing, but it seems that the market has started to

speculate that there is actually very little more the Bank of Japan

can do to weaken the yen and is Japan's monetary situation. So what

do you think will be happening, because we were told that they are

watching the situation very carefully and are ready to act if

the yen strengthens further. Well that is what we call verbal

interventions. So they can talk. But I think markets are clever, they can

see through those talks and they see that it is difficult for the

Japanese government to directly intervene in the exchange rate

market, the US and Europe will definitely not support such a

unilateral intervention and on the monetary policy side, the bank of

Japan keep on saying there is more they can do but then when you really

think about it there isn't really much rank of Japan can do at this

point. So what is the outlook for the Japanese economy -- the bank of

Japan. Well, the outlook I must say is rather negative. I expect the yen

to continue to appreciate, that will damage corporate profits, that will

in turn damage the stock markets, and that will in turn damage

consumer confidence. So what I would say for Japan is I think Japan will

continue to be stagnant, almost at zero growth. So it is relatively

moderate downhill for Japan from now onwards. Thank you for your time.

Interesting analysis, and of course it is something we will keep a close

eye on on World Business Report. In other news: Xi Jinping

has arrived in Poland, as part of a three-nation tour aimed

at strengthening ties The Chinese President will be

meeting with his counterpart in Warsaw, as well as

the country's Prime Minister. The two sides are expected to sign

agreements in areas such as finance, Before Poland, Mr Xi was in Serbia,

and heads to Uzbekistan next. Brazilian prosecutors have made

a formal allegation of tax evasion and money laundering against former

tourism minister Henrique Alves. Mr Alves resigned on Thursday after

being linked to a corruption scheme. Brazil's Attorney General presented

evidence to the Supreme Court saying Mr Alves had a secret bank

account in Switzerland. He is one of the more outspoken

and colourful of central bankers, but the head of the Reserve Bank

of India, Raghuram Rajan, There had been plenty

of speculation about his future, and this weekend he announced

he would not be signing up for a second term when his

contract ends in September. Nice to see you. So in the past we

have talked about this central banker, and how successful he has

been. Why is he not staying in the job? Well, there are two issues. The

first is that the current government, the Narendra Modi

government, there were some voices within his ruling party that didn't

want him to continue for various reasons. Number one, Raghuram Rajan

was seen as a little outspoken. He spoke on issues which were outside

his jurisdiction, issues relating to society. For example, there was this

whole intolerance debate in India last year after a Muslim was lynched

for allegedly eating beef. Even India's economic growth, India is

one of the fastest growing economies in the world and Raghuram Rajan has

questioned the reliability of those numbers, so he has always spoken out

in that didn't go down well with some in the government. That was one

reason. Raghuram Rajan, in a letter on the weekend, said that after due

reflection and consideration, he took this decision. This letter

indicates that he was open to continuing, maybe he didn't get

agreement from the government, or they didn't agree with the terms he

wanted. So no clarity what is the real reason, and many believe the

government was also not keen on extending his term. What has the

reaction been like? I understand the share markets haven't been too bad

in terms of reaction, the rupee is weak, but talked us through the

reaction. Well, even before Raghuram Rajan wrote that letter, investors,

analysts, economists, industrialists also, were saying that Mr Rajan

should get a second term. He has done a sterling job, a marvellous

job, controlling inflation which was a big issue when he took office a

few years back. The criticism against him was that he didn't bring

interest rates down at a rapid pace, and that was to control inflation.

But even then many felt that those were the right decisions and that is

why they thought that given there is a lot of global uncertainty at this

point in time, whether it is Brexit, or the Fed raising rates, or even

domestic issues like that banking sector going through turmoil, it is

important that Mr Rajan stays on to bring that stability to the market.

Because remember, global investors and domestic ones really agree with

this guy and believe in him. So if he goes the worry is that Indian

markets could take a hit in the short term. OK, we shall keep an

eye. Nice to see you, thank you for your time.

Now, it is just three days until voters here in Britain decide

whether the UK should remain in the European Union or leave,

and we have been talking to small business leaders in the UK

and Europe to find out what they believe is

Guy Sainty runs the Stair Sainty Gallery in London,

He feels that his business, and the London art market,

is suffering because of EU VAT regulations.

My name is Guy Sainty. My wife and I run the Stair Sainty Gallery, it

specialises in European art from the 16th to the 20th century. Since

2006, the European Union required that the UK introduce equal VAT for

all works of art that come into this country from outside the European

Union. It is 5% on the value of the import. Far fewer works are

consigned from outside the European Union. This stuff is simply too

expensive for us to handle works that are owned by, say, an American

concern. It has meant that London is essentially being replaced by New

York as the major art dealing Centre. If we leave the European

Union, and we remove the burden of import VAT, this will transform

London, to make it become the most important art centre in the world.

That is one view, we are looking at all sides of the arguments on the

BBC. You can hear from more businesses

giving their views on what the EU Go to the BBC Business webpage,

www.bbc.co.uk/businesstalks. Japan up over 2%, the yen a little

bit weaker, and Japan not perturbed by that news about trade figures.

Just a quick look at currencies we are watching. The Indian rupee

earlier today was at a ten month low of the back of news the central bank

governor is not renewing his turn. The pound very sensitive throughout

the week. -- renewing his term. I will see you soon.

40% of adults in the UK will be overweight by the year 2035,