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Jason Simpkins

Does the Bank of Japan Have Enough Juice to Overcome Nagging Deflation?

The Bank of Japan (BOJ) yesterday (Tuesday) took steps to preserve a fragile economic recovery by pumping more short-term funds into the nation's banking system. However, many analysts are worried that the central bank didn't do enough to put a ceiling on the yen, and prop up its ailing corporate sector.

Japan's central bank said it would make available $115 billion (10 trillion yen) in three-year loans at 0.1% interest. The announcement was made after the BOJ held an extraordinary monetary policy meeting, which was called to "discuss monetary control matters based on recent economic and financial developments," namely the rise of the yen and growing deflation that poses a threat to its nascent economic recovery.

Japan's third-quarter gross domestic product (GDP) rose at a 4.8% annual rate, after revised growth of 2.7% in the second quarter. But the nation's currency, which last week hit a 14-year high against the dollar, is jeopardizing the recovery by making Japanese exports more expensive for other countries.

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Hot Stocks: IBM Simplifying and Succeeding While Oracle is Struggling

While its chief competitor Oracle Corp. (Nasdaq: ORCL) is laboring to smooth out the wrinkles in its merger with Sun Microsystems Inc. (Nasdaq: JAVA), International Business Machines Corp. (NYSE: IBM) is streamlining its core business and fulfilling its mandate for innovation. IBM – which  itself attempted to buy Sun but balked at the hefty price […]

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Emerging Markets Consider Capital Controls to Combat "Hot Money" Inflows

Concerned with accelerating inflows of so-called "hot money," more emerging market nations are considering new capital controls to keep their currencies from appreciating and prevent asset bubbles from becoming a problem.

Loose monetary policy in the United States and Europe has flooded fast-growing Asian economies where Western investors are seeking higher yields. India, Taiwan, South Korea, Hong Kong, and Indonesia are among the regions investigating options to combat the rapid inflows of foreign capital that are driving up stock prices, and threatening their export sectors by forcing their currencies to appreciate.

"With interest rates exceptionally low and with abundant liquidity around the world, Hong Kong faces the potential risk next year that asset prices may go up sharply and become increasingly disconnected from economic fundamentals," the Hong Kong Monetary Authority said on its Web site.

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OECD More Than Doubles 2010 Forecast, as China Leads the World Out of the Recession

The Organization for Economic Cooperation and Development (OECD) more than doubled its 2010 forecast for developed nations, saying that strong growth in Asia – particularly China – would help pull the “more feeble” West out of its financial malaise.

After predicting in June that the combined economy of its 30 member nations would grow 0.7% in 2010, the OECD raised its forecast for developed economies to grow 1.9% next year and 2.5% in 2011. Economic output will contract by 3.5% this year, the Paris-based organization said today.

We now have the numbers that support a recovery in motion,” Jorgen Elmeskov, the OECD's acting chief economist, told Bloomberg News. “It's still a slow recovery because of considerable headwinds from the need to adjust the balance sheets of households, enterprises and financial sectors.”

The OECD cautioned that the recovery is still fragile in developed nations, while pointing to China as the main catalyst for a global rebound.

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Why Gold Will Reach a Record $2,000 in 2010

Gold has surged 60% in the past 12months and it’s not letting up. The “yellow metal” is continuing that scorching surge into the last part of the year, establishing new highs on a near-daily basis. In fact, gold established yet another record price yesterday (Wednesday) when it peaked at $1,153.40 an ounce on the New York Mercantile Exchange (NYMEX).

And the records are going to keep on coming.

With the U.S. dollar in a freefall and global gold demand rising, analysts say the precious metal will likely continue its bullish trend through at least the first half of 2010. It could rise as high as $2,000 an ounce, which would represent a 73% gain from current record levels.

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U.S. Sen. Christopher Dodd's Plan for Financial Reform as Ambitious as it is Antagonistic

U.S. Sen. Christopher Dodd, D-CT, on Tuesday released an 1,136-page draft bill for sweeping financial regulatory reform that will create several new protection agencies, increase regulation of credit agencies and derivatives, and alter the role played by the U.S. Federal Reserve in the financial system.

And that's just the beginning what will be a long and contentious battle to get the bill past the Senate, the House of Representatives and the Obama administration. Lobbyists, large banks, and the heads of government regulators, such as the Federal Deposit Insurance Corp. (FDIC) Chairwoman Sheila Bair, will have their say on the proposal as well.

Still, Dodd's bill, which he worked closely with U.S. Rep. and Chairman of the House Financial Services Committee Barney Frank, D-MA, to draft, is an important first step in the push for financial regulatory reform, which in recent months had been overshadowed by the Obama administration's push for healthcare reform.

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IEA World Energy Outlook: Declining Investment Threatens Recovery

Declining investment and a lack of progress on alternative energy development could lead to sharply higher oil prices in the decades ahead, the International Energy Agency (IEA) said in its 2009 World Energy Outlook.

The IEA for the past year has warned that the financial crisis was undermining investment in energy development. The advisor to 28 developed nations says the financial crisis is already responsible for a $90 billion drop in worldwide oil and natural gas investment, which is 19% below last year's levels.

"Falling energy investment will have far-reaching and, depending on how governments respond, potentially serious consequences for energy security, climate change and energy poverty," said the IEA.

The decline in energy supplies combined with a sharp rise in prices could "undermine the stability of the economic recovery," it added.

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G20 Fizzles as China-Africa Summit Leads to a $10 Billion Loan

While U.S. and European officials this weekend squabbled over the specifics of an economic recovery plan, China took another step to ensure long-term economic growth by inking another multibillion-dollar deal with Africa.

Finance ministers from the Group of 20 (G20) met over the weekend to discuss the ongoing healing process taking place in the world's financial system. Officials agreed that stimulus measures should remain in place, as the global economic recovery is still vulnerable. They also acknowledged that while the dollar is weakening, its downside risk is outweighed by the need to "continue to provide support for the economy until the recovery is assured."

Analysts say that the dollar's decline will take a back seat to the economic recovery so long as it remains orderly.

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Western Oil Majors Reluctantly Return to Iraq

Exxon Mobil Corp. (NYSE: XOM) and Royal Dutch Shell PLC (NYSE ADR: RDS.A, RDS.B) on Thursday won the right to develop Iraq's West Qurna-1 oilfield.

The agreement is the third such deal this year, which means Iraqi oil production could increase at a faster pace than previously expected and potentially lead to a drop in oil prices.

Iraqi officials earlier this week finalized an agreement with BP PLC (NYSE ADR: BP) and China National Petroleum Corp. (CNPC). Policymakers also reached an initial agreement with a consortium led by Italy's Eni SpA (NYSE ADR: E) that will develop the Zubair oil field.

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China Fuming Over the Latest U.S. Trade Complaint

There has been a spate of trade tiffs over the past few months, but relations appeared to be on the mend after a high-level meeting between trade officials at the Chinese city of Hangzhou. Now, as President Obama prepares to make his first official trip to China, tempers are again flaring.

The United States, Europe, and Mexico have asked the World Trade Organization (WTO) to arrange a dispute settlement panel to investigate Chinese restrictions on exports of certain industrial metals. The WTO complaint claims that Chinese restrictions on exports such as bauxite and magnesium are driving up the prices of steel, aluminum, and chemical products.

"China's restrictions on raw materials continue to distort competition and increase global prices, making conditions for our companies even more difficult in this economic climate," said Catherine Ashton, the European Union's (EU) trade commissioner.

Beijing applies an export duty of as high as 15% on some of its materials. However, China's Ministry of Commerce contends that those duties are in place to protect the environment by increasing the cost of extraction. The ministry also disputed Ashton's claim that such taxes are making it harder for Western companies to emerge from the recession.

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