Archive for April, 2011

BOJ Shirakawa warns Japan economic outlook "very severe"

Friday, April 29th, 2011 | Finance News

TOKYO (Reuters) – Bank of Japan Governor Masaaki Shirakawa said on Saturday that the country's economic outlook was very severe and that the central bank would take appropriate action to support the economy.

But he offered few clues on whether and when the BOJ would expand its asset-buying scheme, only saying that its next policy step would depend on economic conditions at the time.

"The BOJ sees the outlook for Japan's economy as very severe," Shirakawa told a financial committee meeting in the lower house of parliament.

"We'd like to take appropriate policy steps as needed while monitoring the economy and prices, taking into account that uncertainty over the outlook is high," he said.

Asked by a lawmaker whether the BOJ would consider buying more government bonds to support the economy, Shirakawa said only: "We'd like to consider in earnest what would be the desirable step to take."

The BOJ kept monetary policy unchanged on Thursday even as it lowered its growth forecast for the current fiscal year, which began in April, and warned of uncertainties over the extent of damage that last month's devastating earthquake would inflict on the economy.

Shirakawa reiterated that having just expanded its asset purchasing scheme days after the March 11 quake, the BOJ preferred to spend more time examining the impact the step would have on the economy.

But he also left open the possibility of easing monetary policy further if damage from the quake proved bigger than expected, stressing that the central bank was focusing on downside risks to growth for the time being.

In a sign some in the BOJ were more cautious about the economic outlook than Shirakawa, Deputy Governor Kiyohiko Nishimura proposed on Thursday expanding the central bank's asset buying scheme by 5 trillion yen ($62 billion).

While the proposal was outvoted by the board, some market players said it may be a sign the BOJ may loosen policy as early as next month.

Japan is facing its worst crisis since World War Two after the 9.0 magnitude earthquake and subsequent tsunami devastated its northeast coast last month.

Reflecting the economic impact, factory output fell at a record monthly pace in March, household spending declined at a record annual rate and another private survey showed manufacturing activity languishing at a two-year low.

The BOJ eased policy days after the quake by doubling to 10 trillion yen the funds it sets aside for purchases of a range of financial assets, such as government bonds and corporate debt.

If the central bank were to next ease policy, the most likely step would be to expand the scheme again, sources familiar with the BOJ's thinking say.

Aside from the government bonds it purchases under the asset buying scheme, the central bank buys 21.6 trillion yen worth of long-term government bonds from the market each year.

Some lawmakers have called on the BOJ to buy more government bonds from the market, or even underwrite them directly, to help the government fund the huge costs for reconstruction.

(Editing by Hugh Lawson)


In Buffett territory, holders show allegiance to Warren

Friday, April 29th, 2011 | Finance News

OMAHA, Nebraska (Reuters) – Warren Buffett may be under fire from New York investment managers over a scandal involving one of his former lieutenants, but on his home turf his most loyal shareholders think he is doing just fine.

One of the focal points of Berkshire Hathaway's (BRKa.N) annual meeting weekend is the Friday night cocktail party at Borsheims, the country's largest independent jewelry store and one of the many businesses in Buffett's ice-cream-to-insurance conglomerate.

The young and the old mingled freely among display cases laden with diamonds at 20 percent off, and many took advantage of the discounts. One thing that was not discounted, though, was the loyalty of Nebraskan shareholders to Buffett, beloved as the hometown kid with the folksy manner.

"I think he's been handling it very well ... I think he's done a nice job of addressing the issue but also recognizing that it's a difficult one," said Amy Peck of Omaha, a shareholder who was visiting with her dog Bosley in tow.

Peck was hardly alone; most smaller shareholders in Omaha simply feel differently about the controversy surrounding David Sokol's behavior than some institutional holders do.

Even if they expect answers from Buffett about Sokol this weekend, they still fundamentally believe in the man some call the "Oracle of Omaha." One investor choked up when asked about Berkshire after Buffett is no longer in charge.

"In my opinion Warren Buffett is Superman," said Ernie Fierro of Omaha, who has been attending the annual meeting for the last five years.

This aura of invincibility is what keeps investors coming back year after year. In fact, Buffett has said he'll never retire, and suggested he'll work until he dies.

Others made no effort to hide their adulation for the 80-year-old and their eagerness to buy Berkshire's stock -- even four-legged investors.

"You know what, that's not a bad idea, maybe we'll have him buy some shares too," Peck said of her dog.

Not everyone shopping at Borsheims on Friday was a small investor, though. Baba Blumkin of Los Angeles, a descendant of the family that founded Buffett's retailer Nebraska Furniture Mart, was browsing some of the store's higher-end offerings.

Blumkin, who grew up attending Berkshire's annual meetings, agreed Buffett had handled the situation well. Yet, asked what he would ask Buffett if given the opportunity, Blumkin had a slight less pragmatic question than most.

"Is it fun hanging out with LeBron James?" he said.

(Reporting by Ben Berkowitz, editing by Bernard Orr)


Judge: I will again deny dismissal of Toyota suits

Friday, April 29th, 2011 | Finance News

SANTA ANA, Calif. – A federal judge said Friday that he will deny another request from Toyota Motor Corp. to dismiss lawsuits filed by car owners who claim sudden-acceleration defects caused the value of their vehicles to drop.

U.S. District Judge James Selna in Santa Ana said in a 30-page ruling that the lawsuits have enough merit to move forward.

"Taking these allegations as true, as the court must at the pleading stage, they establish an economic loss," Selna wrote. "Plaintiffs bargained for safe, defect-free vehicles, but instead received unsafe, defective vehicles. A vehicle with a defect is worth less than one without a defect."

Toyota spokeswoman Celeste Migliore released a statement in response to Selna's ruling after a hearing in an Orange County courtroom late Friday.

"Although Toyota is confident that no defect exists in its electronic throttle control system, at this early stage of the litigation the Court is required to accept as true all of the factual allegations made by plaintiffs' counsel in ruling on Toyota's Motion to Dismiss. The burden is now squarely on plaintiffs' counsel to prove their allegations and Toyota is confident that no such proof exists," the statement read in part.

Selna rejected a similar dismissal motion in November made by the Japanese automaker. His most recent ruling, which likely will be finalized within 10 days, was in response to an amended complaint by the plaintiffs regarding economic loss.

Other lawsuits have been filed that seek compensation for injury and death due to sudden acceleration.

Hundreds of lawsuits have been filed since Toyota began recalling millions of vehicles due to acceleration problems in several models and brake defects with the Prius hybrid. To date, more than 14 million Toyota vehicles have been recalled worldwide, and the company has paid the U.S. government a record $48.8 million in fines for its handling of three recalls.

"We believe that Toyota failed consumers through a litany of failures and missteps, including choosing not to warn the National Highway Traffic Safety Administration of sudden acceleration issues they knew existed," said plaintiffs' attorney Steve Berman. "We believe this specific failure was a violation of consumer protection laws and are pleased that Judge Selna's preliminary ruling will allow us to address that in our case."

Toyota argues the plaintiffs have been unable to prove that a design defect — namely its electronic throttle control system — is responsible for vehicles surging unexpectedly. It has blamed driver error, faulty floor mats and sticky accelerator pedals for the unintended acceleration.

The automaker's defense was buoyed earlier this year when U.S. regulators said electronic flaws weren't to blame for unintended acceleration. Plaintiffs' attorneys, however, want to look at Toyota's secretive source code that may provide more information about the electronic throttle control system.

The first trials on the acceleration issue are expected to begin in 2013.