14
business
Obama aims to control
‘exploding’ deficits
WASHINGTON: US President
Barack Obama is vowing to tackle
trillion-dollar budget deficits facing
the nation after he launched an un-
precedented spending programme
aimed at helping the troubled Ameri-
can economy get back on its feet.
In his weekly radio address on Sat-
urday, Obama said his administration
were determined to do “all we can to
get exploding deficits under control as
our economy begins to recover”.
According to the Congressional
Budget Office, the provisional budget
deficit in fiscal 2009 will balloon to a
record US$1.2 trillion (RM4.2 trillion).
The deficit for fiscal 2008 which
ended in September reached US$438
billion (RM1.5 trillion), or 3.1% of the
nation’s gross domestic product, the
office said in a report last month.
However, the figures do not in-
clude the cost of a huge US$787-bil-
lion economic stimulus plan signed
by Obama into law last Tuesday.
Roughly one-third of the stimulus
funds will be spent on tax cuts, to-
taling US$286 billion, in an effort to
boost consumer spending, a key en-
gine of the world’s largest economy.
But a further US$120 billion is
being allocated to “shovel-ready”
infrastructure projects, in such sec-
Japan bears brunt of global economic crisis
TOKYO: Remember the early 1980s?
The compact disc was brand new, the
Walkman was still a novelty and Japa-
nese carmakers were getting ready to
conquer the world.
Fast forward to 2009 and with Asia’s
biggest economy in a deep recession,
Japanese factories are slashing their
output back down to the same levels
as 1983, wiping out more than two
decades of growth, analysts say.
Once seen as relatively immune to
the global downturn, Japan’s economy
has become one of the biggest victims,
exposing the fragility of its export-led
recovery from a decade-long slump.
Japan’s banks managed to escape
the worst of the financial crisis, but its
manufacturers are being battered by
the slump in demand for cars, electron-
ics and other goods.
“The dire situation for Japan’s econ-
omy cannot be overstated,” Newedge
Group senior strategist Kirby Daley said.
“Japan is woefully unprepared to
deal with the severe downturn in its
economy that it’s going to face in 2009,
2010 and possibly beyond,” he said.
Icons such as Toyota and Sony are
tors as transportation, road-build-
ing, improving the power grid and
renewable energy installations.
Republicans and other critics
said the mammoth spending plan
was mortgaging the nation’s future,
for which America’s “children and
grandchildren will pay a hefty price”.
But Obama said he was now deter-
mined to put spending under control,
saying work on the deficit will begin
on Monday, when he will convene a
fiscal summit of independent experts,
unions, advocacy groups and mem-
bers of Congress to discuss how the
trillion-dollar deficit could be cut.
He promised to further tackle the
issue in Tuesday’s address to the na-
tion, in which he planned to outline
urgent national priorities.
On Thursday, the White House
releases a budget blueprint, which
Obama said is “sober in its assess-
ments, honest in its accounting, and
lays out in detail my strategy for invest-
ing in what we need, cutting what we
don’t, and restoring fiscal discipline”.
A senior administration official
told AFP that Obama planned to cut
the federal budget deficit by half by
end of his first term.
Savings will be made by cutting
spending on the Iraq war and by even-
slashing thousands of jobs as they brace
to fall deep into loss. The government is
in disarray. It’s no wonder the yen’s surge
against the dollar has fizzled out.
“The yen is rapidly losing its ‘safe
haven’ status,” said NAB Capital analyst
John Kyriakopoulos.
The government warned last week
Japan’s economy was in the deepest
crisis since World War II, after contract-
ing at an annualised pace of 12.7% in
the fourth quarter, the worst perform-
ance in almost 35 years.
“In the space of a few months, Japan
has gone from being what market par-
ticipants regarded as one of the world’s
best economies to one of the worst,” RBS
Securities analysts wrote in a note.
“The global collapse of exports and
Japan’s dependence on them are largely
responsible for this change.”
Japan’s Nikkei index is back down
near October’s 26-year low, while the
broader Topix index ended Friday at the
weakest level in a quarter of a century.
With exports and industrial output
plunging, analysts expect another
severe contraction in the Japanese
economy in the first quarter of 2009.
theSun | MONDAY FEBRUARY 23 2009
tually raising taxes for the “wealthiest
Americans”, the official said. Be the
The official did not specify how creator of
much money a person must make to
be categorised as the “wealthiest.” But
a Britney
during the election campaign, Obama Spears
included into this group people mak- music
ing more than US$250,000 a year.
Obama used his address to again
video
showcase his recovery plan, saying pg 18
because of it, “three and a half million
Americans will now go to work doing
the work that America needs done”.
He announced that, starting this
Saturday, employers had begun
reducing taxes for 95% of working
American families as mandated by
the stimulus package. By April, the
average US family will begin to keep
an additional US$65 each month.
But the president acknowledged
that signing the stimulus plan into
law was only a first step on the road
to economic recovery.
He said a complete recovery will
require stemming the spread of real
estate foreclosures and falling home
values, stabilising and repairing the
banking system in order to restore
the flow of credit to families and
businesses and reforming the bro-
ken regulatory system that made the Aussie miner says China
crisis possible. – AFP
takeover saved firm
MELBOURNE: Debt-laden Australian miner OZ Minerals
said yesterday it would go into receivership if a A$2.6
billion (RM6 billion) takeover offer from China’s Minmet-
According to government’s forecasts, als does not proceed.
factory production is expected to drop by While some Australian politicians have expressed un-
February to levels last seen in 1983. ease at Chinese investment in the country’s resources
“Output will have fallen over a five- sector, OZ Minerals chief executive Andrew Michelmore
month period by as much as it had risen Japan said last week’s offer had saved his company.
in the previous quarter of a century,” has gone “Having stared down the barrel of receivership or
said Richard Jerram, chief Japan econo- from being voluntary administration at least three times in the last
mist at Macquarie Securities. what few months, this is the best outcome for our sharehold-
Now more than ever, analysts say, ers,” Michelmore told ABC television.
Japan needs a steady hand on the tiller
market The proposed deal came days after China’s state-
of the economy. Instead, the govern- participants owned aluminium firm Chinalco said it was putting
ment is engulfed in its own crisis, with regarded US$19.5 billion into another troubled Australian mining
Prime Minister Taro Aso’s popularity as one of giant, Rio Tinto.
below 10% according to one poll. Senators from across the political spectrum have
Political turmoil could weaken the
the world’s raised concerns about Beijing’s state-owned entities
government’s ability to implement fis- best buying into Australia’s resource sector.
cal stimulus measures to help revive economies However, Michelmore said he was comfortable with
economic growth, Kyriakopoulos said. to one of Chinese money moving into the sector and believed
Japan has announced a series of spend- the worst.” Minmetals would follow corporate guidelines.
ing packages, but its huge public debts – a “All the information I have is that they want this as their
hangover from efforts to spend its way offshore vehicle to grow their base metals business.
out of the 1990s recession – mean it has “They have a number of entities that they have to
limited ammunition to fight the crisis. report back to and they are very committed to corpo-
“They’re going to have to print rate governance. I think they are going to see this as a
money for anything that they do. They platform to really grow their business.”
can try to throw money at the problem Before the Minmetals offer, OZ Minerals flagged
but they will only exacerbate the long- asset write-downs of up to A$2.8 billion due to steep
term issues facing the country and the commodity price falls sparked by the global financial
economy,” Daley said. – AFP crisis. – AFP