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Japan’s Abe unlikely to tackle hard reforms in next term: economists

TOKYO Japanese Prime Minister Shinzo Abe looks set to win a rare second consecutive term but economists predict he won’t use that victory to push through bold reforms such as labor market changes that are considered vital for long-term growth.

Instead, Abe, who took office in December 2012 pledging to reboot the economy, will stick to politically palatable policies of government spending and easy money – the first and second “arrows” of his “Abenomics” recipe, economists polled by Reuters said.

Abe has spent significant political capital this past year pushing unpopular legislation, expected to pass this month, that could let Japanese troops fight overseas for the first time since World War Two. He was also busy crafting a controversial statement to mark the 70th anniversary of that conflict’s end.

“He will draw a line under the issues of security and history in this session of parliament, and from autumn onward, the focus will be growth strategy,” a Japanese government source close to the administration told Reuters.

Fifteen economists who responded to a Reuters poll overwhelmingly said Abe in his next term should put priority on regulatory reform of the labor market and repairing a social security system burdened by a fast-ageing population.

Equally overwhelmingly, respondents expect Abe’s government instead to plump for an extra budget for the current fiscal year to bolster growth. About half also expect more monetary easing.

“Even with the weak yen, capital investment centered on the manufacturing sector is not growing. This shows … expectations for growth are still insufficient,” said Kyohei Morita, chief Japan economist at Barclays Capital. “What is vital is to increase labor productivity and reform the labor market.

Candidates for a Liberal Democratic Party (LDP) leadership election must register on Tuesday.

Abe’s only potential rival is struggling to get enough sponsors for a bid, while Abe has the backing of major LDP factions. That makes him all but certain to win another three-year term as party leader, and hence premier, by virtue of the ruling coalition’s majority in parliament.

Abe has made progress reforming the energy, medical and farm sectors, but economists want more of the bold reforms that are the “third arrow” of Abenomics.

The yen has eased more than 30 percent against the dollar and Tokyo share prices and corporate profits have more than doubled since Abe took over as head of the then-opposition LDP in September 2012 and then led the party to victory at the polls.

But corporate investment is sluggish and wage rises have failed to keep pace with higher prices, dampening consumption.

GDP shrank an annualized 1.6 percent in the April-June quarter due to an export slump and weak consumer spending.

Delays in clinching a 12-nation pan-Pacific trade pact, the U.S.-led Trans-Pacific Partnership, are weakening external pressures for difficult structural change, said Martin Schulz, a senior research fellow at Fujitsu Research Institute.

“Abe probably had a much bigger mandate at the beginning to implement reform,” he said.

Government efforts to address widening economic gaps ahead of an upper house election next July could also put structural reforms on the back burner. “This is what kills reform. That is a possibility,” Schulz said.

(Additional reporting by Yuko Yoshikawa; Writing by Linda Sieg; Editing by Edmund Klamann)

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China revises down 2014 GDP growth to 7.3 percent from 7.4 percent

BEIJING China has revised its annual economic growth rate in 2014 to 7.3 percent from the previously released figure of 7.4 percent, the National Bureau of Statistics said on Monday.

Gross domestic product stood at 63.6 trillion yuan ($10.00 trillion) last year, down by 32.4 billion yuan from the initial estimate, the bureau said in a statement on its website.

The bureau has revised down 2014 growth of the services sector by 0.3 percentage points to 7.8 percent, which helped drag down estimated GDP growth rate, it said.

The primary sector – the agriculture sector – grew 4.1 percent last year, while growth of the secondary sector, which includes manufacturing and construction, rose 7.3 percent.

After the revision, the services sector accounted for 48.1 percent of GDP last year, down from the previously announced 48.2 percent, the bureau said.

The manufacturing and construction sector accounted for 42.7 percent of GDP while the farm sector accounted for 9.2 percent.

The world’s second-largest economy grew 7 percent in the first half from a year earlier – in line with the government’s target for 2015, but recent downbeat data has raised the risk the government could miss the full-year growth target.

(Reporting by Winni Zhou and Kevin Yao; Editing by Edmund Klamann and Eric)

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Apple to launch Apple TV with gaming focus: NY Times

Apple Inc (AAPL.O) will make gaming a key part of an Apple TV product it is expected to unveil at an event on Wednesday, according to a New York Times online report on Sunday.

The article, which cited unnamed people briefed on Apple’s plans, said the new product is expected to have a starting price around $150, more power for better graphics, a new remote that could double as a controller and an app store for buying games.

Apple representatives were not immediately available for comment.

The New York Times said most game executives and analysts see little chance that Apple will be able to win over fans of high-end game consoles such as Microsoft Corp’s (MSFT.O) Xbox One Sony Corp’s (6758.T) PlayStation 4.

But Apple could instead go after the casual gamers who do not want a high-end console, according to the story.

On August 27, Apple invited journalists to an event on Wednesday where it is widely expected to unveil new iPhones and potentially a new version of its Apple TV set-top box.

(Reporting By Sinead Carew; Editing by Cynthia Osterman)

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Lean manufacturing transforms Wisconsin maker of U.S. Navy warships

MARINETTE, Wis. Big investments, lean manufacturing techniques borrowed from the automotive industry, and a more engaged workforce have revamped the Wisconsin shipyard where Italy’s Fincantieri SpA builds the Freedom variant of the U.S. Navy’s coastal warships for prime contractor Lockheed Martin Corp.

Fincantieri invested $100 million in recent years to transform the 1940s era shipyard into a state-of-the-art facility, where seven LCS ships are now under construction, including three that have already been launched into the river.

Fincantieri and Lockheed hope to leverage the resulting savings in a multibillion-dollar U.S. Navy competition expected to kick off in late fiscal 2017 for 20 frigates, or upgraded versions of the current Littoral Combat Ships (LCS).

The Navy plans to buy 32 of the current LCS models built by Lockheed and Australia’s Austal Ltd. It is expected to decide in 2017 whether to keep ordering both models, or neck down to one provider.

Jan Allman, who took over as president of Marinette Marine last year after nearly three decades in the automotive and truck business, walks the 550,000-square-foot (51,097-square-meter)shipyard every day, gathering tips from workers about how to improve production.

Last month, Allman told Reuters, one worker told her she had saved hundreds of dollars a month by handing out only a small amount of titanium grease for workers’ daily use, instead of a full $20 can that would be thrown away at the end of the day.

“Every penny adds up,” said Allman, who drew on her automotive industry experience to help draft new written guiding principles for the shipyard that emphasize continuous improvement, and urge workers to spend money as if it were their own.

Lawmakers and watchdog groups have criticized early cost growth and technical challenges on the LCS ships, but Navy officials say costs have come down sharply, and the ships are performing well in early deployments in Asia and elsewhere.

For instance, the Navy’s last contract with Lockheed, for LCS 21, was priced at $362 million when it was awarded in April, compared with $537 million for the first of the steel monohull ships Lockheed built for the Navy.

Lockheed is also eyeing foreign sales in coming years. Sources familiar with the talks told Reuters this week that the U.S. government was in advanced talks with the Saudi government about the sale of two Lockheed frigates in a deal worth well over $1 billion.

Allman, who is pressing to meet aggressive internal cost targets, said she receives about 200 suggestions during small, quarterly meetings with nearly all 1,500 full-time employees at the yard, located about 55 miles (89 km) north of Green Bay.

“She’s down there with her steel-toed boots and hard hat,” Rear Admiral Brian Antonio, the Navy’s program executive officer for Littoral Combat Ships, told Reuters in a recent interview.

“We like what we see, from the way she’s energizing her workforce. It makes a big difference in quality and the amount of rework because people are taking more pride in their job.”

For instance, he said, the level of rework – components that must be redone due to quality problems – was halved from single-digit percentage levels on LCS 5 to LCS 9, the future USS Little Rock, which was launched into the Menominee River in July.

He said the ship was also 80 percent complete when it launched, the highest level of completion seen on any LCS hull.

Antonio said the Navy welcomed the improvements. “The changes they’ve made to the shipyard … will allow them to be more competitive as we move forward into the frigate.”

Fincantieri’s changes included paving the entire facility and doubling the indoor production space, including construction of a huge building where two of the 118-foot (36-meter) warships are now being assembled at once. It also streamlined the flow of raw materials and assembly functions to remove a full 8 miles from the production process of each ship.

Other changes include higher rates of recycling, greater use of fixed assembly platforms, earlier installation of shipboard lighting rather than clamp-on lights, and more work assembling large modules on the ground, rather than on board the ships.

Joe North, Lockheed’s vice president of Littoral Ships and Systems, said the transformation reminds him of the scene in the movie “The Wizard of Oz,” when Dorothy’s entire house lands squarely on the wicked witch.

“If you look at the pictures, a new shipyard came down on top of the old one and brought with it a state-of-the-art capability,” he said.

(Editing by Matthew Lewis)

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Businesses hail Renzi’s reforms, urge more to speed Italy’s upturn

CERNOBBIO, Italy U.S. computer company Hewlett-Packard (HPQ.N) is considering increasing investments and hiring new workers in Italy after years of downsizing, because, it says, it has faith, for the first time in a while, that the country is on the mend.

“There is a lot still to be done, but the glass now is looking half-full,” said Stefano Venturi, the group’s corporate vice-president and its chief executive in Italy, where it has three data centers and 5,000 employees.

His words echoed the cautious optimism in the air at an annual forum of corporate and financial leaders that has long been a barometer of the nation’s business mood. 

A fledgling economic recovery after the longest post-war recession is giving companies cause for hope, while Prime Minister Matteo Renzi says his ongoing reform agenda is helping turn around the euro zone’s third largest economy.

Over the past 18 months, Renzi has tackled the labor market, the banking sector, education and the public administration, among other areas, even though few reforms are yet operational and their long-term impact remains to be seen.

Renzi turned up at the meeting to reel off his achievements in a speech followed by two hours of questions from foreign and domestic participants on the future of Italy. 

All the executives said there was much more to be done to bring Italy’s growth in line with the rest of Europe, tackle stifling bureaucracy and corruption, speed up the justice system, cut taxes and keep control of tottering public finances.

But the overall atmosphere was in sharp contrast to last year’s gloomy discussions over the crisis and impatience at the lack of progress, and an internal poll showed 69 percent of participants had an excellent or good assessment of Renzi.

“My view of the government is very positive. Italy is out of the recession and for the first time in I don’t how many years they are talking of raising the growth forecast,” said Federico Ghizzoni, CEO of top Italian bank UniCredit (CRDI.MI).    Italy’s growth estimate of 0.7 percent this year is below the European Union average, while Renzi’s government has so far failed to cut a huge public debt of 2 trillion euros.


EU authorities and the International Monetary Fund still say Italy is too slow in making structural reforms to tackle what they see as the asphyxiating influence of vested interests from unions and professional groups to taxi drivers.  Renzi, who last year skipped the Ambrosetti conference on the shores of Lake Como to visit instead a hydraulic equipment plant, this time turned up to boast about his accomplishments and promise more reforms in the next 2-1/2 years before elections.   “Italy is no longer a problem for Europe,” he said, adding that during his tenure 25 percent of the nearly 1 million jobs lost during the crisis had been recovered.    He said this was thanks to his labor market reform which eased firing restrictions and offered temporary tax breaks for companies that hire workers on permanent contracts.    Though economists say it is way too early to tell is his “Jobs Act” is having any impact on unemployment, entrepreneurs praised Renzi for taking on trade unions and other lobby groups, changing the perception of Italy as a country impervious to change.

“He’s done things in 18 months that weren’t done in the past 40 years. He’s broken taboos – on jobs, banks, the justice system,” said Venturi.

“For foreign investors like us, 50 percent of the decision to invest money in a country depends on the credibility of its leaders. There’s faith he can take Italy out of the doldrums.”

Sandro De Poli, CEO and Chairman of General Electric (GE.N) in Italy and Israel, said Renzi was “at least a straight-talker who gets to the point and explains how he plans to reach his goals.”    In his speech, Renzi said the business world should also change its ways and that the days of the ‘salotto buono’ – a system based on influence and connections that has bound top Italian companies together for decades – were over.

(Additional reporting by Valentina Za and Gianluca Semeraro; Editing by Robin Pomeroy)

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Germany to beat export record despite China worries: trade body

BERLIN Germany will set another export record this year despite recent worries of an economic slowdown in China, the head of the German trade association said in an interview published on Sunday.

Economists have expressed concern that China’s woes might become a burden for Germany’s export-centric economy, Europe’s largest, which has the greatest exposure to China of all 28 EU member states.

China is the Germany’s fourth biggest export market, accounting for 6.6 percent of its exports.

Anton Boerner, head of the BGA trade association, told the newspaper Der Tagesspiegel that he still expected German companies to trump last year’s record trade performance.

“We’ll manage to post a small plus,” Boerner said, adding that China’s impact on Germany should not be overestimated, and that he was more worried about the risk of a break-up of the euro zone.

“There was an incredible growth phase over several decades (in China). So it’s only natural if there is a setback now,” Boerner said, adding that German exports to China might grow at a slower pace, but would not decline.

In total, Germany exported 1.13 trillion euros’ worth of goods and services in 2014, a 3.7 percent increase on 2013, despite sluggish global growth and the sanctions imposed on Russia over the Ukraine crisis.

However, weaker demand from abroad was reflected in a sharper-than-expected drop in industrial orders in July.

Fresh data will come on Monday when industrial output figures for July are due, with analysts predicting a 1.0 percent rise.

Tuesday sees the release of trade figures for July, which will give another clue to how the German economy started into the third quarter.

(Reporting by Michael Nienaber; Editing by Kevin Liffey)

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Fiat Chrysler CEO says pursuing merger with GM a ‘high priority’

MONZA, Italy Fiat Chrysler Automobiles (FCA) (FCHA.MI) boss Sergio Marchionne said on Sunday that seeking a tie-up with General Motors (GM.N) was a “high priority” and such a deal would also be the best strategic option for its U.S. rival.

GM’s board rebuffed a merger proposal from the Italian-American carmaker earlier this year. That has not stopped Marchionne from wooing his bigger competitor as he seeks to reduce the number of players in the industry and share the prohibitive costs of building greener and more intelligent cars.

“That discussion remains a high priority for FCA,” he told journalists on the sidelines of the Formula One Italian Grand Prix in Monza, northern Italy.

He did not want to discuss the next steps FCA might take or their timing, but said a merger with GM would “be the best possible strategic alternative for us and for them. General Motors does remain the ideal partner for us and we represent a not easily replaceable alternative for them.”

Marchionne declined to comment on whether FCA would pursue a hostile bid for GM.

“I have zero comment on that issue. I’m not a good forecaster of the future when it comes to that,” he said.

He added he had not gone out to speak to any GM shareholders about the issue, but may have spoken to some of them by accident because of the companies’ overlapping investor base.

Marchionne said he had had a brief chat about his GM ambitions with Italian Prime Minister Matteo Renzi, but added that while Renzi “may have his personal preferences, he’s never expressed it”.

Addressing concerns that such a merger could mean job cuts, he said: “The implication of any tie up of that caliber would be absolutely zero on the manufacturing infrastructure of the two companies.”

GM has repeatedly said it prefers to go it alone. The U.S. automaker said last week that remained the best strategy to create value for its shareholders, even after an in-depth review of a possible merger with FCA.

(Reporting by Agnieszka Flak, editing by Isla Binnie and Robin Pomeroy)

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German publisher Axel Springer to exit Russia: RBC news agency

MOSCOW/FRANKFURT German publisher Axel Springer is withdrawing from its Russian business, Russian news agency RBC reported at the weekend, citing two media sources and a government source.

A deal to sell an 80 percent stake to Russian publisher Alexander Fedotov, owner of Artcom Media, is in its final stages, with the unit’s CEO Regina von Flemming taking the remaining 20 percent, RBC said.

An Axel Springer spokeswoman declined to comment and an Artcom Media representative was not available for immediate comment on Sunday.

The Springer subsidiary publishes the Russian editions of Forbes and OK! magazines, among others.

Springer’s Chief Executive Mathias Doepfner said in November that the Russian unit was not significant and the company was reviewing its strategy in view of new media laws in the country.

(Reporting by Polina Devitt and Jonathan Gould; Editing by David Goodman)

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Brazil needs temporary tax hike, Rousseff’s chief of staff says

BRASILIA Brazil needs a temporary tax increase to reduce a budget deficit that threatens the country’s debt rating, the presidential chief of staff said in an interview published on Sunday.

Aloizio Mercadante did not say which taxes would need to be raised, but told Folha de S. Paulo that a tax increase could help speed up an economic recovery in the longer term.

“We need to raise taxes temporarily so we can, for example, open room for interest rates to drop faster,” Mercadante said in the interview conducted on Thursday.

A tax hike would help the government avoid the 30.5 billion reais ($7.9 billion) deficit penciled in next year’s budget bill. Other measures should include passing bills to reduce earmarked expenditures and simplify sales taxes, Mercadante said.

The government has been discussing alternative sources of revenue to avoid a budget deficit next year, President Dilma Rousseff said in a radio interview broadcast on Friday.

Failure to run a budget surplus could convince ratings agencies to strip Brazil of its investment-grade rating, worsening the political and economic crisis. Brazil is headed to its worst recession in 25 years this year, with economic growth expected to return only in 2017.

Mercadante, a senior member of the Workers’ Party and within Rousseff’s inner circle, is under investigation for allegedly receiving illegal campaign donations linked to a corruption scandal at state-run oil company Petrobras (PETR4.SA).

(Reporting by Silvio Cascione; Editing by Robin Pomeroy)

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