News Archive

Sears posts quarterly profit on Craftsman sale, cost cuts

Sears Holdings Corp (SHLD.O) reported its first quarterly profit in nearly two years, as the retailer benefited from the sale of its Craftsman brand and a program to cut $1.25 billion in costs, amid doubts about its ability to continue as a going concern.

The company’s shares were up 17 percent at $8.74 in early trading on Thursday.

However, sales continued the years-long decline, hurt by lower demand for groceries, apparel and home appliances at the retailer’s Sears and Kmart stores.

Sears, once the largest U.S. retailer, has been struggling to adjust to the changing retail landscape and rising competition from Wal-Mart Stores Inc (WMT.N), Target Corp (TGT.N) and Inc (AMZN.O).

Sales at Sears’ U.S. stores open more than a year fell 12.4 percent, while at Kmart it declined 11.2 percent in the first quarter ended April 29.

The company said in April it expected a net profit of between $185 million and $285 million for the first quarter, through a cost-cutting plan, which included store closures and cutting management jobs.

Selling and general expenses decreased about 16 percent to $1.27 billion in the quarter, leading to a near-third drop in total costs to $4 billion.

Sears said it cut up to $700 million in costs to date since announcing the plan in February.

The company in March sold its Craftsman tools brand to Stanley Black Decker Inc (SWK.N) for an upfront payment of $525 million.

Net income attributable to Sears’ shareholders was $244 million, or $2.28 per share, compared with a loss of $471 million, or $4.41 per share, a year earlier.

Excluding such one-time items, the company reported a net loss of $2.15 per share.

Revenue fell 20.3 percent to $4.30 billion.

Sears, which has been closing stores and divesting businesses for years to cope with falling sales and a growing debt pile, warned in March about its ability to continue as a going concern.

Up to Wednesday’s close, the stock had fallen 18 percent since the retailer raised going concern doubts.

(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Savio D’Souza, Arun Koyyur and Sriraj Kalluvila)

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Lack of new launches leaves Ford playing catchup with GM

DETROIT James Hackett spent the last year plotting Ford Motor Co’s long-term self-driving car strategy. In his first week as chief executive, he has more immediate concerns: stopping a skid in North American sales and fending off a market share grab by resurgent archrival General Motors Co.

The U.S. No. 2 automaker is stuck in a product drought that shows no signs of easing until 2019, according to two sources who track Detroit’s launch plans. Given the auto industry’s long product cycles, it is not clear what Hackett can do immediately to get Ford out of its predicament, which can be traced back to decisions by former CEOs.

Hackett was tapped to run the company’s autonomous car and ride-sharing unit a year ago. On Monday he unexpectedly found himself at the helm of the whole company as Ford axed CEO Mark Fields.

He now has to face up to a void of new vehicles, partly caused by former CEO Alan Mulally, who focused much of the company’s resources on an expensive 2014 redesign of Ford’s crown jewel, the F-Series pickup.

That safeguarded America’s longtime best-selling vehicle, but it prevented Ford from developing other hits. Given that it typically takes three to four years for a new or redesigned vehicle to get into production, the full effect of Mulally’s narrow focus is now being felt.

Mulally also gambled heavily on making an expensive shift to aluminum from steel to lighten up trucks and make them more fuel efficient, a bet that looks questionable in retrospect, as gas prices have remained far lower than anyone expected.

If Fields had immediately started pulling forward product launches when he took over from Mulally in July 2014, the first of those would likely reach the market in the autumn of 2018 at the earliest. As it is, Ford must wait until early 2019 for its first big slug of new models to hit showrooms.

There is not much Hackett can do about that. Any product moves he makes today would not likely show up in the market before 2021.

“Ford needs to move faster,” said RBC auto analyst Joseph Spak.

Hackett, only three days into his new job, has not yet laid out his plans for Ford publicly.

Ford spokesman Michael Levine side-stepped questions of a short-term product drought. “We’re bullish on our strong pipeline of all-new cars, trucks and SUVs coming in the next five years,” he told Reuters. “What’s more, the vehicles that we are launching … will continue to deliver high transaction prices and good business.”

For a graphic on Ford and GM spending, click here


For much of the past decade, Ford has benefited from management and marketing problems at GM, including GM’s 2009 bankruptcy and a safety scandal that hobbled the company in 2014.

Now, however, Ford confronts a crosstown rival largely free of debt and focused on grabbing market share from Ford, particularly in the truck and SUV segments which account for most of both companies’ profits.

GM, the No. 1 U.S. automaker, is in the midst of a prolific four-year patch of new vehicle launches, many approved by Mary Barra, the company’s former head of global product development who was named CEO in January 2014.

In hindsight, GM benefited from its bankruptcy, as it emerged essentially debt-free and able to spend more on new products. Ford did not seek bankruptcy during last decade’s auto industry crisis, and instead borrowed heavily to survive it, leaving it short on cash to invest in new vehicles.

That result of that disparity is now becoming evident. A Reuters analysis shows that over the past two years GM has surpassed Ford in pretax profit per vehicle in North America. In 2016, Ford made $2,981 (2,296 pounds) per vehicle, calculated by dividing pretax earnings by the number of vehicles sold, compared with $3,044 for GM. And GM plans to solidify that lead by rolling out a volley of new models aimed at the heart of Ford’s lineup.

GM has invested billions of dollars over the past three years to overhaul many of its best-selling truck and SUV models, including the full-size Chevrolet Suburban and Cadillac Escalade SUVs that dominate their sector and typically boast pretax margins of $20,000 or more.

GM also has boosted its share of the U.S. truck market with the 2014 launch of the mid-size Chevrolet Colorado and GMC Canyon pickups. Ford’s rival to the Colorado – an all-new Ranger pickup – is not expected to debut until early 2019.

Over the past five years, both companies have spent roughly the same – about 8 percent to 10 percent of revenue – on capital equipment, engineering, and research and development, Reuters analysis shows. But GM has brought far more new and redesigned vehicles to market in the United States in the past three years.

“GM seems to be getting more for its money and realizing the results sooner,” said Joe Langley, an analyst with IHS Markit.

To see a comparison of Ford and GM’s expected new and redesigned vehicles over the next four years, click on


Earlier this month, Ford’s U.S. sales and marketing chief Mark LaNeve acknowledged the company had missed an opportunity by “not participating in” the mid-size truck and compact crossover segments where GM is well positioned.

Ford also has lagged in redesigning its eight-year-old Expedition and Navigator SUVs, which go up against GM’s Suburban and Escalade, and finally will be overhauled this fall.

One of the biggest challenges for Ford will come next year, when its market-leading F-150 truck will be challenged by GM’s redesigned Chevrolet Silverado and GMC Sierra pickups.

A year after that, GM is expected to launch new heavy-duty editions of the Silverado and Sierra to challenge Ford’s F-Series Super Duty, which is one of the industry’s most profitable vehicles.

Altogether, GM plans five launches in 2018 and eight in 2019, according to industry sources familiar with the company’s plans. In comparison, Ford expects to unveil only two redesigned vehicles in 2018 and will only reach some kind of parity with six launches in 2019.

(Reporting by Paul Lienert; Editing by Joe White and Bill Rigby)

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BlackRock CEO Larry Fink says global growth accelerating

BlackRock Inc (BLK.N) Chief Executive Officer Larry Fink said global growth was accelerating and that corporate earnings were keeping pace with higher stock prices.

“Stay in equities,” he said on Thursday in response to a question at the asset manager’s annual shareholders meeting. “They’re going to be a good place for awhile.”

The remarks are a break in tone for Fink from more dour statements on the U.S. stock market’s prospects in recent months.

Fink also said he expected wage growth to continue, following conversations with corporate executives who say they struggle to find the right workers.

(Reporting by Trevor Hunnicutt; Editing by Lisa Von Ahn)

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OPEC extends oil output cut by nine months to fight glut

VIENNA OPEC decided on Thursday to extend cuts in oil output by nine months to March 2018, OPEC delegates said, as the producer group battles a global glut of crude after seeing prices halve and revenues drop sharply in the past three years.

The cuts are likely to be shared again by a dozen non-members led by top oil producer Russia, which reduced output in tandem with the Organization of the Petroleum Exporting Countries from January.

OPEC’s cuts have helped to push oil back above $50 a barrel this year, giving a fiscal boost to producers, many of which rely heavily on energy revenues and have had to burn through foreign-currency reserves to plug holes in their budgets.

Oil’s earlier price decline, which started in 2014, forced Russia and Saudi Arabia to tighten their belts and led to unrest in some producing countries including Venezuela and Nigeria.

The price rise this year has spurred growth in the U.S. shale industry, which is not participating in the output deal, thus slowing the market’s rebalancing with global crude stocks still near record highs.

By 1150 GMT (7:50 a.m. ET), Brent crude had fallen 1.3 percent to around $53 per barrel as market bulls were disappointed OPEC would not deepen the cuts or extend them by as long as 12 months. [O/R]

OPEC oil ministers were continuing their discussions in Vienna after three hours of talks. Non-OPEC producers were scheduled to meet OPEC later in the day.

In December, OPEC agreed its first production cuts in a decade and the first joint cuts with non-OPEC, led by Russia, in 15 years. The two sides decided to remove about 1.8 million barrels per day from the market in the first half of 2017, equal to 2 percent of global production.

Despite the output cut, OPEC kept exports fairly stable in the first half of 2017 as its members sold oil from stocks.

The move kept global oil stockpiles near record highs, forcing OPEC first to suggest extending cuts by six months, but later proposing to prolong them by nine months and Russia offering an unusually long duration of 12 months.

“There have been suggestions (of deeper cuts), many member countries have indicated flexibility but … that won’t be necessary,” Saudi Energy Minister Khalid al-Falih said before the meeting.


He added that OPEC members Nigeria and Libya would still be excluded from cuts as their output remained curbed by unrest.

Falih also said Saudi oil exports were set to decline steeply from June, thus helping to speed up market rebalancing.

OPEC sources have said the Thursday meeting will highlight a need for long-term cooperation with non-OPEC producers.

The group could also send a message to the market that it will seek to curtail its oil exports.

“Russia has an upcoming election and Saudis have the Aramco share listing next year so they will indeed do whatever it takes to support oil prices,” said Gary Ross, head of global oil at PIRA Energy, a unit of SP Global Platts.

OPEC has a self-imposed goal of bringing stocks down from a record high of 3 billion barrels to their five-year average of 2.7 billion.

“We have seen a substantial drawdown in inventories that will be accelerated,” Falih said. “Then, the fourth quarter will get us to where we want.”

OPEC also faces the dilemma of not pushing oil prices too high because doing so would further spur shale production in the United States, the world’s top oil consumer, which now rivals Saudi Arabia and Russia as the world’s biggest producer.

“A nine-month extension is insufficient at shale’s current trajectory. The strategic challenge of shale is still to be addressed,” said Jamie Webster, director for oil at Boston Consulting Group.

(Additional reporting by Ahmad Ghaddar, Vladimir Soldatkin and Shadia Nasralla; Writing by Dmitry Zhdannikov; Editing by Dale Hudson)

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Jobless claims edge up; goods trade deficit widens

WASHINGTON The number of Americans filing for unemployment benefits rose less than expected last week and the four-week moving average of claims fell to a 44-year low, suggesting further tightening in the labor market.

Initial claims for state unemployment benefits increased 1,000 to a seasonally adjusted 234,000 for the week ended May 20, the Labor Department said on Thursday. The increase followed three straight weeks of declines.

Data for the prior week was revised to show 1,000 more applications received than previously reported. Economists polled by Reuters had forecast first-time applications for jobless benefits rising to 238,000 in the latest week.

It was the 116th straight week that claims were below 300,000, a threshold associated with a healthy labor market.

That is the longest such stretch since 1970, when the labor market was smaller. The labor market is near full employment, with the jobless rate at a 10-year low of 4.4 percent.

A Labor Department official said there were no special factors influencing last week’s data and that only claims for Louisiana and North Dakota had been estimated.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 5,750 to 235,250 last week, the lowest level since April 1973.

Prices of U.S. Treasuries were largely unchanged after the data. U.S. stock index futures were trading higher while the dollar .DXY was weaker against a basket of currencies.


Labor market strength supports the view that an abrupt slowdown in economic growth in the first quarter was probably temporary, which could encourage the Federal Reserve to raise interest rates next month.

Minutes of the Fed’s May 2-3 policy meeting, which were published on Wednesday, showed that while policymakers agreed they should hold off hiking rates until they see evidence the growth slowdown was transitory, “most participants” believed “it would soon be appropriate” to increase borrowing costs.

Gross domestic product increased at a 0.7 percent annualized rate in the first quarter, the weakest performance in three years. Data on the labor market, retail sales and industrial production suggest the economy regained momentum at the start of the second quarter.

But expectations of a sharp rebound in GDP growth were tempered somewhat after the Commerce Department reported on Thursday that the goods trade deficit rose 3.8 percent to $67.6 billion in April. At the same time, both wholesale and retail inventories fell 0.3 percent last month.

Trade made no contribution to GDP growth in the first quarter while inventory investment subtracted 0.93 percentage point from output. The Atlanta Fed is currently forecasting GDP rising at a 4.1 percent rate in the second quarter.

Thursday’s claims report also showed the number of people still receiving benefits after an initial week of aid rose 24,000 to 1.92 million in the week ended May 13. Despite the increase, the so-called continuing claims have remained below 2 million for six straight weeks.

The four-week moving average of continuing claims dropped 16,000 to 1.93 million, the lowest level since January 1974. The continuing claims data covered the period of the household survey, from which May’s unemployment rate will be derived.

The four-week average of continuing claims decreased 76,750 between the April and May survey weeks, suggesting further improvement in the unemployment rate. The jobless rate has dropped by four-tenths of a percentage point this year.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

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Some Uber and Lyft riders are giving up their own cars: Reuters/Ipsos poll

SAN FRANCISCO Wally Nowinski got his first car when he turned 16 in Michigan, the home of the U.S. auto industry. But after two years of living in New York City, he sold his wheels, using ride services, carsharing and bike sharing to get around.

“My mom didn’t think I could do it. She thought I would buy a new car in six months,” he said. But that was more than a year ago, and his car budget of $820 per month fell to $250 for carsharing and ride services last year. “I take Uber like pretty frivolously,” he said.

Nowinski, 32, is not alone.

Nearly a quarter of American adults sold or traded in a vehicle in the last 12 months, according to a Reuters/Ipsos opinion poll published on Thursday, with most getting another car. But 9 percent of that group turned to ride services like Lyft Inc and Uber Technologies Inc [UBER.UL] as their main way to get around.

About the same percentages said they planned to dispose of cars and turn to ride services in the upcoming 12 months.

Though a small percentage, the figure of people switching to ride services could be early evidence that more consumers believe that ride sharing can replace vehicle ownership.

Automakers could see a new market in ride services drivers and believe the fast adoption of ride service technology bodes well for self-driving car technology, a big area of investment for many companies, said auto analyst Alan Baum.

It is not clear whether ride service drivers, who rack up vehicle miles and are likely to buy new cars relatively frequently, will make up for any long term drop in personal car ownership.

But Lyft Director of Transportation Policy Emily Castor called the survey ‘early evidence’ that its vision of a world where personal car ownership was unnecessary was beginning to take hold.

“What we’ve seen anecdotally aligns with what you’ve found,” said Uber Head of Transportation Policy and Research Andrew Salzberg.

The survey was the first on the subject by Reuters/Ipsos, so it was not possible to tell whether the move to ride services from car ownership is accelerating, and respondents were not asked whether they gave up a car because of ride services.

The survey showed that 39 percent of Americans had used rides services and that 27 percent of that group did so at least several times per week.

University of California, Berkeley researcher Susan Shaheen said the results on the move to ride services was in line with her 2016 study of a one-way carsharing service, which found a small portion of customers sold a vehicle due to carsharing. She noted, however, that the Reuters/Ipsos survey did not address carsharing or whether people who did not own cars would avoid buying one because of ride services.

Transportation consultant Bruce Schaller said that most of the move to ride sharing probably was explained by factors such as moving in and out of cities and employment changes. Still, he said, “It’s not the predominant trend, but there are a significant number of people who have changed their lifestyle, if you will, and are now relying much more on ride services than their own car.” That was especially true of people who used many sharing services, such as ride share, car share and bike share.

Auto companies say they are getting ready for changes in technology, including expanded demand for ride services and, eventually, self-driving vehicles. “Those are the factors that are driving our move into being both an auto and a mobility company,” said Ford spokesman Alan Hall.

The Reuters/Ipsos U.S. poll was conducted online in English April 5-11. It gathered responses from 584 people who said they disposed of their personal vehicle within the last 12 months and 566 people who said they planned to get rid of their personal vehicles in the next 12 months.

The poll has a credibility interval, a measure of accuracy, of 5 percentage points for the people who recently got rid of their vehicle or planned to do so in the future.

For a graphic on ditching personal cars for ride sharing, click here

(Reporting By Peter Henderson; Editing by Bernard Orr)

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Moody’s China downgrade ‘illogical’, overstates debt: People’s Daily

SHANGHAI The decision by Moody’s Investors Service to downgrade China’s credit rating is “illogical” and overstates the levels of government debt, a commerce ministry researcher said in an editorial in the official People’s Daily newspaper on Thursday.

Mei Xinyu, a researcher at China’s Ministry of Commerce, wrote in a front page editorial of the paper’s overseas edition the downgrade, Moody’s first for China since 1989, overstated China’s reliance on stimulus and the country’s debt levels.

Moody’s downgraded China’s credit ratings on Wednesday for the first time in nearly 30 years, saying it expects the financial strength of the economy will erode in coming years as growth slows and debt continues to rise.

China’s Finance Ministry said on Wednesday the downgrade overestimated the risks to the economy and was based on “inappropriate methodology”. China’s state planner said debt risks were generally controllable.

Mei said China’s economic performance this year had exceeded market expectations and criticized Moody’s for including debt at state-owned enterprises (SOEs) and local government financing vehicles as indirect government liabilities.

“It is clear to see that the logic behind Moody’s assertions goes against the objective facts,” he wrote.

Moody’s one-notch downgrade in long-term local and foreign currency issuer ratings, to A1 from Aa3, comes as the Chinese government grapples with the challenges of rising financial risks stemming from years of credit-fueled stimulus.

Chinese leaders have identified the containment of financial risks as a top priority this year, but are moving cautiously to avoid choking economic growth. The authorities have gingerly raised short-term interest rates while tightening regulatory oversight.

Mei added that the China downgrade amounted to a “double standard” compared with how countries in Europe and the United States were treated. However, the decision would not have a major impact on the Chinese economy, he said.

The downgrade is likely to modestly increase the cost of borrowing for China’s government and SOEs, but it remains comfortably within the investment grade rating range.

(Reporting by Adam Jourdan and Samuel Shen; Editing by Jacqueline Wong)

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Oil prices rise in anticipation of extended OPEC-led production cut

SINGAPORE Oil prices rose ahead of an OPEC meeting on Thursday that is expected to extend a production cut aimed at tightening the market well into 2018, adding at least nine months to an initial six-month cut in the first half of this year.

Brent crude futures LCOc1 were trading at $54.40 per barrel at 0118 GMT, up 44 cents, or 0.82 percent from their last close.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $51.76, up 40 cents, or 0.78 percent.

Both benchmarks have risen more than 16 percent from their May lows.

Prices have risen on a consensus that a pledge by the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, to cut supplies by 1.8 million barrels per day (bpd) would be extended into 2018, instead of just covering the first half of this year.

The production cut, introduced in January, was initially only to cover the first half of 2017, but an ongoing glut has meant that OPEC and its allies who are meeting in Vienna on Thursday are expected to extend the cut by nine or potentially even 12 months.

“A strong consensus has developed that producer supply cuts will be extended. The only question is the choice of the duration,” French bank BNP Paribas said.

“This (extension) has been highly factored into the price of oil, and at this stage it is unlikely that we will see a deepening in the level of production cuts, with OPEC officials preferring to wait and see the impact of an extension in helping rebalance the market prior to taking any more drastic actions,” said James Woods, analyst at Australia’s Rivkin Securities.

Energy consultancy Wood Mackenzie said “a nine-month extension would have little impact on our price forecast for 2017, which is for an annual average of $55 per barrel for Brent.”

Wood Mackenzie estimated that a nine-month extension would result in a 950,000 bpd production increase in the United States, undermining OPEC.

U.S. oil production C-OUT-T-EIA has already risen by more than 10 percent since mid-2016 to over 9.3 million bpd as its drillers take advantage of higher prices and the supply gap left by OPEC and its allies.

Should the meeting in Vienna result in a cut extension to cover all of 2018, Wood Mackenzie said the tighter market could push average 2018 Brent prices up to $63 per barrel.

Brent has averaged $53.90 per barrel so far this year.

Should the meeting in Vienna fail to agree an extended cut, traders expect oil prices to fall as this would result in ongoing oversupply.

(Reporting by Henning Gloystein; Editing by Joseph Radford and Sonali Paul)

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Asian shares firm, dollar and U.S. bond yields slip after Fed

TOKYO Asian shares eked out modest gains on Thursday while the dollar and U.S. bond yields slipped after the U.S. Federal Reserve signalled a cautious approach to future rate hikes and the reduction of its $4.5 trillion of bond holdings.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS advanced 0.3 percent, with South Korea leading with a 0.4 percent rise. .KS11.

Japan’s Nikkei .N225 dipped 0.1 percent though MSCI Japan rose 0.4 percent in dollar terms .MIJP00000PUS.

Minutes from the Fed’s last policy meeting showed policymakers agreed they should hold off on raising interest rates until it was clear a recent U.S. economic slowdown was temporary, though most said a hike was coming soon.

“Their views seem to have changed considerably. In the past, they had said the slowdown was transitory,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.

The minutes also showed that policymakers favored a gradual reduction in its massive balance sheet.

Fed staff proposed that the central bank set a cap on the amount of bonds that would be allowed to run off each month, initially setting it at a low level and raising it every three months.

Following the minutes, the 10-year U.S. Treasuries yield US10YT=RR fell to 2.252 percent from Wednesday’s high of 2.297 percent.

Fed funds rate futures are pricing in about a 75 percent chance that the Fed will raise rates next month, moving down from more than 80 percent earlier this week . FEDWATCH

The specter of a slower pace of policy tightening underpinned share prices, with the SP 500 .SPX closing at a record high.

In the currency market, the euro EUR= traded up 0.1 percent in Asia at $1.1225, having bounced back from Wednesday’s low of $1.1168 and coming within sight of $1.1268, its 6 1/2-month high set on Tuesday.

The dollar stood at 111.59 yen JPY=, slipping from one-week highs of 112.13 touched on Wednesday.

Those moves have pulled the dollar’s index against a basket of six major currencies .DXY =USD down to 97.015, near Monday’s 6-1/2-month low of 96.797.

The Canadian dollar strengthened to a five-week high of C$1.3405 per U.S. dollar CAD=D4 after the Bank of Canada was more upbeat about the economy than some investors had expected.

Oil prices stayed near five-week highs as investors expect oil producing countries to extend output cuts at their meeting in Vienna later in the day.

Benchmark Brent crude oil LCOc1 rose 20 cents a barrel, or 0.4 percent, to $54.16. U.S. light crude CLc1 was up 20 cents, or 0.4 percent, at $51.56.

Both benchmarks have gained more than 10 percent from their May lows below $50 a barrel, rebounding on a consensus that OPEC and other producers will maintain strict limits on production in an attempt to drain persistent global oversupply.

Elsewhere, digital currency bitcoin BTC=BTSP hit a fresh record high, having surged 170 percent in about two months from its March low.

Demand for crypto-assets soared with the creation of new tokens to raise funding for start-ups using blockchain technology.

(Reporting by Hideyuki Sano; Editing by Shri Navaratnam)

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