Central bankers say economic rebound closer

BASEL, Switzerland (AFP) – The global economy is nearing the start of a rebound, top central bankers said yesterday, as Asian stocks reeled from bad news in Japan and amid concern about the future of the world’s banks.Japan, Asia’s biggest economy, announced its first current account deficit for more than a decade and new data showed a surge in bankruptcies and welfare rolls, sending the Nikkei stock index down 1.21 percent to a 26-year low. But central bankers from the Group of 10 industrialised countries including Britain, France, Germany, Japan and the United States meeting at the Bank for International Settlements in Switzerland offered a more optimistic outlook.

“We have a number of elements that are suggesting that we are approaching the moment where you would have a pick up,” said European Central Bank head Jean-Claude Trichet, who is also the spokesman for the influential group. But investment guru Warren Buffett said recovery in the United States could take five years and compared the US recession with the devastation of the Pearl Harbor strike that brought the country into Second World War. “I’ve never seen Americans more fearful,” Buffett, one of the world’s richest men, said in a CNBC television interview. “It takes five minutes to become fearful, much more time to regain confidence.”

US and European stocks held relatively stable during the day, with Wall Street’s Dow Jones Industrial Average down 0.01 percent in morning trading and London’s FTSE 100 index rising 0.53 percent in the late afternoon. Stock prices plunged in Asia however with Hong Kong shedding 4.8 percent, Shanghai falling 3.39 percent and Singapore giving up 3.71 percent.

Renewed concern over prospects for a capital-raising operation by British banking giant HSBC and a report that Asian financial assets lost $9.6tn of their value last year further dampened sentiment.

Ratings agency Moody’s downgraded the outlook on HSBC’s shares to “negative” from “stable,” citing the impact of the credit crunch and its huge cash call. The finance sector was also under strain in Iceland, where the authorities shut down investment bank Strarumur Burdaras—the last of the big lenders left independent after the state seized control of three others in 2008.

The gloom was compounded by data from Japan, the world’s second biggest economy after the United States, showing a higher than expected deficit of some $1.8bn (€1.4bn) in its current account in January. The figure was “shocking,” Toshihiro Nagahama, a senior economist at Dai-ichi Life Research Institute, told Dow Jones Newswires.

“I’m afraid that Japan’s current account will likely be in the red ink for months ahead. Because we can’t expect that the US economy will hit a trough in the near term, Japan’s exports will very likely remain very weak,” he said.

Historically, Japan has run a large surplus in its current account thanks to brisk foreign demand. But the global crisis has seen US and European consumers tighten their purse-strings, forcing Japanese companies such as Toyota and Sony to cut output and slash jobs.

“The Japanese economy has continued to deteriorate rapidly and is in a severe state,” vice finance minister Kazuyuki Sugimoto said. “The deterioration is likely to continue for a while.”

There was further gloom in the corporate sector as a new survey showed that 1,318 companies went bankrupt in Japan in February, up 10 percent from a year earlier.