TOKYO – Japan’s top currency diplomat Masato Kanda said a weak yen brings both merits and demerits to the economy due to the country’s changing export patterns and increasing reliance on imports.

The boost a weak yen gives to Japan’s export volumes has declined compared with the past, as manufacturers target shipments to high-end, state-of-the-art products overseas rather than compete with price cuts, said Kanda, the country’s vice finance minister for international affairs.

A weak yen, however, still inflates the yen-denominated profits Japanese companies earn overseas, he said.

“The demerits of a weak yen is that it pushes up the import cost of energy and food, thereby increasing household burdens,” he said, acknowledging growing domestic concerns about the potential side-effects of a weak currency.

Kanda’s remarks underscore how a weak yen is becoming a tricky political issue for Japan’s finance ministry, which has historically focused on preventing a strong currency from hurting the country’s export sector.

“There are both positive and negative effects (on the economy) from a weak yen. It’s hard to say which is bigger, because the pros and cons of a weak yen differ for each entity,” Kanda told Reuters in an interview conducted on Monday.

Imports play an increasingly important role in Japan’s economy, making up 16% of gross domestic product (GDP) now, compared with just 9% two decades ago, he said.

“We need to guide policy based on the understanding that the mechanism in which exchange-rate moves affect the economy has changed,” he said.

But Kanda stressed that global energy and commodity inflation, rather than the weak yen, was mostly to blame for pushing up the cost of living for households.

“At least for now, the rise in imported goods prices is due largely to rising energy costs and global inflation,” he said. – Reuters

WASHINGTON – The Pentagon said on Monday it is in active discussions with Eastern European allies about possible U.S. troop deployments to NATO’s eastern flank, as Washington moves to reassure jittery NATO allies in the face of a Russian military buildup near Ukraine.

Any decisions on new troop movements would be separate from the some 8,500 forces in the United States who were put on alert last week to potentially bolster a NATO rapid response force, the Pentagon said, adding context to President Joe Biden’s comments on Friday about potential near-term deployments to Eastern Europe.

Pentagon spokesman John Kirby said the troops that Biden was referring on Friday to could potentially be redeployed from within Europe.

“We’re going through the rigorous work of providing options for the commander in chief should he decide to do that … in close consultation with the actual allies themselves,” Kirby said.

Separately, the U.S. military last week put about 8,500 troops inside the United States on alert to be ready to deploy to Europe, largely to fill the ranks of a NATO rapid response force should the alliance call them up for duty.

Russia denies planning an invasion. But, having engineered the ongoing crisis by surrounding Ukraine with forces from the north, east and south, Moscow is now citing the Western response as evidence to support its narrative that Russia is the target, not the instigator, of aggression.

Russia, which seized Crimea from Ukraine in 2014 and backs pro-Russian rebels fighting government forces in eastern Ukraine, is demanding sweeping security guarantees including a promise NATO never admit Ukraine.

Russian Foreign Minister Sergei Lavrov is expected to speak by phone with U.S. Secretary of State Antony Blinken on Tuesday, a State Department spokesperson said.

Biden stressed diplomatic efforts aimed at averting a conflict.

“We continue to engage in nonstop diplomacy and to de-escalate tensions,” Biden told reporters in the Oval Office. – Reuters

LIMA – Peru Environment Minister Ruben Ramirez said on Monday the government will temporarily suspend Repsol‘s offshore oil unloading operations following a spill of over 10,000 barrels that has caused widespread environmental damage.

Ramirez said the suspension of operations would last until the company “can offer technical guarantees that another spill will not happen.”

“In addition, (the company) has not shown clear cleaning actions.”

Repsol said in a statement it considered the decision to be “disproportionate and unreasonable” and the company would “make every effort to avoid the risk of shortages of essential products.”

Repsol‘s La Pampilla refinery is the largest in Peru, and the company said it accounts for 40% of the Peruvian fuel market.

Outgoing Peruvian Prime Minister Mirtha Vasquez, who resigned from her role on Monday, said the administration had been working on an international lawsuit against Repsol over the “gravity of the environmental disaster.”

“I hope this continues,” she said on Twitter.

Repsol has said 35% of the oil spilled has already been recovered but it will not finish cleanup tasks until late February.

The spill took place on the Pacific Ocean just off the coast of Lima on Jan. 15, which the company has blamed on unusual waves triggered by a volcanic eruption thousands of miles away in Tonga.

The Spanish company has faced widespread backlash for the spill and Peruvian President Pedro Castillo has called it the biggest ecological disaster to affect the country in recent years.

Prosecutors are weighing criminal charges against executives over the spill and successfully petitioned a judge to bar four of them, including the company president, from leaving Peru for the next 18 months.

Peru‘s government has said the spill involved 11,900 barrels of oil, while the company said the number was smaller, involving 10,396 barrels. – Reuters

NEW DELHI – India is likely to step up spending on infrastructure, health services and social programmes in its annual budget on Tuesday, to try to set the economy on a firmer footing as it fights a spike in COVID-19 cases and rising inflationary pressure.

Finance minister Nirmala Sitharaman is expected to announce more spending on roads, railways, besides higher subsidies for affordable housing amid growing public criticism over inadequate relief following the economic disruption after the outbreak of pandemic in 2020.

A government report on Tuesday warned that growing risks of global inflation led by rising crude oil prices could hit the economy, while projecting growth of 8% to 8.5% next fiscal year compared to 9.2% in current fiscal year and 6.6% contraction in the previous year.

The budget comes days before the start of elections in five states, including the most populous, Uttar Pradesh, which could spur Sitharaman to promise higher rural spending and subsidies on food and fertiliser, economists and officials said.

“The fiscal position appears much healthier than expected ahead of the (budget) announcement,” said Shilan Shah, economist at Capital Economics, Singapore in a note.

The strong revival in revenue receipts, which rose 67% during April-November period from a year earlier implied that the government has a “fiscal space to provide additional support if necessary”, Sanjeev Sanyal, principal economic adviser at the finance ministry told reporters on Monday.

Policymakers are worried that private consumption, which makes up nearly 55% of GDP, is still below pre-pandemic levels amid rising levels of household debt, while retail prices have increased by nearly 10% since the coronavirus outbreak began in early 2020.

But the government looks unlikely to offer any major relief measures to struggling consumers, focusing instead on beefing up spending on transport and healthcare networks, which analysts estimate could rise between 12% and 25% in the next fiscal year.

“We will focus on reviving the economy through higher investments, while individual and corporate taxes will be kept steady,” one government official, who sought anonymity, told Reuters, adding that reviving growth would be a priority.

To attract investments that create jobs and spur growth, Sitharaman could also boost incentives tied to production in more industries, the official said.

Food processing and exports are two areas that could see more production-linked incentives, two senior government officials said, adding no major budget changes were likely on individual and corporate taxes, in view of rising government debt and subdued private investments. – Reuters

BOSTON – Thirteen U.S. states and two Latin America and Caribbean nations on Monday threw their support behind a lawsuit from Mexico that accuses several major U.S. gun makers of facilitating the trafficking of weapons to drug cartels, leading to thousands of deaths.

The states and the countries of Antigua and Barbuda and Belize filed separate briefs urging a federal judge in Boston to not dismiss Mexico’s $10 billion lawsuit against companies including Smith & Wesson and Sturm, Ruger & Co.

The companies have argued Mexico has failed to establish its harms were attributable to them and that a U.S. law, the Protection of Lawful Commerce in Arms Act, protected gun makers from lawsuits over their products’ misuse.

Mexico’s lawyers in a filing on Monday countered that the law only precludes lawsuits over injuries that occur in the United States and would not shield the companies from allegations over the trafficking of guns to Mexican criminals.

Democratic attorneys general from 13 states including Massachusetts, California and New York along with the District of Columbia agreed, saying even if that law applied extraterritorially, the statute would not bar Mexico’s claims.

Representatives for the companies did not respond to requests for comment. Other defendants include Beretta USA, Barrett Firearms Manufacturing, Colt’s Manufacturing Co and Glock Inc.

In a lawsuit filed in August, Mexico claimed the companies undermined its strict gun laws by designing, marketing and distributing military-style assault weapons in ways they knew would arm drug cartels, fueling murders, extortions and kidnappings.

Mexico’s lawsuit said over 500,000 guns are trafficked annually from the United States into Mexico, of which more than 68% are made by the manufacturers it sued.

Lawyers for Antigua and Barbuda and Belize argued countries in their region had likewise faced violent gun crimes and that U.S. gun manufacturers “must not be permitted to hold hostage the law-abiding citizens of an entire region of the world.” – Reuters