World Economic News

Japanese Ten-Year Bond Rises as Concerns Mount

The yield on the Japanese ten-year bond rose to its highest point in 18 months, following a statement by Chief Cabinet Secretary Shinzo Abe that government borrowing costs are rising too rapidly. Speaking at a press conference April 20, Abe said that the yields, reaching 25%, marked the highest point since Aug. 26, 1999. Finance Minister Tanigaki and Vice Minister Koichi Hosokawa both expressed concern about the rise. A sustained increase would lift the government's interest payments on public debt, already expected to be 151 percent of the economy by March 2007, the biggest in the industrialized world.

More from IMF: Markets To Decide Who Works, Who Survives

In the April 19 press conference releasing its World Economic Outlook report, the Director of the IMF's Research Department, Raghuram Rajan, insisted that globalization requires fascist labor policies everywhere.

Worldwide, Rajan insisted, "some companies should be allowed to go out of business. The financial sector should be able to do that, and reallocate resources elsewhere. Similarly, labor markets: you should be able to move people from one area to another. So, this globalized competitive economy needs flexibility and it is across the board.... If you have unrealistic wage protections ... the consequences can be very detrimental.... Do not protect the company; do not protect the job." Just protect "the individual," he threw in as a sop.

Under the catchword of "labor flexibilization," Rajan proclaimed that "more insecurity in the workplace may well be the price that has to be paid to obtain more security for the European way of life." More reforms are needed in Germany, to create "an easier sort of ability for firms to adjust their size.... You cannot hire people for life nowadays.... Similarly, ... you cannot have an across-the-board wage bargain, because different firms are in different competitive positions."

Italy, said Rajan, will not leave the euro, but it needs to go on a "war footing" to bring about structural reforms. Pressed, he did allow that "tremendous resistance" against such policies in France suggested more work is needed on how to bring about that "flexibility."

Globalized Agriculture/Disease: New Mad Cow Case in Canada

A new case of "mad cow" disease (bovine spongiform encephalopathy, BSE) has appeared in Canada, the fifth since 2003; and there is a scare in Japan of the youngest BSE case ever, the Calgary Sun reported April 18. Implications? Free trade's axiom of "borderless" farming is dangerous to man and beast. Since BSE's first outbreak in the 1980s in Margaret Thatcher's Britain, it has spread worldwide along export routes of animal-feed and livestock. Therefore, prudent sanitation measures today (even though much remains to be known about the nature of BSE) call for thorough surveillance, a total ban on recycling waste animal parts back into the feed chain, and minimizing unchecked, borderless free-trade. However, these principles are at odds with cartelized farm/food practices. The latest concerns:

* A six-year-old dairy cow with BSE in British Columbia got the disease after the feed ban was imposed. Canadian authorities, who confirmed the new case on April 16, are checking on the source of feed used on the cow's birth farm and since. New, tighter feed regulations are now said to be under consideration. The U.S. Agriculture Department has dispatched an official to British Columbia, to work on the investigation. Cartelized meat and feed operations—led by Tysons, Cargill, Smithfield—have positioned their operations cross-border, and insist that there be no changes.

* A 20-month-old dairy cow in Japan was found negative for BSE, according to the Japanese Agriculture Ministry, April 18, but not before there was a big scare that the young animal was stricken. Vice Agriculture Minister Mamoru Ishihara indicated April 17 that beef imports from the U.S.—which are to be from cows 20 months or younger—would be reconsidered if the disease is manifest in young animals. The conventional thinking is that cows this age should not "have"—that is, manifest—the disease.

China and India Plan Large Increase in Oil Refining Capacity

Petrochina's Vice President Duan Wende told reporters that China plans to spend $22.5 billion in the oil refining and petrochemical sector in the next five years, according to Bloomberg April 21. During this period, China plans to commission five 10-million-ton oil refining bases; two aromatic hydrocarbon production bases, four chemical fertilizer plants, and six large ethylene production facilities. China plans to increase its oil refining capacity by over 45 million tons to reach 170 million tons capacity by the year 2010.

Simultaneously, two Indian private-sector companies, Reliance Petroleum Limited and the Gulf Oil Corp., have decided to set up refineries in India for both crude and base oil. Gulf Oil plans to set up a 12-million-ton-a-year refinery at the estimated cost of $1.8-2.5 billion, and a 300,000-ton-a-year base-oil refinery at the cost of about $250,000.