Japan's industrial output plunges

Japan's industrial production fell by 10% in January - the biggest monthly drop since records began more than half a century ago, the government says.

It is the fourth successive month that factory output has fallen, as the world's second-biggest economy suffers its worst recession in decades.

The latest figures come days after the government said exports plunged 45.7% in January compared with a year ago.

Japan's economy is suffering because of falling demand for its products abroad.

Consumers around the world afraid of losing their jobs in the global downturn no longer want to buy Japanese electronic gadgets and cars, the BBC's Roland Buerk in Tokyo says.

The country's car production plunged a record 41% year-on-year in January, according to the Japan Automobile Manufacturers' Association.

It said 576,539 vehicles were produced in January compared with 976,975 for the same month of 2008.

Painfully exposed

The Japanese themselves are also shopping less, with average household spending falling 5.9% in January compared with the same month a year ago, our correspondent says.

Jobs are also being slashed - the number of people unemployed rose by more than 200,000.

"The recession is having an increasing impact on the real economy," Finance Minister Kaoru Yosano said.

Japan was once seen as relatively immune to the global crisis because its banks were not as exposed to bad loans as those in the US and Europe, our correspondent says.

But he says that Japan's reliance on foreign markets to drive its economy out of a long slump in the 1990s has left it painfully exposed.

Oil prices slide in Asian trade

Oil prices slid in Asian trade on Friday as investor pessimism returned after the release of more weak US economic data, dealers said.

New York's main contract, light sweet crude for April delivery, fell 69 cents to USD 44.53 a barrel.


Brent North Sea crude for April delivery shed 45 cents to USD 46.06.


Oil prices fell due to "an over-reaction to gasoline stocks in the past few days... and fresh weak economic data out of the US that dented market sentiment," said Mark Pervan, senior commodities analyst for ANZ bank in Melbourne.


Pervan said the US Durable Goods report released late Thursday showed a plunge in orders of goods for the transportation sector, which dampened sentiment amongst oil traders.


US data also released on Thursday showed jobless claims surged to 667,000 in the past week, the highest jump in over 26 years.


Oil prices had surged in recent days in reaction to the rise in US gasoline stocks and indications of production cuts by the Organisation of the Petroleum Exporting Countries (OPEC).

Indian economy in sharp slowdown

India's economy grew by less than expected in the last three months of 2008, official figures have shown.

The country's gross domestic product (GDP) grew by 5.3%, compared with 7.6% in the previous three months and 8.9% in the same period a year earlier.

Agriculture, which makes up about a fifth of the economy was one of the sectors to see growth fall.

The global recession has cut demand for exports, and economists are calling for further measures to boost growth.

These have included a clamour for further interest rate cuts.

The data saw India's main stock exchange index, the Sensex fall by 2% on Friday.

Domestic demand

Observers say the data will come as a blow to the Congress-led government, which faces general elections by May.

It has predicted that the economy, which grew by 9% overall to March 2008, will expand by 7.1% in the 12 months to March this year.

However analysts say this will probably be revised down.

The sharp slowdown in both China and India, which have been among the world's fastest-growing economies, will have a significant impact on the world economy, with the major industrial countries already mired in recession.

India's economy is Asia's third-largest, and is largely driven by domestic demand. It has seen strong growth of 9% or more in the past three years.

But the slowdown has "dismissed speculation India is more resilient in this global turmoil because its economy is more domestically oriented," said Sherman Chan, an economist at Moody's Economy.com.

Meanwhile Rupa Rege Nitsure, chief economist at Bank of Baroda in Mumbai said the growth figure was "way below my pessimistic expectations".

"Whatever the government is doing is not going to be very effective as large scale demand stimulus across the world has not proved to be effective in restoring business confidence."

Obama unveils his $3.6tn budget

President Barack Obama has unveiled a $3.6tn (£2.5tn) budget for 2010, aiming to pull the US out of financial crisis.

He has predicted the budget deficit for the current year will be $1.75tn, which is 12.3% of annual output and the biggest since World War II.

Planned spending includes $634bn to pay for healthcare reform and an extra $250bn to be set aside, in case it is needed to bail out US banks.

Mr Obama hopes to save money by cutting subsidies and tax breaks.

These announcements are an overview. There will be more details in April.

The $3.6tn of planned spending is still well below the spending of $3.7tn, which is forecast for the year to the end of September 2008 and includes economic stimulus packages.

Eliminate waste

The president promised to roll back tax cuts for the very wealthy and businesses that move jobs overseas.

He added that instead, he would bring in tax cuts that would benefit 95% of hard-working families. "There are some hard choices that lie ahead," he said, adding that there were areas where the government would like to spend money in normal economic times, but would be unable to at the moment.

"Each and every one of us has to compromise on certain things we care about, but which we simply cannot afford right now," he said.

He predicted that some of his decisions would be unpopular with special interest lobbying groups in Washington.

Healthcare subsidies

He also promised that his budgets would be an honest accounting of the country's economic situation and include "the full cost of fighting in Iraq and Afghanistan".

He projected spending of $200bn to fight those two wars over the next 18 months.

There are expected to be savings from the winding-down of the war in Iraq, but increased spending as a result of sending more troops to Afghanistan.

The president said he would introduce a scheme to give a subsidy to recently-unemployed people to help them maintain their healthcare funding.

Providing easier access to healthcare was one of his key election promises.

He has promised to halve the budget deficit by the end of his term in 2013 and said one of the ways he would do so would be by cutting back on waste in government.

"We're going to go through our books page by page, line by line to eliminate waste and inefficiency," he said.

"This is a process that will take time, but in the last 30 days alone, we have already identified $2tn in deficit reductions that will help us cut our deficit in half by the end of my first term."

Eastern Europe banks get bail-out

The banking sectors in Central and Eastern Europe are to get a 24.5bn euro ($31bn; £21.8bn) rescue package to support them in the economic crisis.

The European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and the World Bank have pledged the investment.

The funds are particularly aimed at helping small firms survive.

Countries such as Latvia and Hungary have seen their economies particularly hit by the global economic slump.

The two-year joint initiative will include equity and debt financing, and access to credit and risk insurance aimed at encouraging lending, the three groups said in a joint statement.

This initiative is on top of national government responses and was designed to "deploy rapid, large-scale and coordinated financial assistance... to support lending to the real economy through private banking groups, in particular to small-and medium-sized enterprises."

'Diverse challenges'

The EBRD will provide up to 6bn euros for the financial sector, the EIB will put up 11bn euros of lending facilities, while the World Bank will provide about 7.5bn euros.

"The response takes into account the different macroeconomic circumstances in, and financial pressures on countries in Eastern Europe, acknowledging the diversity of challenges stemming from the global financial retrenchment," the groups added.

Founded in 1991, the EBRD aims to assist the transition of former communist nations to market economies - investing across 30 countries including Ukraine, Moldova and Russia.

"The institutions are working together to find practical, efficient and timely solutions to the crisis in eastern Europe," said EBRD President Thomas Mirow.

"We are acting because we have a special responsibility for the region and because it makes economic sense.

"For many years the growing integration of Europe has been a source of prosperity and mutual benefit, and we must not allow this process to be reversed."

Exposure outgrown?

Earlier this week, ratings agency Moody's said that faltering economic conditions in Eastern and Central Europe would hit the local subsidiaries of Western banks.

Austria, whose banks have large exposure to Eastern Europe, has seen the cost of insuring its debt rocket.

On Friday, the country's Erste Group Bank signed a long-expected deal to get up to 2.7bn euros of government support.

But the talks to secure the funding have been going on since October, with some analysts saying that the mounting problems in emerging Europe meaning Erste's exposure may already have outgrown the government injection.