Fed Is Likely to Sustain Its Stimulus Program

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WASHINGTON — The Federal Reserve is widely expected to announce on Wednesday that it will continue buying Treasury securities to stimulate growth in the new year.

The Fed’s public declaration in September that it would buy bonds until the outlook for the labor market “improved substantially” has cleared away much of the uncertainty and controversy that usually precedes such announcements.

The economic recovery remains lackluster and millions are looking for work. But while some analysts question the central bank’s ability to improve the situation, few doubt that the Fed, under its chairman,Ben S. Bernanke, is determined to keep trying.

Indeed, while Fed officials continue to warn that a failure to avert scheduled tax increases and spending cuts next year would overwhelm their efforts and plunge the economy back into recession, they have also said that even if Congress and the White House negotiate a compromise, the Fed’s efforts would continue.

“I am not prepared to say we are remotely close to substantial improvement on the employment front,” Dennis P. Lockhart, president of the Federal Reserve Bank of Atlanta,said in a recent speech. “I expect that continued aggressive use of balance sheet monetary tools will be appropriate and justified by economic conditions for some time, even if fiscal cliff issues are properly addressed.”

The remarks were particularly significant because Mr. Lockhart is among the moderate members of the Federal Open Market Committee whose support Mr. Bernanke invested months in winning before starting the new policy.

With the direction of policy clearly set, debate has turned to the details. The Fed, whose policy-making committee is meeting on Tuesday and Wednesday, still must determine what to buy and how much to spend, and officials continue to debate the best way to describe when the agency is likely to stop buying.

In making those decisions, the Fed must balance its conviction that buying bonds reduces borrowing costs for businesses and consumers against concerns the purchases might disrupt financial markets or inhibit its control of inflation.

Analysts say the immediate answer is likely to be more of the same. The Fed currently buys $40 billion of mortgage-backed securities and $45 billion of Treasury securities a month. Officials highlighted that $85 billion figure in September, and have indicated since that it remained their rough target.

“It would be odd for them to disappoint the expectations that they have created themselves,” Kris Dawsey of Goldman Sachs wrote in a note to clients predicting that the Fed would maintain both the dollar amount and the division. Other analysts have suggested the Fed might slightly decrease the total amount of purchases, to $80 billion, or increase the share of mortgage securities.http://www.nytimes.com/2012/12/10/business/economy/fed-likely-to-sustain-bond-buying-program-to-stimulate-growth.html

Japan Sinks Into Recession as Abe Calls for More Stimulus Steps

Japan’s economy sank into recession in the second and third quarters, fueling opposition leader Shinzo Abe’s calls for more stimulus and highlighting the risk that weak growth will derail a planned sales-tax rise.Gross domestic product shrank an annualized 3.5 percent in the three months through September, the Cabinet Office’s second estimate showed in Tokyo today, matching a preliminary reading. The government revised the previous quarter to a 0.1 percent contraction, matching the textbook definition of a recession.Abe, whose Liberal Democratic Party is leading in polls to win elections on Dec. 16, has called for more fiscal stimulus and “unlimited” monetary easing, and has said that economic conditions next year will determine whether the sales tax rise goes ahead. Barclays Plc and Citigroup Inc. forecast another contraction this quarter as exports fall and domestic demand stays weak.“It’s likely that Japan’s economy hit bottom in the last quarter,” said Shuichi Obata, senior economist at Nomura Securities in Tokyo. “The new government will aim to have solid growth by the middle of next year as they have to decide whether to raise the sales tax or not.”The yen was trading at 82.49 per dollar at 10:24 a.m. in Tokyo after touching 82.64, an eight-month low, earlier in the day. The Nikkei 225 Stock Average was 0.2 percent higher, heading for its highest close since April after U.S. and Chinese data showed signs of recovery in the world’s two biggest economies.

Economic Contraction

http://www.bloomberg.com/news/2012-12-10/japan-s-economy-contracts-more-than-forecast-in-third-quarter.html

Sony Loses Science Talent as Student Resumes Go to Dairies: Tech

Japan’s science students are eschewing traditional high-powered employers such as Sony Corp. (6758) and Panasonic Corp. (6752) to help make ice cream and yogurt.They are applying to dairies. That says quite a bit about the current state of Japan -- and, some say, its future.Enlarge imageA Toshiba Corp. tetrapod robot, developed to work in areas too dangerous for humans, walks along a catwalk at the company's Yokohama Complex in Yokohama City. Toshiba which makes products ranging from personal computers to nuclear reactors is the second most popular employer for Japanese science students entering the job market next year. Photographer: Akio Kon/BloombergSony, the Walkman inventor that once topped the rankings among the most-coveted jobs for graduating science majors, may drop further in popularity after it fell to fourth place from second in a survey this year of science students who’ll enter the job market in April, said Takuya Kurita, a researcher at Tokyo-based Mynavi Corp. Sony, trying to end four years oflosses, is hiring the fewest recruits in 23 years.“I’ve read about their huge losses in the newspaper,” Asuka Okamoto, a physics graduate student at Waseda University inTokyo, said of the electronics makers. “I’d rather work somewhere else if workers seem worried at those companies.”As Japan’s biggest companies kick off their annual campus recruitment drives this month, science students are increasingly favoring companies like Meiji Holdings Co. (2269), a Tokyo-based dairy maker. For the once-dominant electronics makers, a loss of market share to Samsung Electronics Co. (005930) and Apple Inc. also means they’re losing future engineers and scientists needed to come up with hit products that can revive their brands.“The gap between Japanese companies and Samsung, LG, and Chinese or Taiwanese competitors may only widen if the Japanese can’t hire excellent young talent,” said Yoshihisa Toyosaki, an analyst at Architect Grand Design, an electronics research and consulting company in Tokyo. “New products can only be born from new brains.”Food Makershttp://www.bloomberg.com/news/2012-12-09/sony-loses-science-talent-as-student-resumes-go-to-dairies-tech.html