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Council on Foreign Relations Daily News Brief
April 5, 2013

Top of the Agenda

Top of the Agenda: Abenomics Sets Markets Soaring

Japanese stocks rallied to new multiyear highs on Friday after the Bank of Japan announced a dramatic new monetary stimulus (WSJ) that would expand the central bank's purchases of government bonds and allow it to buy riskier assets. The Nikkei 225 Stock Average surged as much as 4.7 percent (FT) to its highest level since August 2008, while the yen hit a new 3.5 year low of Y97.21 against the dollar early on Friday before making back some of the losses. Yields also fell on long-dated Japanese government debt. Freshly installed central bank chief Haruhiko Kuroda said he was confident (JapanTimes) Japan could reach the 2 percent inflation target within two years, saying he would "do all there is to do" to achieve it.

Analysis

"Those who have been frustrated by the performance of the Japanese economy have argued that the problem is not the failure of unconventional monetary policies, but the failure of the Bank of Japan to properly or more enthusiastically embrace those policies. Now that the Bank of Japan is embracing them about as enthusiastically as possible, we're going to see whether they really work," says Greg Ip in this CFR Backgrounder.

"The delicate task facing Mr Kuroda – a former senior finance ministry official who most recently ran the Asian Development Bank – was to get his way without opening a rift. If his plans for more aggressive easing had been supported by only a narrow majority, for instance, it might have signalled that he had reached the limit of what he could do in his first time out," writes Jonathan Soble for the Financial Times.

"Somehow it has become conventional wisdom in the English-speaking world that in the last two decades Japan has gone through something similar to the gut-wrenching economic problems suffered by the United States in the 1930s. Nothing could be further from the truth," writes Eamonn Fingleton for Forbes.

 

PACIFIC RIM

China's Bird Flu Death Toll Rises

A sixth person died of the H7N9 bird flu (SCMP) in China after authorities slaughtered poultry en mass at a Shanghai market where the virus has been found. The World Health Organization ruled out human-to-human transmission, but experts fear mutation could facilitate human infection.

CFR's Yanzhong Huang questions China's handling of the bird flu outbreak in this blog post.

 

SOUTH AND CENTRAL ASIA

NATO Strikes Kill Six

A NATO air strike killed four Afghan police and two civilians (al-Jazeera) in the central-east Ghazni province after Taliban insurgents attacked a local police station. The assault came as Afghan President Hamid Karzai said he remained open to talks with the Taliban.

INDIA: At least thirty-seven people died after a seven-story building allegedly under illegal construction collapsed near the Indian capital of Mumbai (HindustanTimes).

 

MIDDLE EAST

Iran Talks Start Again

Six party talks on Iran's nuclear program resumed for a second round this year in Kazakhstan (Reuters). World powers urged Tehran on Friday to give a "clear and concrete" response to their offer of easing sanctions in exchange for halting the most sensitive nuclear work.

CFR's Ray Takeyh discusses the best red line for a nuclear Iran in this op-ed.

LEBANON: Tamam Salam, a former Sunni minister, emerged on Friday as a consensus candidate (al-Arabiya) to replace Prime Minister Najib Mikati, who announced his resignation in late March.

 

AFRICA

Former Guinea Bissau Navy Chief Arrested

Na Tchuto, the former navy chief in Guinea-Bissau, was arrested on charges of being a "kingpin" in the country's drug trade (AllAfrica) and is being transferred to the United States for prosecution. The UN has expressed concern that drug trafficking has increased since the country's coup last April.

UGANDA: Uganda has suspended its search for fugitive warlord Joseph Kony in the Central African Republic (WSJ), which faced a rebel overthrow of its government last month.

CFR's John Campbell delves into the crisis in the Central African Republic in this recent blog post.

 

EUROPE

Portugal Faces Constitutional Court Ruling

Portuguese Prime Minister Pedro Passos Coelho called an emergency cabinet meeting (FT) for the weekend in anticipation of the constitutional court ruling that could overturn the government's 2013 budget. The ruling is expected to be announced late Friday.

FRANCE: Approval ratings for French President Francois Hollande dipped to a record low (GlobalPost) of 27 percent since he came to power ten months ago, according to a poll.

 

AMERICAS

Brazil Central Bank Struggles With Inflation

Brazil's central bank chief Alexandre Tombini said he would consider action in the next months to tame the country's stubbornly high inflation, which in the month to mid-March climbed close to the ceiling of the official target range to 6.4 percent (MercoPress).

MEXICO: Several people were arrested in Mexico City on Thursday for allegedly plotting to assassinate two leftist lawmakers (LAHT).

 

 

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