Business News & Financial News

The Japanese consumer prices fell in July for the 17th consecutive month on an annual basis, a sign that deflation remains entrenched in the archipelago and Nippon will be difficult to fight for the government.

Tokyo seeks the method that will curb the rising yen, which this week hit a high of 15 years against the dollar and a high of nine against the euro, threatening to bring down a recovery that based on exports.

But the strong yen is likely to complicate efforts by the Japanese government to fight deflation.

Japanese Prime Minister, Naoto Kan, said Friday that reporters would act when necessary on the issue of the strong yen and he would meet the Governor of the Bank of Japan Masaaki Shirakawa on his return from a trip to the abroad.

Naoto Kan also said that excessive currency fluctuations could threaten financial stability and hoped that the BoJ would take the appropriate measures in terms of monetary policy.

Decisions will be made August 31 on these issues.

The Interior Ministry announced Friday that consumer prices, which include fuel costs but not those of fresh products, fell 1.1% yoy in July according to the median forecast of the market. In June, they were down 1%.

"TWO OR THREE YEARS OF DEFLATION"

"Given the appreciation of the yen, exports will plunge and temporarily slow the economic recovery in Japan.Japan will remain in deflation for the next two or three years, "said Takeshi Minami, chief economist at Norinchukin Research Institue.

Investors are betting on an intervention by the Bank of Japan to ease monetary policy in the country.

"The BoJ could expand its refinancing tools next month, but the effect on interest rates in the short term will be limited.She needs to take bolder decisions to fight deflation and the rising yen, as increasing outright purchases of government bonds, although it is very unlikely to happen, "said Takeshi Minami.

Two other indicators released Friday offers a contrasting vision of the Japanese recovery.

The unemployment rate adjusted for seasonal variations fell 5.2% in July against 5.3% in June while the median forecast was 5.3%, according to figures from the Ministry of Internal Affairs.

Household spending has in turn increased by 1.1% in July over a year in real terms, less than the market forecast of an increase of 1.3%.

For a chart comparing the evolution of consumer prices in Japan, the United States and the euro area, click on link.reuters.com/pum57n

Wall Street could fall this week in a market upturn phase, but will require a new set of quarterly results convincing to feed the stock market rally that started in U.S. last weekend.

The markets have been digesting macroeconomic statistics found disappointing and pessimistic comments from Federal Reserve Chairman Ben Bernanke on the U.S. economy, but the announcement of strong quarterly results by companies suggest a brighter future.

But this week, others are expected quarterly publications such as the oil company Chevron, DuPont chemist or the aircraft manufacturer Boeing.Good news would reassure investors.

Investors have had to readjust their forecasts for the economy with the latest statistics that portend a slowdown in the pace of recovery.

These data have also created divisions in the markets about the possibility of a new recession.If the concerns of a return to "W" began to fade among investors, publications positive would result in rising markets.

FIGURES OF THE GROWTH EXPECTED

"All indicators continue to signal growth, simply we are not moving as quickly as when we came out of the recession, which is totally logical," said Michael O'Rourke, chief market strategist at BTIG LLC, adding that the downward phase of the contract is completed.

He considers in particular that the beginning of July should be the low point of annual contracts.

Analysts hope to cheer the quarterly results this week after figures better than expected and forecast annual improvements announced last week by industry groups.

But the economy remains crucial. The series of publications macroeconomic expected this week will also be particularly monitored to determine the strength of the U.S. economic recovery.

The Fed should publish its Beige Book Wednesday on the economic conditions, while the figures for new home sales will launch the week Monday.

On Tuesday, it is the Standard & Poor's / Case Schiller home prices and consumer confidence, which will be followed, before investors only look the next day on orders of durable goods.

But it was the day Friday with the first estimate of gross domestic product (GDP) U.S. second quarter to be expected this week.

Fiat announced Friday it would invest 700 million euros to produce the Panda in its factory near Naples Pomigliano after a landmark agreement with unions.

The decision to relocate production in Italy of the best-selling small car in Europe, built up in Poland, has been a while appear compromised because only 62% of factory workers in Naples had voted in favor of the plan Fiat, which also includes a significant change in working conditions.

The agreement gives Fiat more flexibility regarding the fees, limits the number of strikes and sick-leave.

It is part of an investment program of Fiat to eight billion euros until 2011 which is designed to make the group more efficient and competitive in a market that has experienced a severe crisis.

Fiat has finally decided to pursue his project after meeting with the four unions that support the project, FIM, UILM, Fismic and UGL.

Fiom, only union opposed the agreement, said it will help the government dismantle the labor law.

The union's national coordinator, Enzo Masini, said the union would consider a lawsuit for infringement of the rights of employees.

The Secretary General of the UILM Palombella Rocco told Reuters: "We hope the employees who voted against the plan will realize that the investment is important and it is in their own interest."

The Fiat Chief Executive Sergio Marchionne has written a four-page letter to convince employees.

"What we're doing is (…) to use all possible means to save the work, even work on which the Italian Republic is founded," says the boss of the group.

He added that his entire strategy for Italy depends on the agreement at Pomigliano.

The government of Silvio Berlusconi welcomed the announcement of Fiat.

The plant in Naples, which employs 5,000 people, shows the lowest productivity of the five Italian factories of Fiat. It is lower than that of the Polish site, which, with just over 6,000 workers, produced 600,000 cars per year.

The CEO of BP's Tony Hayward met with officials of the Abu Dhabi Investment Authority (Adia), one of the largest SWFs in the world, said an official source of United Arab Emirates (UAE).

A UAE source told Reuters on Tuesday that BP had approached sovereign wealth funds to find a strategic partner to preserve it from any takeover attempt as it is mobilized by an oil spill that has caused the Gulf of Mexico.

Tony Hayward has made various "options" at this meeting, added the official source, without being more explicit.

Adia was not immediately available for comment.

A Saudi financial daily reported Wednesday that Saudi investors wishing to enter the capital of BP at 10% to 15%.

A delegation of these investors will travel to London to begin a dialogue with BP, said al-Eqtisadiyah, the main financial newspaper in the kingdom, without citing sources.

Action BP has lost more than half its value since the oil spill that began last April.

The British oil giant said it hoped to raise 10 billion this year to finance a fund for cleaning $ 20 billion that had opened under pressure from Washington.

Action BP earns 4.17% to 360 pence in morning.