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BOJ may say economy better

THE Bank of Japan will consider upgrading its view on the economy later this month in response to improved exports and output, sources said yesterday, as markets anxiously await United States jobs data that may offer fresh signs the recession is easing.

Muted gains in Asian shares underlined the tenuous nature of the scattered signs of recovery appearing in the global economy.

The BOJ's board is set to discuss at a meeting on June 15-16 the possibility of changing its view, stated last month, that the economy is worsening, central bank sources told Reuters.

That sign of optimism, or at least less intense pessimism, will be tested when US non-farm payroll numbers are expected to show employers cut 520,000 jobs in May, down from 539,000 in April.

A much worse-than-expected figure could dampen hopes that the worst may be over for the global economy, hopes that have pushed stock markets from Seoul to London sharply higher since early March and weakened support for the US dollar as a safe haven.

"If the numbers are better than expected, investors will get confirmation that the economy's really improving, but there's worry about what will happen if the figures are worse than consensus," said Yumi Nishimura, a deputy general manager of the investment advisory section at Daiwa Securities SMBC.

Asian shares, oil and higher-yielding currencies rose yesterday on hopes for improvement in the economic outlook, but those gains were capped by nervousness about the US payroll data.

A less pessimistic outlook by the BOJ would follow a cautiously upbeat message from US Federal Reserve Chairman Ben Bernanke this week, when he said the risk of a dangerous downward spiral had receded.

Bleaker view

The European Central Bank is taking a bleaker view. It slashed its economic forecasts on Thursday, unveiled a bond-buying plan and warned that the euro zone recession would last for another year.

However, the ECB kept euro zone interest rates on hold, as did the Bank of England and Bank of Canada.

Corporate news underlined firms' varying success at weathering the credit crunch.

Global miner Rio Tinto dumped plans for a US$19.5 billion tie-up with China's Chinalco and agreed to set up an iron ore joint venture with BHP Billiton and sell new shares to slash its debt.

Japan's Canon Inc, the world's largest digital camera maker, revived plans to build a US$180 million factory as demand holds firm for its high-end single-lens reflex cameras.

KB Financial Group, which runs South Korea's largest bank Kookmin, is seeking to raise US$1 billion to US$3 billion in new capital by around the third quarter of the year, a banking source told Reuters.


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