Japan

FILE PHOTO: A man makes his way in a business district in Tokyo
FILE PHOTO: A man makes his way in a business district in Tokyo, Japan May 16, 2018. REUTERS/Kim Kyung-Hoon/File Photo

June 18, 2019

By Daniel Leussink

TOKYO (Reuters) – Japan’s government left its assessment of the economy unchanged in June, after revising it down twice in the past three months, even as the escalating U.S.-China trade war threatens to take a heavier toll on global growth.

The risks to the economic outlook could add pressure on the government to boost spending to offset the potential blow from a planned sales tax hike in October.

“Japan’s economy is recovering at a moderate pace, while weakness in exports and industrial production continues,” the government said in the June report released on Tuesday, maintaining its view from last month.

The government downgraded its view for the world’s third-largest economy in March and May.

The June report left unchanged its assessment that exports and output remained weak, as well as its view that capital expenditure was increasing at a moderate pace.

“The weakness in exports was due to China’s economic slowdown and inventory adjustment of information technology-related goods,” an official told a briefing on the report.

But the government upgraded its view on corporate profits for the first time in more than two years, saying they are holding firm at a high level.

It also kept its assessment that domestic demand remained strong enough to offset some of the pain from weaker exports, which would help keep Japan’s recovery intact, with private consumption picking up.

The economy expanded an annualized 2.2% in the first quarter due to robust capital spending, though analysts expect trade tensions to remain a drag on growth.

The government’s plan to raise the sales tax to 10% from 8% in October could also hurt consumption at a time overseas headwinds weigh on exports, some analysts say.

(Reporting by Daniel Leussink; Editing by Kim Coghill)

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FILE PHOTO: Bank of Japan Governor Kuroda speaks during a group interview at the BOJ headquarters in Tokyo
FILE PHOTO: Bank of Japan Governor Haruhiko Kuroda speaks during a group interview at the BOJ headquarters in Tokyo April 10, 2013. REUTERS/Toru Hanai/File Photo

June 18, 2019

By Leika Kihara

TOKYO (Reuters) – Bank of Japan Governor Haruhiko Kuroda said the central bank will “certainly” debate heightening overseas risks at a rate review this week, underscoring concerns among policymakers about the economic fallout of a U.S.-China trade war.

The trade frictions and slowing global demand have cast doubt on the BOJ’s forecast that Japan’s economy will continue to expand moderately, pressuring central bank to deploy additional monetary easing to underpin growth.

“As for recent overseas economic developments, there are strong downside risks regarding the Sino-U.S. trade friction and China’s economy,” Kuroda told parliament on Tuesday.

“We’ll certainly debate such overseas developments” at the upcoming rate review, he said, but added that the BOJ is already keeping monetary policy ultra-loose.

At the two-day meeting kicking off on Wednesday, the BOJ is expected to keep monetary policy steady but signal its readiness to ramp up stimulus if growing overseas risks threaten the economy’s modest expansion.

“The BOJ will guide monetary policy appropriately taking into account the impact overseas economic changes could have on Japan’s economic outlook and the momentum for achieving our inflation target,” Kuroda said.

Under a policy dubbed yield curve control (YCC), the BOJ guides short-term interest rates at -0.1% and the 10-year government bond yield around zero percent in an effort to accelerate inflation to its elusive 2 percent target.

Some analysts say the central bank could be forced to ease more if the U.S. Federal Reserve cut interest rates in coming months and trigger an unwelcome yen rise against the dollar in a blow to Japan’s export-reliant economy.

Many BOJ policymakers are wary of deploying stimulus any time soon, given their dwindling ammunition and the rising cost of prolonged easing such as the damage years of near zero rates are inflicting on financial institution’s profits.

Barclays expect financial markets to start factoring in the chance of additional easing at the BOJ’s July policy meeting.

“We expect the BOJ to keep any actual easing measures on hold for now, instead strengthening its forward guidance” at the July meeting, their analysts wrote in a research note.

(Reporting by Leika Kihara; Editing by Chris Gallagher & Shri Navaratnam)

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FILE PHOTO: A pumpjack is seen at sunset outside Scheibenhard, near Strasbourg
FILE PHOTO: A pumpjack is seen at sunset outside Scheibenhard, near Strasbourg, France, October 6, 2017. REUTERS/Christian Hartmann

June 18, 2019

By Aaron Sheldrick

TOKYO (Reuters) – Oil prices were falling for a second day on Tuesday, after more signs that global economic growth is being hit by U.S.-China trade tensions, although losses were limited amid tensions in the Middle East after tanker attacks last week.

Brent crude futures were down 16 cents, or 0.3%, at $60.78 a barrel by 0215 GMT. They fell 1.7% in the previous session on concerns about slowing global growth.

U.S. West Texas Intermediate (WTI) crude futures were down 12 cents, or 0.2%, at $51.92. They dropped 1.1% on Monday.

The New York Federal Reserve said on Monday that its gauge of business growth in New York state posted a record fall this month to its weakest level in more than 2-1/2 years, suggesting an abrupt contraction in regional activity.

U.S. business sentiment has sagged as tensions over trade have escalated between China and the United States and on signs of softness in the labor market.

“The (oil) market is in a rut and desperately in need of some robust economic data to get it out of this funk,” said Stephen Innes, managing partner at Vanguard Markets in Bangkok.

Oil prices have fallen around 20% since 2019 highs reached in April, in part due to concerns about the U.S.-China trade war and disappointing economic data.

U.S. President Donald Trump and China’s President Xi Jinping could meet at the G20 summit in Japan later this month. Trump has said he would meet Xi at the event, although China has not confirmed the meeting.

Putting further pressure on oil, the U.S. energy department said on Monday that shale oil output is expected to reach a record in July.

But tensions in the Middle East are likely to keep prices supported, analysts said.

Acting U.S. Defense Secretary Patrick Shanahan announced on Monday the deployment of about 1,000 more troops to the Middle East for what he said were defensive purposes, citing concerns about a threat from Iran.

Fears of a confrontation between Iran and the United States have mounted since last Thursday when two oil tankers were attacked, which Washington has blamed on Tehran. Iran has denied involvement.

(Reporting by Aaron Sheldrick; Editing by Richard Pullin and Joseph Radford)

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A man looks on in front of an electronic board showing stock information at a brokerage house in Nanjing
A man looks on in front of an electronic board showing stock information at a brokerage house in Nanjing, Jiangsu province, China February 13, 2019. REUTERS/Stringer

June 18, 2019

By Shinichi Saoshiro

TOKYO (Reuters) – Investor caution ahead of the Federal Reserve’s interest rate meeting capped Asian stocks on Tuesday, while crude oil prices retreated as global growth worries overshadowed supply concerns stemming from recent Middle East tensions.

MSCI’s broadest index of Asia-Pacific shares outside Japan inched up 0.05%.

Australian stocks added 0.1% while Japan’s Nikkei dipped 0.05%.

The Fed, facing fresh demands by U.S. President Donald Trump to cut interest rates, begins a two-day meeting later on Tuesday. The central bank is expected to leave borrowing costs unchanged this time but possibly lay the groundwork for a rate cut later this year.

Fresh hopes for looser U.S. monetary policy have been a tonic for risk assets markets, which were buffeted last month by an escalation in the trade conflict between Washington and Beijing. The S&P 500 has gained 5% this month after sliding in May on trade war fears.

Focus is now on how close the Fed could be to cutting interest rates amid the raging U.S.-China trade war, signs of the economy losing steam and pressure by President Trump to ease policy.

“The FOMC (Federal Open Market Committee) meeting is the week’s biggest event so there will be a degree of caution prevailing in the markets,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.

“Expectations for a rate cut in July have increased significantly, so the markets could experience disappointment if the Fed does not send strong signals of impending easing.”

U.S. Treasury yields dipped on Monday after the New York Fed’s “Empire” gauge of business growth in the state showed a fall this month to its weakest in more than 2-1/2-years, fanning rate cut expectations.

The dollar index against a basket of six major currencies stood little changed at 97.507 after pulling back from a two-week high on the decline in Treasury yields.

The pound traded at $1.2542 after retreating overnight to a six-month low of $1.2532 on Monday on concerns that arch-Brexiteer Boris Johnson will replace Theresa May as prime minister. [GBP/]

The euro was a shade higher at $1.1224 after spending the previous day confined to a narrow range.

U.S. crude oil futures shed 0.08% to $51.89 per barrel after retreating 1.1% the previous day.

Oil prices had slipped on Monday as weak Chinese economic data released at the end of last week led to fears of lower global demand for the commodity. [O/R]

Concerns over weakening demand overshadowed tensions in the Middle East, which remained high following last week’s attacks on two oil tankers in the Gulf of Oman.

(This version of the story corrects typographical error in paragraph 5)

(Editing by Sam Holmes)

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FILE PHOTO: An oil rig is seen in the waters on the southern coast of Pengerang
FILE PHOTO: An oil rig is seen in the waters on the southern coast of Pengerang, Malaysia February 26, 2019. Picture taken February 26, 2019. REUTERS/Edgar Su/File Photo

June 17, 2019

By Stephanie Kelly

NEW YORK (Reuters) – Oil prices fell more than 1% on Monday after more poor Chinese economic figures fanned fears of lower worldwide oil demand.

Brent crude futures lost $1.07 to settle at $60.94 a barrel, a 1.73 percent loss. U.S. West Texas Intermediate (WTI) crude futures fell 58 cents to settle at $51.93 a barrel, a 1.10 percent loss.

Prices have fallen around 20% since a 2019 high reached in April, in part due to concerns about the U.S.-China trade war and disappointing economic data.

China’s industrial output growth unexpectedly slowed to a more than 17-year low, data from the National Bureau of Statistics showed on Friday. It grew 5.0% in May from a year earlier, missing analysts’ expectations of 5.5% and well below April’s 5.4%.

U.S. President Donald Trump and China’s President Xi Jinping could meet at the G20 summit in Japan later this month. Trump has said he would meet with Xi at the summit, although China has not confirmed the meeting.

“All the major reporting agencies are reporting that demand is going to be weaker,” said Phil Flynn, an analyst at Price Futures Group in Chicago. “That has played into the market malaise. Things we would normally rally off of, we’re not.”

Bank of America Merrill Lynch lowered its Brent price forecast to $63 per barrel from $68 a barrel for the second half of 2019 on faltering demand.

Worries remained about increased tensions in the Middle East following last week’s attacks on two oil tankers in the Gulf of Oman. The United States blamed the attacks on Iran but Tehran denied involvement.

Saudi Arabian Energy Minister Khalid al-Falih said on Monday that countries need to cooperate on keeping shipping lanes open for oil and other energy supplies to ensure stable supplies.

Market participants also await a meeting between the Organization of the Petroleum Exporting Countries and other producers including Russia, a group known as OPEC+, to decide whether to extend a production cut agreement that ends this month.

The group has been considering since last month moving the date of their policy meeting in Vienna to July 3-4 from June 25-26. After a meeting on Monday, Iran’s oil minister said he told his Russian counterpart that he still disagreed with the early July dates but could attend if the dates were shifted to July 10-12, the Iranian oil ministry’s news agency SHANA reported.

OPEC+ agreed to cut output by 1.2 million barrels per day from Jan. 1.

In the United States, U.S. oil output from seven major shale formations is expected to rise by about 70,000 barrels per day (bpd) in July to a record 8.52 million bpd, the U.S. Energy Information Administration said in a monthly drilling productivity report on Monday.

(Additional reporting by Noah Browning in London and Aaron Sheldrick in Tokyo; Editing by Marguerita Choy, Mark Potter and Cynthia Osterman)

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FILE PHOTO: The Airbus logo is pictured at Airbus headquarters in Blagnac near Toulouse
FILE PHOTO: The Airbus logo is pictured at Airbus headquarters in Blagnac near Toulouse, France, March 20, 2019. REUTERS/Regis Duvignau/File Photo

June 17, 2019

By Laurence Frost and Eric M. Johnson

PARIS, France (Reuters) – Boeing suffered a fresh setback at the opening of the Paris Airshow on Monday as the U.S. planemaker’s engine supplier revealed a delay affecting its all-new 777X jet, while Airbus targeted the middle of the market with a rival plane.

GE Aviation said it had found unexpected wear in a component for the GE9X engine it is making for Boeing’s 777X, the world’s largest twin-engined jet, forcing a delay of several months while it redesigns and tests the part.

The aerospace industry’s biggest annual event, which alternates with Britain’s Farnborough Airshow, is traditionally a slugging match between Airbus and Boeing in the $150 billion a year commercial aircraft market.

But this year Boeing is still grappling with the grounding of its top-selling 737 MAX aircraft in March after two deadly crashes, while European arch-rival Airbus is dealing with the fallout from a long-running corruption scandal.

Airbus used the show to launch a long-range version of its A321neo jet, aiming to carve out new routes for airlines with smaller planes and steal a march on Boeing’s owns plans for another potential all-new jet, the NMA.

“We can fly from north-eastern Asia into south Asia, from the Middle East to Bali or from Japan deep into Australia, and so on,” Airbus chief salesman Christian Scherer said.

“It is therefore the lowest-risk investment for airlines on these kinds of routes.”

Leasing company Air Lease Corp became the first customer of the new aircraft – the A321XLR – lining up for 27 as part of a deal for 100 Airbus planes.

Sources familiar with the matter said Airbus was trying to assemble close to 200 orders or conversions to the new model as it chases deals with carriers including American Airlines, JetBlue, Cebu Air and Frontier Airlines owner Indigo Partners.

Despite a flurry of delegates dashing in golf carts between parked jetliners, missiles and spy planes, this year’s gathering appeared relatively subdued, with a profit warning from Lufthansa adding to trade tensions and slowing economies.

French President Emmanuel Macron watched as France and Germany unveiled a sleek, dagger-shaped mockup of a new fighter plane the two close European allies plan to develop.

Analysts expect anything from 400 to 800 commercial aircraft orders and commitments at the show, compared with 959 at Farnborough last year, though it can be hard to identify truly new business against firmed-up commitments and switched models.

Boeing commercial airplanes boss Kevin McAllister said it was premature to predict any delays to the 777X program. The planemaker is targeting a maiden flight this year and entry into service the next.

Gulf airline Emirates has said it expects the first plane in June 2020. Flight tests often take more than a year.

(For a graphic on ‘Airbus, Boeing, Raytheon, UTC shares’ click https://tmsnrt.rs/2Ip8dvj)

SIZE VS COMFORT

The Airbus A321XLR will be the longest-range narrow-body jetliner and arrives as airlines look to maximize the flexibility of more fuel-efficient, single-aisle aircraft.

Its range of up to 4,700 nautical miles – about 15% more than the previous A321LR – will leapfrog the out-of-production Boeing 757 and nudges it into the long-jump category occupied by more costly wide-body jets.

The A321XLR also eats into a range category targeted by the possible NMA mid-market, twin-aisle jet under review by Boeing.

“It does provide a very effective airplane for many of the same routes as the NMA, and it does so many years earlier,” Air Lease CEO John Plueger said of the new Airbus jet.

But there is a debate over whether passengers will enjoy flying longer distances in medium-haul planes.

Airbus did not give a price for the A321XLR. The current A321neo has a list price of $129.5 million.

Boeing Chairman and CEO Dennis Muilenburg on Sunday said the A321XLR would only “scratch an edge” of the market segment targeted by the NMA. But Air Lease founder Steven Udvar-Hazy, a doyen of the leasing industry, said the NMA project remained “a little bit in cold storage” as long as the MAX grounding lasted.

He added that Boeing expected to announce orders for wide-body jets at the Paris show but its main focus at the event was safety, with executives taking turns to apologize for the MAX crashes in Indonesia and Ethiopia that killed 346 people.

“This is the most trying of times,” Boeing’s McAllister told a press briefing.

“But without a doubt this is a pivotal moment for all of us. It’s a time to capture learnings. It’s a time to be introspective. And it’s a time for us to make sure accidents like this never happen again.”

(Additional reporting by Tim Hepher, Andrea Shala, Alistair Smout and Cyril Altmeyerhenzien; Editing by Mark Potter, David Goodman and Alexander Smith)

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FILE PHOTO: Saudi Arabian Energy Minister Khalid al-Falih, is seen after the OPEC 14th Meeting of the Joint Ministerial Monitoring Committee in Jeddah
FILE PHOTO: Saudi Arabian Energy Minister Khalid al-Falih, is seen after the OPEC 14th Meeting of the Joint Ministerial Monitoring Committee in Jeddah, Saudi Arabia, May 19, 2019. REUTERS/Waleed Ali

June 16, 2019

KARUIZAWA, Japan (Reuters) – Saudi Energy Minister Khalid al-Falih said on Sunday that OPEC would probably meet in the first week in July in Vienna and that he hoped it would reach consensus on extending its agreement to cut oil output.

Falih said earlier this month that OPEC was close to agreeing to extend the agreement beyond June, although more talks were still needed with non-OPEC countries that were part of the production deal.

The Organization of the Petroleum Exporting Countries plus Russia and other producers, an alliance known as OPEC+, have a deal to cut output by 1.2 million barrels per day (bpd) from Jan. 1.

“We are hoping that we will reach consensus to extend our agreement when we meet in two-weeks-time in Vienna,” Falih told reporters on the sideline of a G20 energy and environment ministerial meeting in , northwest of Tokyo.Asked when the meeting will be held, he said: “Probably first week of July”.

(Reporting by Yuka Obayashi; Editing by Michael Perry)

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Hong Kong Chief Executive Carrie Lam attends a news conference in Hong Kong
Hong Kong Chief Executive Carrie Lam speaks at a news conference in Hong Kong, China, June 15, 2019. REUTERS/Athit Perawongmetha

June 16, 2019

By James Pomfret, Greg Torode and Ben Blanchard

HONG KONG/BEIJING (Reuters) – With an escalating U.S. trade war, a faltering economy and tensions in the South China Sea vexing her bosses in Beijing, Hong Kong leader Carrie Lam appeared in no mood to compromise on a planned extradition law at recent meetings, according to foreign envoys and business people who met with her.

Some of the people at those meetings in recent weeks pointed to media reports that even Hong Kong’s usually reticent judges were worried about the proposed law which threatened to send people for trial in mainland China for the first time.

But Lam bluntly dismissed concerns about a Chinese justice system that is widely criticized for forced confessions, arbitrary detentions and one-sided trials, saying judges were not supposed to speak.

Worries over the bill’s impact on Hong Kong’s international standing as a financial hub with a respected legal system were building in Washington, London and other European capitals, but Lam stressed the need for the extradition law to help solve the murder of a Hong Kong woman in Taiwan.

“She needed a dinghy and she deployed the Titanic,” one diplomat who met Lam this month told Reuters, declining to be identified due to the sensitivity of the issue.

In numerous public appearances after that, Lam was unyielding on the need for the bill, despite huge and sometimes violent street protests including one last Sunday that organizers said drew more than a million people.

Then on Saturday, Lam suddenly announced the bill had been postponed indefinitely.

She told a news conference she felt “deep sorrow and regret that the deficiencies in our work and various other factors have stirred up substantial controversies and disputes in society”.

Hong Kong’s self-styled Iron Lady had cracked, having apparently created an entirely fresh crisis for President Xi Jinping – and the city’s biggest since Britain handed it over to Chinese rule in 1997 with the guarantee its freedoms and autonomy would be preserved.

Clues to the catalyst for the about-face may lie in a reported meeting between Lam and China’s Vice-Premier Han Zheng.

According to Hong Kong’s Sing Tao newspaper, Lam had a clandestine emergency meeting with Han, a member of the Politburo’s seven-person Standing Committee, China’s top decision-making body, across the border in Shenzhen on Thursday.

The content of the meeting is unknown. Lam on Saturday refused to confirm or deny that it had taken place, despite repeated questions.

BEIJING BACKDOWN

Beijing’s grip over Hong Kong has intensified markedly since Chinese President Xi Jinping took power in 2012, and after the city’s protracted 2014 pro-democracy street protests.

He warned in 2017 that any attempts to undermine Chinese sovereignty were a “red line” that Beijing would not allow to be crossed – warnings that reinforced his strongman image amongst Hong Kongers.

Many politicians, diplomats and analysts had not expected Beijing to allow any backdown on the bill, unlike in 2003 when contentious national security laws were scrapped after half a million people took to the streets.

But a source in Beijing with ties to China’s leadership who meets regularly with senior officials, said the Hong Kong government had handled the extradition saga badly.

And while a backdown from Beijing on the bill seemed near inconceivable just a week ago, the violence and escalating unrest forced their hand.

“The outcome doesn’t bear thinking about if this situation wasn’t turned around,” the source said, also declining to be named given the sensitivity of the matter.

The source added that Beijing now had severe doubts about Lam’s capabilities. China’s State Council and the central government’s liaison office in Hong Kong did not immediately respond to Reuters requests for comment.

China’s Communist Party mouthpiece, the People’s Daily, said in a commentary on Sunday, however, that central authorities expressed “firm support” for Lam and the Hong Kong government in “safeguarding the rule of law and legitimate rights of its residents”. It added that it supported the decision to suspend the extradition bill.

Steve Tsang, a London-based political scientist, said Lam had caused Xi “major embarrassment” at a time that is not helpful for him given trade tensions with the United States, and ahead of a possible meeting with U.S. president Donald Trump at the month’s end at the G20 summit in Japan.

“Xi is not a leader who tolerates failures of officials,” Tsang said.

Retired senior Hong Kong government official Joseph Wong said he was shocked by Beijing’s U-turn, but the situation had become so untenable that he believed it had led to a recalculation by Han after meeting Lam in Shenzhen.

“I suspect … he (Han) would have had to consider, are we prepared to continue to fire rubber bullets or even real bullets in order to get this through, and what would be the implications for the central government internationally, vis-a-vis the U.S. So that protest was the turning point.”

Lam has refused calls from the opposition and protestors to step down but her ability to govern has been questioned on numerous fronts, including her failure to gauge the pulse in Hong Kong, the broader U.S.-China relationship, and Taiwan’s refusal to accept any extradition bill, undermining her core argument the bill would resolve the Taiwan murder case.

Political scientist Tsang said he did not expect Lam to last much longer as leader.

“I think Carrie Lam’s days are numbered … Beijing cannot afford to sack her right away because that would be an indication of weakness. They would have to allow for a bit of decent interlude,” he said.

Two former post-colonial leaders, Tung Chee-Hwa and Leung Chun-ying, were forced to truncate their time in office from various controversies linked to policies that stoked fears of Chinese encroachment on the city’s freedoms.

For her part, Lam has asked for time so that the bill can be properly deliberated.

“Give us another chance and we will do this thing well,” she told Saturday’s news conference.

Asked about China’s leaders, she said: “They have confidence in my judgment and they support me.”

(Reporting by James Pomfret and Greg Torode in Hong Kong and Ben Blanchard in Beijing; Additional reporting by Anne Marie Roantree, Clare Jim and Jessie Pang and John Ruwitch in Hong Kong; Editing by Edwina Gibbs and Stephen Coates)

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An aerial view shows police officers investigating the site where a police officer was found stabbed in front of a police box and the officer's gun, loaded with several bullets, was stolen, in Suita, Osaka
An aerial view shows police officers investigating the site where a police officer was found stabbed in front of a police box and the officer’s gun, loaded with several bullets, was stolen, in Suita, Osaka prefecture, western Japan June 16, 2019, in this photo taken by Kyodo. Mandatory credit Kyodo/via REUTERS

June 16, 2019

TOKYO (Reuters) – A Japanese police officer was stabbed several times in the chest with a kitchen knife and his loaded handgun stolen while on patrol on Sunday morning in the western city of Suita, in a rare case of violent crime in Japan, public broadcaster NHK reported.

The attack, which police believe may have been pre-meditated, sparked a manhunt with police using loudspeakers at a railway station to warn people to be on alert.

The stabbing comes two weeks before Japan hosts a leaders’ summit of the Group of 20 major economies in the neighboring city of Osaka. It also follows an incident last month in which a knife-wielding middle-aged man killed a girl and an adult, injuring another 17 people near Tokyo.

Violent crime is relatively rare in Japan but occasional high-profile incidents have shocked the nation.

“It’s scary that handgun was stolen. I want this to be resolved quickly,” a male neighbor said.

“A kindergarten’s open day was canceled due to this incident. My kids cannot go out. It’s scary,” another man said.

The 26-year-old police officer was found lying on the ground with a kitchen knife stabbed in his left chest around 5:30 a.m. Sunday (2030GMT), reported NHK.

He was attacked in front of a police box as he likely followed two officers after a telephone call reporting a theft.

Police suspect the attack may have been pre-meditated as there was no theft and a security camera showed a man, who appeared in his 30s, hanging around the police box about an hour before the stabbing, said NHK.

(Reporting by Tetsushi Kajimoto; Editing by Michael Perry)

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FILE PHOTO: Man holds the flags while people take part in the 35th India Day Parade in New York
FILE PHOTO: A man holds the flags of India and the U.S. while people take part in the 35th India Day Parade in New York August 16, 2015. REUTERS/Eduardo Munoz/File Photo

June 16, 2019

By Nidhi Verma and Neha Dasgupta

NEW DELHI (Reuters) – India will impose higher retaliatory tariffs on 28 U.S. products including almonds, apples and walnuts from Sunday, following Washington’s withdrawal of key trade privileges for New Delhi.

The new duties take effect from Sunday, a government notification said, in the latest trade row since U.S. President Donald Trump took office in 2017 vowing to act against countries with which Washington has a large trade deficit.

From June 5, President Trump scrapped trade privileges under the Generalized System of Preferences (GSP) for India, the biggest beneficiary of a scheme that allowed duty-free exports of up to $5.6 billion.

India termed that “unfortunate” and vowed to uphold its national interests.

Reuters previously reported India was preparing to levy higher tariffs ahead of Prime Minister Narendra Modi’s first meeting with Trump on the sidelines of a G20 summit in Japan on June 28 and 29.

India initially issued an order in June last year to raise import taxes as high as 120% on a slew of U.S. items, incensed by Washington’s refusal to exempt it from higher steel and aluminum tariffs.

But New Delhi repeatedly delayed raising tariffs as the two nations engaged in trade talks. Trade between them stood at about $142.1 billion in 2018.

India on Saturday amended its previous order “to implement the imposition of retaliatory duties on 28 specified goods originating in or exported from USA” while preserving the existing rate for these goods for all other countries, the government notification said.

Higher Indian tariffs on U.S. goods could impact growing political and security ties between the two nations.

U.S. Secretary of State Mike Pompeo, who is expected to visit India this month, said this week the United States was open to dialogue to resolve trade differences with India, through greater access for American companies to its markets.

India is by far the largest buyer of U.S. almonds, paying $543 million for more than half of U.S. almond exports in 2018, U.S. Department of Agriculture data shows. It is the second largest buyer of U.S. apples, taking $156 million worth in 2018.

New Delhi’s new rules in areas such as e-commerce and data localization have already angered the United States and hit companies such as Amazon.com, Walmart Inc, Mastercard and Visa, among others.

(Reporting by Nidhi Verma and Neha Dasgupta; Editing by Andrew Cawthorne)

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