<<"What's going on is a battle between producers hedging, speculators taking short positions and enormous physical demand in the Far East"
telegraph.co.uk. <http://www.telegraph.co.uk/et?ac=000626415357098&rtmo=pQNpS4pe&atmo=99999999&pg=/et/99/8/25/cngold25.html>
Sums it up nicely. >>
FOCUS-Japan economy wobbles towards recovery
(Updates with markets closes)
By Reed Stevenson
TOKYO, Aug 25 (Reuters) - Japan's economy held steady in the April-June quarter but remained weak enough to justify more spending by the government to push it along, key data showed on Wednesday.
Economists said a slight 0.4 percent contraction in the Trade Ministry's overall business activity index, which approximates key gross domestic product data, indicated the economy did not suffer a relapse after the brisk two percent pace of growth seen in the first three months of this year.
``Even though the number was negative, it shows that the economy is keeping the same level and it's not changing direction at this stage,' Hiroyuki Inoue, senior economist at the Japan Center for Economic Research, told Reuters Television.
``It's difficult to tell when we (will) completely hit bottom,' Inoue said, since the economy was still being supported by government spending.
The government has indicated its willingness to implement another stimulative budget to guarantee that Japan will pull out of a decade of stagnation, although policy-makers have said they need to see April-June GDP data, due out around September 10, to decide the size of a such spending package.
Prime Minister Keizo Obuchi said on Wednesday that an extraordinary session of parliament should be held this autumn to discuss extra spending in the fiscal year to next March.
Obuchi said more fiscal spending to ensure the economy's recovery was maintained was a ``viable idea,' and also called for a cut in the top inheritance tax rate.
Separately, trade data from the Finance Ministry showed that exports continued to offer support for the economy, with the surplus coming in bigger than economists' expectations.
Although the overall trade surplus shrank 4.6 percent in July from a year earlier, the 1.25 trillion yen surplus exceeded economists' average forecast of a 1.05 trillion yen surplus.
Japan's politically sensitive trade surplus with the United States rose eight percent in July from a year earlier to 721.3 billion yen.
The trade data and the Trade Ministry's index had little impact on Japanese bonds and the dollar/yen rate, both of which retained their bearish tone on Wednesday amid perceptions that Japan's economic outlook is improving.
The extra budget talk sent jitters through bond prices, with the 10-year bond yielding 1.0 percent at the close of trade.
The dollar remained near seven-month lows at 0700 GMT at 111.33 yen, although authorities continued to keep the threat of intervention alive.
Vice Finance Minister for International Affairs Haruhiko Kuroda on Wednesday reiterated Japan's stance that a premature strengthening of the yen was undesirable.
``Our forex policy is absolutely unchanged,' Kuroda told reporters. ``We are ready to take decisive action against a premature yen appreciation.'
For some, the business index was a precursor to further yen strength and a respectable performance in April-June GDP, which had been widely expected to pull back after the stunning pace of growth the January-March period.(cont)
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