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Explainer-Key challenges for Japan PM Kishida’s stimulus plan

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November 7, 2021

By Tetsushi Kajimoto and Takaya Yamaguchi

TOKYO (Reuters) – Japanese Prime Minister Fumio Kishida’s pledge to deliver a big economic stimulus this year faces challenges, including negotiations within his coalition and a tight schedule to secure funding for the spending.

Below are key issues confronting Kishida, his ruling Liberal Democratic Party (LDP) and the finance ministry, as discussions on the package begin in earnest on Monday:

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WHAT’S AT STAKE?

The case for supporting Japan’s economy is urgent as supply disruptions hurt mainstay exports for the world’s third-biggest economy even as consumption has yet to accelerate after the Sept. 30 lifting of COVID-19 curbs.

Having deployed huge fiscal stimulus last year, Japan risks a drop-off in support needed to support the fragile recovery, finance ministry officials say.

Delay in approving Kishida’s promised extra budget for this year could disrupt passage of other key legislation as parliament’s regular session next year must end in time for a summer upper house election.

“The government’s hope is for parliament to pass the extra budget by year end so that the spending would underpin the economy in the first quarter of next year,” a finance ministry official with knowledge of the matter told Reuters.

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HOW TIGHT IS THE TIMEFRAME?

Japan’s government and ruling bloc usually agree on additional spending plans around October, giving the finance ministry time to draft an extra budget to be enacted before previous funding runs out.

This time, the schedule is tight because procedures to craft the package and extra budget were disrupted by the Oct. 31 general election, which affirmed Kishida’s rule weeks after he took office.

Kishida says the package will focus on helping households hit hardest by the COVID-19 pandemic and include steps to distribute wealth more broadly to households. He has offered little detail on the size of the package beyond that it will be worth several hundred billion dollars.

Negotiations on the details have just begun, leaving little time for bureaucrats to compile a draft budget. The extra budget must pass through parliament next month to avoid a delay in enacting next year’s budget by the March end of this fiscal year.

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DELAY RISKS?The size and timing of the package will be swayed by how smoothly the LDP and its coalition partner Komeito agree on the size of payouts to individuals.

The government and coalition have agreed to pay each person up to age 18 about $900, costing the government some $18 billion, the Yomiuri newspaper reported on Friday.

The coalition parties on Monday will discuss details on how much to offer children, said Kyodo news agency.

The spending plan will require delicate negotiations among lawmakers and bureaucrats. In a potential signal of resistance, the ministry’s top bureaucrat, Koji Yano, recently issued a rare criticism of politicians engaging in pork-barrel spending.

MARKET FOCUS?

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Another contentious issue will be how much debt the government must issue to fund the package, another area Kishida has not detailed. The lack of clarity leaves economists guessing.

Some tip the scale of the stimulus spending around 30 trillion yen ($260 billion), a figure once floated by Kishida, but estimates vary widely.

Takashi Miwa, chief economist at Nomura Securities, expects the package to total 45 trillion yen ($400 billion), funded by an extra budget one-third that size requiring the issuance of more than 5 trillion yen ($45 billion) in fresh government debt.

Takuya Hoshino, senior economist at Dai-ichi Life Research Institute, forecasts a notably smaller budget of 20 trillion to 30 trillion yen ($180-$260 billion) but which would require up to twice as much in bond issuance at 10 trillion yen ($90 billion).

($1 = 113.8400 yen)

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(Reporting by Tetsushi Kajimoto and Takaya Yamaguchi; Additional reporting by Yoshifumi Takemoto; Editing by Leika Kihara and William Mallard)

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Amazon asks India antitrust body to revoke Reliance-Future deal approval

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November 28, 2021

By Aditya Kalra and Abhirup Roy

NEW DELHI (Reuters) – Amazon has asked India’s antitrust regulator to revoke its approval for Future Retail’s $3.4 billion sale of retail assets to Reliance, saying it was “illegally obtained”, violating an order suspending the deal, a letter seen by Reuters shows.

The approval for the deal was a “nullity in the eyes of law” as an arbitrator’s order was still in force, according to the letter sent by Amazon.com Inc to the Competition Commission of India (CCI) last week.

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The battle between two of the world’s richest men, Amazon founder Jeff Bezos and Reliance Industries Ltd boss Mukesh Ambani, marks a contest for preeminence in India’s booming, nearly trillion-dollar retail market.

The winner in the fight for Future Retail Ltd, India’s second-largest retailer and Amazon’s estranged local partner, will get pole position in the race to meet the daily needs of more than a billion people.

The CCI, Amazon, Future Group and Reliance did not respond to requests for comment.

Future has said the arbitrator’s suspension order was invalid but Indian courts have declined to overturn it.

If the regulator agrees with the previously unreported letter, it would be a major setback for oil-to-telecom conglomerate Reliance.

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Amazon won an injunction against the deal from a Singapore arbitrator last year, alleging Future had violated contracts that prevented it from selling the assets to entities including Reliance.

But the CCI later cleared the deal.

Future misled the CCI and continued to seek approval for the deal, Amazon said in the letter dated Wednesday, calling the injunction a “brazen attempt to subvert the rule of law”.

Amazon asked for a personal hearing from the CCI to make its case.

The letter comes as Amazon is also battling allegations that it misrepresented facts and concealed information while seeking antitrust clearance for a 2019 deal with Future Group.

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Amazon has so far successfully used this deal’s contracts to block Future’s deal with Reliance.

(Reporting by Aditya Kalra and Abhirup Roy in New Delhi; Additional reporting by Zeba Siddiqui; Editing by William Mallard)

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Exclusive-Visa complains to U.S. govt about India backing for local rival RuPay

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November 28, 2021

By Aditya Kalra

NEW DELHI (Reuters) – Visa Inc has complained to the U.S. government that India’s “informal and formal” promotion of domestic payments rival RuPay hurts the U.S. giant in a key market, memos seen by Reuters show.

In public Visa has downplayed concerns about the rise of RuPay, which has been supported by public lobbying from Prime Minister Narendra Modi that has included likening the use of local cards to national service.

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But U.S. government memos show Visa raised concerns about a “level playing field” in India during an Aug. 9 meeting between U.S. Trade Representative (USTR) Katherine Tai and company executives, including CEO Alfred Kelly.

Mastercard Inc has raised similar concerns privately with the USTR. Reuters reported in 2018 that the company had lodged a protest https://reut.rs/3cQA2La with the USTR that Modi was using nationalism to promote the local network.

“Visa remains concerned about India’s informal and formal policies that appear to favour the business of National Payments Corporation of India” (NPCI), the non-profit that runs RuPay, “over other domestic and foreign electronic payments companies,” said a USTR memo prepared for Tai ahead of the meeting.

Visa, USTR, Modi’s office and the NPCI did not respond to requests for comment.

Modi has promoted homegrown RuPay for years, posing a challenge to Visa and Mastercard in the fast-growing payments market. RuPay accounted for 63% of India’s 952 million debit and credit cards as of November 2020, according to the most recent regulatory data on the company, up from just 15% in 2017.

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Publicly, Kelly said in May that for years there was “a lot of concern” that the likes of RuPay could be “potentially problematic” for Visa, but he stressed that his company remained India’s market leader.

“That’s going to be something we’re going to continually deal with and have dealt with for years. So there’s nothing new there,” he told an industry event.

‘NOT SO SUBTLE PRESSURE’

Modi, in a 2018 speech, portrayed the use of RuPay as patriotic, saying that since “everyone cannot go to the border to protect the country, we can use RuPay card to serve the nation.”

When Visa raised its concerns during the USTR gathering on Aug. 9, it cited the Indian leader’s “speech where he basically called on India to use RuPay as a show of service to the country,” according to an email U.S. officials exchanged on the meeting’s readout.

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Finance Minister Nirmala Sitharaman said last year that “RuPay is the only card” banks should promote. The government has also promoted a RuPay-based card for public transportation payments.

While RuPay dominates the number of cards in India, most transactions still go through Visa and Mastercard as most RuPay cards were simply issued by banks under Modi’s financial inclusion programme, industry sources say.

Visa told the U.S. government it was concerned India’s “push to use transit cards linked to RuPay” and “the not so subtle pressure on banks to issue” RuPay cards, the USTR email showed.

Mastercard and Visa count India as a key growth market, but have been jolted by a 2018 central bank directive for them to store payments data “only in India” for “unfettered supervisory access”.

Mastercard faces an indefinite ban on issuing new cards in India after the central bank said it was not complying with the 2018 rules. A USTR official privately called the Mastercard ban “draconian”, Reuters reported in September.

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(Reporting by Aditya Kalra in New Delhi; Editing by William Mallard)

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‘Flash mob’ thieves target U.S. retail stores on Black Friday

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November 28, 2021

By Steve Gorman

LOS ANGELES (Reuters) – Black Friday shoppers weren’t the only ones out hunting for bargains on the day after Thanksgiving. Thieves were busy as well.

Police in Los Angeles and cities elsewhere across the country spent much of their holiday weekend patrols looking for suspects in a spate of “flash mob” robberies on Friday, part of a surging U.S. crime trend in which groups of thieves swarm a store, ransack the shelves and flee.

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Authorities also have used the term “smash-and-grab” to describe the trend.

At least two such robberies were reported on Saturday by the Los Angeles Police Department (LAPD) and the Los Angeles County Sheriff’s Department. A local television station, KCAL-TV, counted a total of six smash-and-grab heists on the city’s west side alone on Friday.

In one incident, a group of eight men entered a Home Depot outlet at a shopping mall in Lakewood, south of downtown Los Angeles, walked directly to the tool aisle and snatched a bunch of hammers, sledgehammers and crowbars valued at about $400 before making their getaway, the sheriff’s office said.

According to L.A. television station KTTV, the Home Depot robbery on Friday night involved up to 20 suspects who pulled up to the store in as many as 10 cars and donned ski masks before raiding the tool aisle.

“We tried to stop them,” store employee Luis Romo told KTTV. “We closed the front entrance, and they put their sledgehammers up and whoever got in the way, they were going to hurt them.”

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The Los Angeles City News Service said four suspects in that robbery were arrested on Saturday by Beverly Hills police.

In a similar incident Friday afternoon, a group of 10 men or more invaded a store in the city’s Fairfax district and started grabbing merchandise without paying for it, pushing employees out of the way before fleeing the scene, according to LAPD.

Police are investigating possible ties between that incident and a flurry of other robberies and retail thefts on Friday and earlier in the week, including two smash-and-grabs reported on Wednesday, an LAPD spokesperson said.

The rash of retail crime prompted the LAPD to place its officers on a citywide tactical alert on Friday afternoon.

Mass robberies also were reported on Friday at two Best Buy electronics stores in the Minneapolis-St. Paul area, one of them involving as many as 30 suspects, while a spree of pre-dawn retail burglaries were under investigation in Chicago.

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In one of the biggest flash-mob robberies reported on the West Coast in recent days, police in the San Francisco suburb of Walnut Creek were seeking about 80 suspects who swarmed and ransacked a department store last Saturday.

(Reporting by Steve Gorman in Los Angeles; Editing by Paul Simao)

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