Japan's Economy Dips As New Sales Tax Bites

Japan's economy has shrunk by 7.1%, on an annualised basis, amid pressure on the government to halt a second big hike in sales tax.

The figures come as a blow to Prime Minister Shinzo Abe and his plan to rejuvenate the economy.

It was the steepest quarterly drop in the world's third largest economy since the 2011 earthquake and tsunami.

Gross domestic product (GDP) in the three months to the end of June contracted 1.8% from the first quarter, worse than the previously estimated fall of 1.7%.

The annualised basis drop of 7.1% - calculated if the performance was replicated over a 12-month period - exceeded the 6.8% preliminary estimate.

The annualised rate means it was the worst performance since early 2009 during depths of the global financial crisis.

Experts said it was a result of a 3% rise in sales tax in April to 8% - the first increase for 17 years - designed to increase revenue and reducing Japan's massive national debt.

It is due to be raised again, to 10%, in 2015.

The economy had been expanding in the first quarter, as consumers splashed out on goods ahead of the sales tax rise.

A weakened yen had also helped the economy and exporters, spurring on a stock market rally, amid a monetary easing policy.

"Expectations will likely strengthen for further monetary easing by the Bank of Japan and more spending by the government," SMBC Nikko Securities chief economist Junichi Makino said.

Meanwhile China, which has shot past Japan to be the world's second largest economy, announced a surge in the August trade surplus to a record monthly figure of $49.8bn (£30.8bn).

Imports fell 2.4% year on year, while exports increased 9.4% in the period.

The results came on the heels of data showing softness in China's economy during the current third quarter, prompting economists to expect officials to take further steps to boost growth.

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Business Leaders Sucked Into Independence Row

By Ian King, Business Presenter

Business people hate getting involved in politics, as a rule.

There is little upside to getting involved in political spats, particularly for those running consumer-facing businesses, as such interventions often risk alienating customers.

Shareholders do not like to see chief executives of the companies in which they are invested getting involved in politics, either, as it is a distraction from making them money.

Like it or not, though, business leaders have been sucked into the debate over Scottish independence ahead of the referendum.

Both sides have rolled out some big names, too, with the 'Yes Scotland' campaign's supporters including Sir Brian Souter, the Stagecoach founder, Ralph Topping, until recently the chief executive of William Hill, and Sir George Mathewson, the former chairman of Royal Bank of Scotland.

Sir George, a long-time supporter of Scottish independence, told Sky News there were plenty of benefits for the Scottish economy in the event of a 'Yes' vote.

"It would mean the Scottish government was responsible for both sides of the balance sheet - for the income and the expenditure," he said.

Sir George Mathewson says voting 'yes' will bring many economic benefits

"I think we can better use the revenues we have - Scottish GDP is about the same per head as the UK as a whole, and that's not counting the oil.

"I think we can make much better use of the oil revenues than historically by the UK, and we can do things to tailor the assets we have rather than the UK government as a whole will do, but I also like to think the social aspirations of Scotland will be better catered for in an independent Scotland.

"We will no longer have to go cap in hand to the UK government if we have different plans for education and health."

The Better Together campaign also has some big Scottish business names backing it. They include Douglas Flint, the chairman of HSBC, Andrew Mackenzie, chief executive of BHP Billiton - the world's biggest mining company - and Keith Cochrane, chief executive of Weir Group, the £5.6bn pump and mining equipment maker.

Keith Cochrane says voting 'no' will ensure 'the best of both worlds'

Mr Cochrane, who recently helped co-ordinate a letter of business leaders urging Scots to support remaining in the UK, said he was worried about the uncertainty that a 'Yes' vote would create, particularly over the currency that an independent Scotland would use.

But he said his main reason for voting 'no' was that businesses would do better from remaining in the United Kingdom.

He told Sky News: "I will vote no because I think we can have the best of both worlds. A strong Scottish Parliament, focused on the domestic agenda, but, as part of the UK, we can benefit from being a part of a domestic market of 63 million - the skill, the ability to manage risk far more effectively than as an independent Scotland."

The key issue facing every voter in the Scottish referendum is whether Scotland's economy will be stronger, and more jobs created, in the event of independence.

Few people are better placed to speak out on this subject than business people and wealth creators. It is good that they are doing so.

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Europe Agrees On Fresh Russian Sanctions

European leaders have agreed to hit Russia with a fresh round of sanctions - despite Moscow signing up to a ceasefire in Ukraine.

The sanctions include credit restrictions on Russia companies, export bans, travel bans and asset freezes on a new set of officials, according to a European Union diplomat who spoke on condition of anonymity.

Two branches of the world's biggest oil producer - Gazprom Bank and Gazprom Neft - are targeted by the measures, said the diplomat.

Speaking at the end of a Nato summit in Wales on Friday, David Cameron said sanctions would continue despite both sides agreeing to the 12-point peace plan.

However, the Prime Minister said they could be lifted if a lasting peace was found.

The new restrictions, which will be imposed early next week, come as Britain agreed to supply 1,000 troops to a Nato rapid response force aimed at countering Russian aggression in Ukraine and Eastern Europe.

Nato Secretary General Anders Fogh Rasmussen revealed the plan for the Spearhead force after discussions with members in Newport.

Ukraine was a dominant topic on the final day of the Nato summit

"This decision sends a clear message: Nato protects all allies at all times," he said.

"And it sends a clear message to any potential aggressor: should you even think of attacking one ally, you will be facing the whole alliance."

Western leaders accuse Russia of sending thousands of troops into the east of Ukraine - prompting fears of future incursions into other Eastern European countries.

Mr Rasmussen said the Spearhead force would establish a command-and-control presence in the east of allied territories ready to deploy air, sea and special forces in the event of aggression.

He told Sky News Tonight: "We have decided to improve our ability to act swiftly. The force could be deployed within very few days if needed.

"The intention is to strengthen the defence of our allies."

Mr Rasmussen said alliance countries would contribute troops on a rotational basis to the high-readiness force.

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UK Airlines Axe Flights Due To Italian Strike

Thousands of UK air passengers suffered disruption to flights as a result of a strike by Italian air traffic controllers.

Ryanair said it was forced to cancel 96 flights to and from Italy, including a number serving UK airports, during the four-hour walkout on Saturday.

EasyJet had to axe a further 60 flights, including 20 in and out of the UK.

British Airways also had to re-schedule a number of flights.

The strike took place from 11.30am to 3.30pm UK time.

It was expected to cause delays throughout the day - but Ryanair said its services had now returned to normal.

Ryanair has apologised for the disruption

Its spokesman, Robin Kiely, said: "We sincerely apologise to all passengers who have had their travel plans disrupted by these unjustified ATC (Air Traffic Controllers) strikes."

Easyjet said it had offered anyone flying to or from Italy during the strike the chance to transfer their flights to another day free of charge.

A spokeswoman for consumer organisation Which? said: "If you have a flight delay because of a strike, your airline has an obligation to offer you assistance if the delay is expected to go beyond a certain point.

"You could be entitled to food, drink and overnight accommodation, if required.

"Our advice is always to contact your airline before travelling to the airport to check if your flight has been affected."

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Phone Snatchers' Favourite Handsets Revealed

Apple's latest iPhones have topped the list of handsets most likely to be targeted by thieves.

The iPhone 5 was named the phone most likely to be stolen in a new Government consumer study.

In fact, Apple products filled the top four places of the Home Office's Mobile Phone Theft Ratio.

The Blackberry 9790 sneaked in at number five.

Samsung and HTC phones also won a spot in the Top 10.

The list, published by Home Secretary Theresa May, analysed theft data from August 2012 to January 2014.

According to a crime survey for England and Wales, some 742,000 phones were stolen in the 2012/2013 period.

The Metropolitan Police reported almost 100,000 mobile phone thefts in London alone during 2013. 

The paper found that 14 to 24-year-olds are most at risk of phone theft

Ms May said: "Crime has fallen by more than 10% under this government.

"However, the level of mobile phone theft remains a concern and people are increasingly carrying their lives in their pockets, with bank details, emails and other sensitive personal information easily accessible through mobile phones.

"This is why it is vital that government, police and industry work together to tackle this crime."

Mrs May said the Government was working closely with industry leaders to find a way to prevent mobile phones being reactivated overseas. 

That, in turn, could cut demand for stolen products.

She said "vital action" was also being taken to introduce near features to allow phones to be tracked and wiped when they are reported missing.

The paper found that 14 to 24-year-olds are most at risk of theft, with women being particularly vulnerable.

It includes a list of steps people can take to protect themselves from theft, warning that people are most likely to have phones taken directly from their person.

It also urges people not to leave their phones unattended, for example at a table in a bar.

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Exodus Of Brits From Economic Woes in Cyprus

By Tom Parmenter, Sky News Correspondent

British expats are packing up and leaving Cyprus as the effects of the financial meltdown continue to be felt.

Removals firms on the island have seen huge demand from people moving back to the UK, with immigration from the east helping replace those on their way out.

Significant numbers of Russians and Chinese are moving in, with the attraction of an EU passport and the freedom to move around Europe if they get residency.

Peter Morton Removals started operating on the island nine years ago, when most of their customers were arriving on Cyprus to begin a dream new lifestyle in the sun.

Stacey Morton, who juggles client requests and the logistics for the family firm, told Sky News Britons were still arriving but that just as many were heading home.

She said: "We are busy. Per day, I can get anything between 20 to 30 enquiries a day."

Jude Dudson says some families can no longer afford the live in Cyprus

Her colleague, Jude Dudson, moved over from Penrith in Cumbria six years ago.

She is part of the settled expat community but sees many sad stories where people have been forced to head home.

"It tends to be the older people who are now getting to the point where they need medical attention, or their pension has been affected," she said.

"The prices have gone up. The electricity is very, very expensive.

"Then you get the people with the young families that have lost their jobs and they can't afford to live here anymore."

It is 18 months since the financial crisis in Cyprus left the banking system paralysed and saw an unprecedented EU rescue package that clawed back cash from people's savings accounts.

The economy took a big hit and is still recovering, unemployment is high.

British expats are part of a changing society

The influx of Russians has continued apace and, desperate to open new revenue streams, the Cypriots are wooing the Chinese and many new housing developments have signs and brochures in Mandarin.

It leaves the British expats part of a changing society.

Michael Coombs, who lives near southern coastal city Limassol, told Sky News: "It is not the heaven it once was, it is very expensive to live here now.

"If you were retired you could see your pension eroded by the local costs but at the end of the day we have wonderful weather.

"We don't switch the central heating on in August so I'm not moving. I planned my finances around the worst possible case and it hasn't got there yet."

Renting is now becoming more popular than buying for the Brits and Russians moving to Cyprus, with people naturally more cautious of sinking their life savings into buying their place in the sun.

It is a story that is common right across the southern beaches of the Eurozone. 

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Microsoft Accused Of 'Massive Copyright' Breach

Microsoft has pulled a new tool from its Bing service after being accused of "massive infringement" of copyrighted photographs.

The Bing Image Widget let bloggers and other online publishers to embed collages and slideshows onto their websites based on search results.

But on Thursday Getty Images filed a lawsuit in New York alleging that the "beautiful, configurable image galleries and slideshows" contained copyrighted images.

It demanded that the widget be removed and asked for unspecified damages.

By Monday, Microsoft had an announcement on its Bing website saying the feature – which was still in beta testing – had been "temporarily removed".

The company said: "As a copyright owner ourselves we think the laws in this area are important.

"We'll take a close look at Getty's concerns."

The tool was launched late last month and markets to website publishers as a way to enhance how their sites look.

Legal papers filed by Getty said: "Rather than draw from a licensed collection of images, defendant gathers these images by crawling as much of the Internet as it can, copying and indexing every image it finds, without regard to the copyright status of the images and without permission from copyright owners like plaintiff."

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Pound Falls Over Scotland Referendum Fears

Sterling has fallen to a 10-month low against the dollar amid a sell-off of Scotland-linked companies, after a weekend poll showed a potential surge for independence.

The markets reacted with widespread negative sentiment over rising uncertainty about the United Kingdom's economic stability.

The pound was trading down more than 1% against the US dollar in midday trades. At 3pm it was still 0.99% down.

A broad range of companies with major interests in Scotland also saw their share prices fall on Monday.

Weir Group saw its shares drop more than 2.45%, SSE fell 2.44% and defence contractors Babcock and BAE Systems slid 4.87% and 2.37%, respectively.

The Royal Bank of Scotland dropped 2.88%, Lloyds Banking Group was down 3.36% and Standard Life fell 4.2%.

The drops eased slightly in afternoon trades.

Many leading pension funds have significant exposure to the banks and big companies affected by the sell-off.

Forex.com research director Kathleen Brooks told Sky News: "An independent Scotland would potentially have to start a currency from scratch, which is a hard thing to do.

"Obviously a new currency was formed with the euro, but that was decades in the making - and Scotland doesn't have the time so it would be a real uphill struggle."

The sell-off follows a YouGov poll in the Sunday Times which indicated that 51% of Scots supported independence while 49% backed the current Union.

It was the first time polls suggested there could be a 'Yes' vote for independence in the referendum on September 18.

On Sunday, Chancellor George Osborne sought to head off the surge of support for an independent Scotland by promising more powers north of the border, including control over taxation, job creation and welfare spending.

"The markets took for granted for so long that it was going to be a 'No' vote and as the polls narrow there has been a huge change in sentiment," Ms Brooks added.

"If there is a 'Yes' vote in 10 days' time things are going to get very ugly in the markets, not just for the pound, but for stocks and potentially raise our borrowing costs in the UK without Scotland."

And on Monday, party leaders began a final push to sway undecided voters as Alistair Darling, leader of the Better Together campaign, warned a Yes vote "would be forever". 

The Scottish Government, based on expert advice it has received, has said that Scotland should continue to use the pound as part of a currency union with the rest of the UK.

As a fully tradeable currency Scotland cannot be stopped from using sterling.

In arguing its case, the 'Yes' campaign said: "A formal currency union would provide the right balance of autonomy for government and stability for business, as well as straightforward access to markets in the remainder of the UK."

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Russia Threatens To Block Flights Over Sanctions

Russia has warned that it will hit back against the West if tougher sanctions are imposed over the conflict in Ukraine - as a shaky ceasefire in the region holds.

Dmitry Medvedev blamed countries backing Ukraine for damaging the Russian economy with "stupid" sanctions and suggested Moscow could retaliate by stopping flights over Russian airspace.

The Russian prime minister told the Vedomosti newspaper Russia may have been too patient in responding to sanctions imposed so far by the United States and European Union over the Kremlin's role in Ukraine - and warned the mistake would not be repeated.

He said: "If there are sanctions related to the energy sector, or further restrictions on Russia's financial sector, we will have to respond asymmetrically. 

Ukrainian president Petro Poroshenko greeting steel workers in Mariupol

"If Western carriers have to bypass our airspace, this could drive many struggling airlines into bankruptcy. This is not the way to go.

"We just hope our partners realise this at some point."

A new package of EU-agreed sanctions, which would hit oil and gas giants Rosneft and Gazprom, is due to come into force on Monday but could be suspended if Russia is judged to be working towards a resolution of the Ukraine conflict.

A ceasefire agreed on Friday by envoys from Ukraine, the leadership of pro-Russian separatists fighting Kiev government forces, Russia and Europe's OSCE security watchdog has been tested by fighting in eastern Ukraine.

OSCE chair Thomas Greminger said on Monday that the truce was holding, although "it is still shaky".

The ceasefire is part of a peace plan to end the five-month conflict, which the United Nations' human rights envoy says has now killed more than 3,000 people.

Speaking on a visit to Mariupol, Ukrainian President Petro Poroshenko revealed separatists have so far handed over around 1,200 prisoners of war under the terms of the truce agreement.

Russia PM Dmitry Medvedev suggested Moscow may have been too patient

He said he had reinforced the frontline city with tanks, rocket launchers and aerial defences as he vowed: "We will not give up this land to anybody".

Updating MPs on last week's Nato summit in the House of Commons, David Cameron said he had agreed with Mr Poroshenko and the leaders of France, Germany, Italy and the US that a "proper peace plan" that respects Ukraine's territorial integrity was needed.

Ukrainian forces said they had come under sporadic fire overnight from pro-Russian separatists in eastern Ukraine and listed rebel violations of the agreement in five sites, while the separatists accused government forces of preparing to storm a town near rebel-held Donetsk, the region's industrial hub.

There were no reports of any overnight casualties.

A tentative truce is to be holding amid tension around Donetsk and Mariupol

Both the rebels and the Ukrainian military insist they are strictly observing the ceasefire and blame their opponents for any violations.

One woman was killed after shelling resumed near Mariupol on Saturday, while the area around Donetsk airport was hit by blasts on Sunday.

Before the ceasefire was agreed in Minsk, Russian-backed separatists had been advancing on Donetsk airport and Mariupol - a key city between Russia and Crimea, which Moscow annexed in March.

The Ukraine crisis could provide a tense backdrop to talks on Thursday between Russia and the US over a 1987 arms treaty agreement - which a Russian general suggested pulling out of earlier this year.

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Smaller Energy Firms Luring Big Six Customers

Labour Pledge To Get Tough With Energy Firms

Updated: 9:31am UK, Thursday 21 August 2014

Energy companies' licences could be revoked by a new regulator to help protect the interests of the public under a Labour government, the party has announced.

Shadow energy and climate change secretary Caroline Flint said the current Government had helped create a "broken energy market".

And she said Labour would give a tough new regulator the power to cancel energy firms' licences if they repeatedly commit the most "serious and deliberate breaches of their licence conditions which harm the interests of consumers".

Figures show energy companies have continued to "mistreat their customers" and face another 16 investigations into mis-selling, poor customer service and other bad practice.

This comes despite Ofgem issuing 30 fines, worth a total of more than £87m, since 2001.

Ms Flint said Labour's reforms would see the regulator producing an annual scorecard for energy suppliers, reporting on the firm's performance and identifying areas of concern.

She claimed household energy bills had risen twice as fast as inflation and four times as fast as wages since 2010 - and that UK energy prices had risen faster than almost anywhere else in the developed world since Labour lost office.

"The public have a right to be treated fairly by energy companies," she said.

"Where firms fail to meet these standards, there must be tough and decisive action. Too often energy companies seem to view the regulator's fines as a cost of doing business - not as a warning to get their act together."

She insisted that Ofgem's current powers to revoke a supplier's licence did not go far enough.

Ms Flint told Sky News: "They can revoke a licence if a company doesn't pay a fine or comply with an order.

"What we're saying is if there is persistent evidence that they continue to deliberately undermine their customers through bad practice, then all these things should be taken into account."

Labour says information disclosed by Ofgem under the Freedom of Information Act, shows it currently has 12 investigations ongoing and a further four at informal review stage.

Responding, a Conservative spokesman said: "We'll take no lectures from the party that brought Britain's economy to its knees.

"Labour left our country with a broken energy market and huge taxes on bills - meaning the number of people in fuel poverty nearly doubled in Labour's last five years.

"We're carrying out a full, independent inquiry to fix the broken market we inherited. And we're forcing energy companies to simplify bills so people can be sure they are getting the best deal."

An Ofgem spokesperson said: "Ofgem is always interested to work with government on any new powers or refinements to existing powers which would help to further protect consumers.

"Ofgem does currently have powers to revoke licences in certain specific circumstances including where companies have failed to comply with particular enforcement orders we have set requiring them to change or stop behaviours."

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