A plan by Japan to raise the limit on sales of bills used for currency intervention and accounting for earnings on foreign reserves in yen may offer additional funds for a budget hit by dwindling tax revenues.
The borrowing ceiling for the so-called foreign-exchange special account will be lifted by 5 trillion yen ($56 billion) to 145 trillion yen for the next fiscal year should the parliament approve the proposed 2010 budget. A Finance Ministry official speaking on condition of anonymity said the increase reflects rising earnings on Japan’s $1 trillion of reserves.
Prime Minister Yukio Hatoyama’s administration is struggling to reduce a record debt burden and fulfill pledges to boost spending on childcare and education. The Finance Ministry has already tapped some special accounts that are excluded from the budget to help restrain the fiscal deficit.
“The move probably reflects the government’s aim to increase the transparency and flexibility of using excess money in special accounts” to help find funding sources for the budget, said Susumu Kato, chief Japan economist at Credit Agricole Securities Asia in Tokyo.
Speculation emerged this week that the increase in the ceiling on the bill sales was aimed at increasing the power of the Finance Ministry to intervene in the currency market. While Japan hasn’t stepped into the foreign-exchange market since March 2004, Finance Minister Naoto Kan took office in January saying he was prepared to do so in “emergency situations.”
No Intervention Link
“The increase in the limit has nothing to do with intervention,” said Tohru Sasaki, chief currency strategist at JPMorgan Chase & Co. in Tokyo. Sasaki, who used to work in the foreign-exchange division of the Bank of Japan, said the likelihood of intervention is “extremely low” at a time when the Group of Seven nations is urging China to make its yuan more flexible.
The yen traded at 89.38 per dollar at 4:39 p.m. in Tokyo from 89.02 late yesterday in New York. Japan’s currency reached a 14-year high of 84.83 last November.
The ministry issues short-term bills denominated in yen to finance currency intervention. It also sells the bills to account for profits on foreign reserves in yen. It saves the funds in the special account for addressing currency fluctuations and transfers some of the proceeds to the budget.
Earnings on Reserves
Rising earnings on Japan’s foreign reserves meant that the limit on sales of the securities needed to be lifted, the Finance Ministry official said.
Japan’s reserves, the world’s largest after China’s, have more than tripled in the past decade as the ministry bought U.S. Treasuries and other securities to contain gains in the yen that would hurt exporters. The country’s monetary authorities last stepped into the foreign-exchange market in the first three months of 2004, when they sold 14.8 trillion yen.
The increase in the ceiling is the first since the government raised it by 40 trillion yen for the fiscal 2004 budget, around the time Japanese authorities were last intervening in the currency market.
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Toyota’s pain is its rivals’ gain.
All major automakers but Toyota reported higher U.S. sales in February, and most took customers from their powerful Japanese competitor, which has been struggling with a series of massive safety recalls.
Toyota Motor Corp. said its U.S. sales fell 9 percent last month, while Ford, GM, Nissan, Honda and Hyundai all reported double-digit growth compared with February 2009, at the depth of the recession.
The gains may have been even higher without the blizzards that paralyzed the East Coast.
Other winners included Kia Motors Corp. and Subaru. Even struggling Chrysler Group LLC saw improvement. Toyota, by contrast, suspended sales of eight popular models in late January. And it spent last week answering questions from Congress about its safety record.
"We feel we’re getting our fair share of the Toyota business," said Susan Docherty, vice president of marketing at GM, whose sales rose nearly 12 percent.
February was the first full month since Toyota’s decision Jan. 26 to halt sales of some of its vehicles in the U.S. because of safety concerns. Those vehicles went on sale again as dealers repaired them, but Toyota’s image suffered.
Ford Motor Co. posted a 43 percent jump in February U.S. auto sales and outsold General Motors Co. for the first time in nearly a dozen years as it grabbed customers from struggling Toyota. Ford sold 334 more cars than GM in the U free credit report online.S. for the first time since August 1998, when GM was in the midst of a strike.
Most automakers reported that sales to rental car companies and other fleet buyers also were strong as companies began buying again after cutbacks last year. Fleet sales generally mean lower profits to automakers than sales to individuals.
Chrysler, for example, said sales rose half a percent, its first year-over-year monthly increase since December 2007. Car sales rose 38 percent, but truck sales dived 28 percent.
Hyundai Motor Co. said its sales rose 11 percent, driven by sales of the new Tucson small SUV. The company’s redesigned Sonata midsize car saw sales rise 58 percent.
The industry was expecting to see gains over February 2009, which was one of the weakest months in a very depressed year. Sales over President’s Day weekend — which traditionally kicks off the spring selling season — were robust, according to automotive website Edmunds.com.
Still, winter storms at the beginning and end of the month hurt sales on the East Coast and in the Midwest.
"Three and a half feet of snow on these cars," Docherty said. "It took our dealers a bit of time to get all that snow off here and get the customers back into the showrooms."
Owners of a Marion, Ill., golf club late last week finally got their long-awaited sit-down with U.S. Treasury officials to ask the agency to drop its objections to the club’s sale.
But Treasury did not indicate what action it might take or give a timetable, said Fritz Archerd, head of the golf owner’s group, who attended the meeting.
"There’s reason for hope. But there’s also reason for pessimism," Archerd said.
For the past 15 months, the Treasury has blocked the sale of the Kokopelli Golf Course because of the involvement of Zimbabwean national John A. Bredenkamp. He led a group that owned the golf course from 2001 to 2006. He retained a right to future profits when the course was sold again.
The problem is that Bredenkamp was named in late 2008 by Treasury’s Office of Foreign Asset Control to a list of people targeted for economic sanctions. These specially designated nationals, which include al-Qaida terrorists and drug kingpins, are prohibited from conducting any business in the U.S.
Treasury, which has declined to comment on the proceedings, accuses Bredenkamp of "gray-market arms trading and trafficking" and other endeavors to prop up Zimbabwe’s ruling regime.
Archerd said the Kokopelli investment lost about $750,000. A purchase price expected to be about $1 million would be enough to recoup that investment and pay off debt. So no profit would head to Bredenkamp if the golf club were sold to Marion-area owners quick payday loans.
Archerd said his group could no longer afford to invest in the golf club, featuring an 18-hole championship course once voted No. 3 in Illinois by Golf Week magazine. And yet, they cannot sell the course. It’s not even clear if the bank could foreclose on the property with the Treasury’s blocking order.
The plight of this golf course was the subject of a Post-Dispatch article last Sunday.
An economic sanctions attorney not involved in the case said he was surprised Treasury did not offer a solution at the sit-down meeting.
"I don’t understand why this hasn’t moved forward," said Clif Burns with Bryan Cave in Washington.
After Archerd’s meeting, the potential buyers indicated they had lost patience. Marion-area restaurateur David Hays said in a release, "We no longer are optimistic that we will see a timely solution to this dilemma."
Time — and money — does appear to be running out for Kokopelli. Staff already has been cut from 75 to one. The lawnmowers were repossessed last week, so there is no way to maintain fairways and greens. And next week the power company plans to turn out the lights.
Google is being scrutinized by European antitrust officials, who have notified the Internet search giant that three companies have complained about its practices.
The European Commission is investigating complaints made by Ciao! from Bing, which is a unit of Microsoft (MSFT, Fortune 500); UK price comparison site Foundem; and French legal search engine ejustice.fr, Google said.
The three are arguing that the search firm suppresses the ranking of its competitors in search results.
"The Commission has not opened a formal investigation for the time being," according to a statement released by the executive arm of the European Union. "As is usual when the Commission receives complaints, it informed Google earlier this month and asked the company to comment on the allegations cash advance."
Google (GOOG, Fortune 500), which revealed the inquiry in a post on an official company blog early Wednesday, said that given its growth, it wasn’t surprised its search and search advertising practices were being examined.
"This kind of scrutiny goes with the territory when you are a large company," senior competition counsel Julia Holtz said on the company’s European Public Policy blog.
She said that Google will provide information on the complaints and said that the company is confident its business operates in line with European competition law.
Taiwan and Thailand exited recession last quarter and Malaysia probably followed, as Asian economies lead the global recovery.
Taiwanese gross domestic product rose 9.2 percent in the fourth quarter from a year earlier and the Thai economy expanded 5.8 percent, according to reports today. Malaysian figures for the three months to Dec. 31, due for release on Feb. 24, may show GDP increased 3.4 percent last quarter, according to the median estimate of 14 economists surveyed by Bloomberg News.
Asian economies are paving the way for a global recovery from the worst worldwide recession since the Great Depression after central banks in the region slashed interest rates to record lows and governments increased spending by more than $1 trillion. The strength of Asia’s rebound has seen policy makers lead the way in withdrawing stimulus.
“Asia’s recovery is at least two quarters ahead of the U.S. and monetary authorities have been contemplating exit strategies for some time,” said David Carbon, head of economic and currency research at DBS Group Holdings Ltd. in Singapore. “With higher U.S. rates on the cards, Asia’s central banks can pursue their exit strategies with less to fear on the inflow and currency front.”
Policy makers in China, India and Vietnam are tightening monetary conditions amid signs that accelerating growth is fueling inflation and may led to asset bubbles. The U.S. Federal Reserve, which increased its discount rate by a quarter point to 0.75 percent on Feb. 18, has left its benchmark policy rate unchanged for more than a year.
Rising Demand
Asian stocks jumped by the most since November on speculation Federal Reserve Chairman Ben S. Bernanke will say in a report due to be released this week that U.S. interest rates will be kept low to spur economic growth. The MSCI Asia Pacific Index gained 2.4 percent to 118.14 as of 2 p.m. in Tokyo, the biggest increase since Nov. 30.
The emergence of the world economy from the global recession is encouraging companies in Asia to boost production and hire more workers. Singapore last week raised its economic growth forecast for 2010, predicting an expansion of as much as 6.5 percent this year.
Taiwan Semiconductor Manufacturing Co. and United Microelectronics Corp., the world’s largest makers of custom chips, are boosting capital spending this year after fourth- quarter profits beat analysts’ estimates.
‘Very, Very Strong’
Demand has been “very, very strong” in the computer, automotive and consumer electronics sectors over the past few quarters, Richard Han, chief executive officer of Hana Microelectronics Pcl, said in an interview with Bloomberg Television in Bangkok today. Hana makes parts for computers and mobile phones including Apple Inc.’s iPhone.
Taiwan’s fourth-quarter economic growth was the strongest since June 2004 and Thailand’s increase in GDP was the most in seven quarters.
China’s central bank on Feb. 12 ordered lenders to set aside larger reserves, aiming to rein in credit growth after banks extended 19 percent of this year’s 7.5 trillion yuan ($1.1 trillion) lending target in January and property prices climbed the most in 21 months. Goldman Sachs Group Inc. expects the Chinese economy will expand 11.4 percent this year.
Reserve Bank of India Governor Duvvuri Subbarao on Jan. 29 increased the cash reserve ratio to 5.75 percent from 5 percent, exceeding the median forecast for a half-point move in a Bloomberg News survey of economists. India is due to release GDP data for the December quarter on Feb. 26, along with the budget for the next fiscal year.
Emerging Asia
India’s $1.2 trillion economy may grow 7.2 percent in the current fiscal year through March, accelerating for the first time since 2007, the statistics office said Feb. 8.
“We expect GDP growth in emerging Asia to stay strong in coming quarters,” said Kevin Grice, an economist at Capital Economics Ltd. in London. “The most trade-dependent economies will eventually see slower GDP growth later this year and in 2011 as the global upswing loses momentum. But Asia’s rebound will not come to a complete halt and growth, by some distance, will stay higher than in any other part of the world.”
Brazil created a record number of jobs for the month of January, increasing the odds that policy makers may start raising the benchmark interest rate as early as next month to keep inflation in check.
Latin America’s biggest economy created 181,419 jobs last month, led by manufacturers, compared with a loss of 101,748 jobs a year earlier, the Labor Ministry said in a report today in Rio de Janeiro.
Yields on interest rate future contracts due January 2011, the most traded on Sao Paulo’s BM&F exchange, rose 1 basis point, or 0.01 percentage point, to 10.25 percent. Traders bet the central bank will raise rates by at least a quarter point next month, according to Bloomberg estimates based on rate futures.
“This figure clearly reinforces the view that the economy is expanding at a strong pace,” Pedro Tuesta, senior economist for Latin America at 4Cast Inc., said in a phone interview from Washington. “It increases the odds that the central bank may start raising rates in March.”
According to the median forecast in a central bank survey of about 100 analysts published yesterday, faster economic growth, fueled by domestic demand, will prompt policy makers to raise the benchmark interest rate in April from a record low 8.75 percent for the first time since September 2008 to keep inflation in check.
“Brazil is on track to reach an all-time high in job creation in 2010,” Labor Minister Carlos Lupi told reporters. “If there is an interest rate increase this year, it will be very small,” Lupi said.
Brazilian companies will continue to hire more workers throughout the year, driven by forecasts that the country will post “strong” growth in 2010, Aurelio Bicalho, an economist at Itau Unibanco, Brazil’s biggest non-state bank, said in an e- mailed comment.
Gross domestic product will expand 5.8 percent this year, after growing 0.2 percent last year, according to central bank estimates.
The government-registered job creation number is a balance of posts created minus job dismissals. Registered jobs, or so- called formal work, assure employees a range of benefits such as unemployment insurance, bonuses and retirement payments by the government.
Haitian Prime Minister Jean-Max Bellerive told an aid conference in Montreal that his country needs help with a “colossal” reconstruction from the Jan. 12 earthquake that left the nation in shambles.
“Haiti will need massive support in the medium and long term from its partners in the international community,” Bellerive said today at the conference attended by 20 governments and multi-lateral organizations. “The challenge will require that we do more, that we do better and certainly that we do differently.”
Aid groups called on those attending the meeting to cancel the Caribbean nation’s $890 million foreign debt. The meeting, to discuss long-term reconstruction and plan a full donor conference in March, is being hosted by Canadian Foreign Affairs Minister Lawrence Cannon. The U.S. is represented by Secretary of State Hillary Clinton.
Haiti was already the poorest country in the Western Hemisphere before the temblor, which killed more than 150,000 people and destroyed a third of the buildings in the capital, Port-au-Prince. The country’s infrastructure, including the water system, has collapsed and the government is unable to deliver services. Relief groups and foreign military forces are trying to reach the estimated 3 million of Haiti’s 9 million people affected by the quake.
‘Path to Development’
The donor nations’ plans must aim to “bring the country back on the path to development,” Bellerive said in a speech to the group. “Going back to the status quo ante is not an option.”
Reconstruction will have to include moving some people out of shantytowns that have overrun the capital, and fostering economic development outside Port-au-Prince, he said.
“The Haitian government is at work in precarious conditions, but it is able to provide the leadership the Haitian people expect of it in the colossal challenges on the way to development,” Bellerive said.
Most government offices and computer systems were destroyed the quake.
The U.S. has taken control of aid deliveries through Haiti’s sole international airport, and the United Nations has taken responsibility for the country’s security
Cannon said the delegates at the conference support the Haitian government’s effort to join in the reconstruction planning. Today’s meeting will help set out a “coherent” and “consistent” approach for supporting Haiti in advance of a major conference to be held in coming months.
‘Ready to Help’
“Your role is key, and your voice is clear guaranteed payday loans. We stand ready to help,” Cannon said.
Haiti’s foreign debt must be cancelled immediately, “accompanied by urgent action to support farmers and prevent a man-made food crisis exacerbating the hardship,” Oxfam Executive Director Jeremy Hobbs said in an e-mailed statement.
Cancelling debt is “indispensable to help the government of Haiti marshal the most resources possible” to rebuild the country, said Eric Faustin, president of Regroupement des Organismes Canado-Haitiens pour le Developpement, a Montreal- based non-profit aid group that focuses on Haiti.
Rescuers today wound down operations seeking survivors among the wreckage, and the UN reported that security in Port- au-Prince “remains calm but fragile, with isolated instances of looting.”
More than 150,000 bodies have been buried and 200,000 residents of Port-au-Prince have left the city, the New York Times reported Jan. 23, citing Marie-Laurence Jocelynn Lassegue, Haiti’s culture and communications minister.
Aid Groups
UN humanitarian chief John Holmes and UN development head Helen Clark are attending the Montreal meeting, along with representatives from the International Monetary Fund and the Inter-American Development Bank. Other participating nations include Japan, Mexico, Costa Rica, France and Spain.
Japan will pledge $70 million in aid at Montreal, Chief Cabinet Secretary Hirofumi Hirano told reporters today in Tokyo. The nation, which has the world’s second-biggest economy, had initially pledged $5 million, compared with the U.S. pledge of $100 million and $10 million promised by South Korea.
Japan also intends to send about 300 members of its Self- Defense Force to Haiti, serving with the UN peace-keeping troops, Hirano said.
Norway today doubled its humanitarian aid to Haiti to 200 million krone ($34 million).
Venezuela, Nicaragua and Bolivia said they will boycott the meeting to protest the U.S. military’s presence in the Caribbean, according to the German news service Deutsche Presse Agentur.
Former Cuban President Fidel Castro wrote in the official Cuban newspaper Granma that U.S. troops have “occupied” Haiti. The U.S. bolstered its presence in the country and offshore to 11,000 soldiers and sailors last week to help provide humanitarian assistance and security.
Treasurys were mixed late Wednesday following the government’s $21 billion offering of 10-year notes and after the Federal Reserve said economic activity is weak but recovering.
What prices are doing: The benchmark 10-year note was down less than 1/32 at 96-19/32, and the yield rose to 3.78% from 3.72% late Tuesday. Bond prices and yields move in opposite directions.
The 30-year bond was up less than 1/32 to 94-20/32 and its yield was 4.72%. The 2-year note was flat at 100-2/32 and yielded 0.96%.
What’s moving prices: Investors submitted bids totaling $63 billion at Wednesday’s auction of reopened 10-year notes. The bid-to-cover ratio, a measure of demand, was 3. That compares with 2.62 at the last 10-year sale in December.
It was the second of three auctions this week aimed at selling $84 billion worth of U.S. debt. On Tuesday the government received solid demand at its sale of 3-year notes. On Thursday, it will auction $13 billion worth of reopened 30-year bonds.
Meanwhile, the Fed’s reading on the economy, known as the Beige Book, said that while the economy remains weak, conditions are improving.
Separately, the Treasury posted a deficit of $91.9 billion in December, nearly double the shortfall of a year earlier need a personal loan with bad credit.
Bond prices were also pressured by comments from a key Federal Reserve official.
Charles Plosser, president of the Philadelphia Federal Reserve, said late Tuesday that the Fed should raise interest rates before unemployment reaches an "acceptable" level.
Plosser also said the central bank should not deviate from its plan to stop buying mortgage-backed securities this quarter.
What analysts are saying: Bill Larkin, a portfolio manager at Cabot Money Management, said Treasurys have been trading in a range since last week’s dour jobs report damped enthusiasm for more risky assets.
Government data showed Friday that employers cut 85,000 jobs in December after adding 4,000 jobs the month before. The nation’s unemployment remains at 10%.
Larkin said the market is also focused on the corporate sector as the quarterly reporting period gets into full swing.
"If earnings are mixed, we’ll probably stay where we are," he said. "If we get more strength in earnings, we could break out to higher yields."
CARACAS–A senior minister and close confidant of Venezuelan President Hugo Chavez resigned Sunday in a growing banking scandal that has triggered a purge of businessmen with ties to the government.
In a move likely to win him support, Chavez said he had accepted the resignation of Science and Technology Minister Jesse Chacon, whose brother was arrested Saturday following the closure of the bank he headed.
"Yesterday Jesse Chacon asked if the best thing for the government would be that he offered his resignation and I said I believe so. He will have to leave the government," Chavez said in his weekly television show where other ministers were among the audience.
Chacon took part in a 1992 coup that sought to bring Chavez to power and both men were jailed for their actions. He has held numerous posts under Chavez.
Police have also arrested Giuzel Mileira, the director of the Banco Real, bringing to eight the number of bankers in custody.
Another banker with government ties fled to Miami, Chavez said.
Those detained include a businessman who made more than one billion dollars partly by selling corn to government-subsidized supermarkets.
Venezuela last week closed the seven small banks for regulatory breaches including capitalization problems and unexplained funds, causing market turmoil as Chavez threatened to nationalize the financial system.
Most analysts agree that Chavez is unlikely to risk instability through a widespread nationalization of the country’s best-capitalized and profitable banks.
The rise of a new mega-rich elite during his decade in office has been a liability for Chavez, who wants to build a socialist society in Venezuela and took office in 1999 promising to end corruption.
The arrest of executives widely considered to be corrupt is likely to be popular with Chavez’s supporters before legislative elections in September.
More detentions are expected because authorities have issued 27 warrants including nine requests to Interpol for international arrests.
Reuters News Agency
Amelia A.J. Bond is opening a St. Louis office for George K. Baum & Co., a Kansas City-based public finance firm.
Bond worked as managing director and head of public finance for Wachovia Securities for two years after its merger with A.G. Edwards in 2007. Before the merger, she served for seven years as senior vice president and director of public finance for A.G. Edwards.
While leading the A.G. Edwards public finance department from 2001 to 2007, Bond supervised the doubling of annual revenue for the department.
From 2003 to 2006, Bond served on the Municipal Securities Rulemaking Board, the regulator for U.S. municipal bonds, and she was elected by fellow board members to serve as its chairman during the 2005-2006 fiscal year. She is only the second woman to have held that position in the organization’s 30-year history.
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