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Economic News

Ratings of Japan PM, ruling party fall on scandal

Ratings of Japan PM, ruling party fallonscandal

TOKYO (Reuters) – Voter support for Japanese Prime Minister Yukio Hatoyama and his party has fallen due to a funding scandal linked to his powerful No.2 party executive, two media surveys showed on Monday, raising the risk of a policy stalemate.

Opposition parties have threatened to boycott parliamentary debate on an extra budget to prop up the economy if the ruling Democratic Party dodges questions about the scandal ensnaring its secretary-general, Ichiro Ozawa.

The scandal could also threaten the Democrats’ chances of gaining a majority in a mid-year election for parliament’s upper house that they need to win to pass legislation smoothly.

Support for Hatoyama’s cabinet, which had already slid since he took office four months ago due to voters’ doubts about his leadership, fell to 42 percent in an Asahi newspaper poll from 48 the previous month. That was down from initial highs above 70 percent after Hatoyama took power last September.

A Yomiuri newspaper survey showed a steeper drop to 45 percent from 56 percent earlier this month.

Prosecutors have arrested three current and former Ozawa aides. Japanese media say they are probing the source of funds improperly reported by Ozawa’s funding group, and suspect construction firms seeking government contracts were involved.

Hatoyama said on Saturday he would back Ozawa’s decision to stay on in his key post and urged him to fight on.

That stance has drawn fire from Japanese media and the opposition as suggesting bias against the prosecutors, but Kyodo news agency said the premier repeated his position on Monday.

PRESSURE TO RESIGN

Equally disturbing for the government, the percentage of those planning to vote for the ruling party in the upper house election fell to 28 percent from 35 percent in the Yomiuri poll.

That compared to 21 percent who said they would opt for the opposition Liberal Democratic Party (LDP), little changed.

But 70 percent of respondents to the Yomiuri survey said Ozawa, who stepped down as party leader last year over a separate scandal, should resign from his No. 2 post.

“We must accept the figures from the polls sincerely,” Chief Cabinet Secretary Hirofumi Hirano told a news conference.

“Parliament opens today and our mission is to enact the extra budget as quickly as possible … and by so doing, realise policies that put priority on the people’s livelihoods.”

The Democrats and their allies could ignore any opposition boycott but doing so could further erode voter support.

The Democrats swept to power in an August election that ended more than half a century of nearly unbroken LDP rule, pledging to refocus spending on consumers and cut wasteful spending to help rein in Japan’s ballooning public debt.

But they need to win an outright majority in parliament’s less powerful upper chamber to break free of two small allies who often disagree on policy and ensure smooth passage of laws.

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Dollar falls to 14-year low vs yen on US outlook

Japan Dollar Asian World Markets

A Tokyo money dealer reacts as the U.S. dollar is traded at between 86.43 yen and 86.48 yen on the Tokyo foreign exchange in Tokyo, Japan, Thursday, Nov. 26, 2009. The dollar has tumbled to 14-year low against the Japanese yen after traders reacted to indications that U.S. interest rates will remain low and that Federal Reserve isn’t overly concerned about the dollar’s slide.

Dollar falls to 14-year low vs yen on US outlook

TOKYO – The dollar tumbled to 14-year low against the yen Thursday, adding to pressure on Japan‘s beleaguered exporters, amid indications U.S. interest rates will remain low and the Federal Reserve isn’t overly concerned about the dollar’s slide.

The dollar sank to 86.27 yen in Tokyo trading, the lowest since July 1995, and sending the Nikkei 225 stock average down by 0.6 percent to 9,383.24. Dealers were not ruling out further weakness in the currency.

Analysts said some investors were selling the dollar to buy gold, which surged to a record Thursday, and other commodities.

A strong yen is bad for Japan’s economy because it erodes overseas income for the country’s big auto and electronics exporters.

Toshiba Corp. President Norio Sasaki said the yen’s appreciation “could have a severe impact on our businesses.”

“I would like governments to coordinate in a bid to halt a surge in the yen,” Sasaki told public broadcaster NHK.

Toshiba, which makes everything from nuclear power plants to household electronics, is forecasting a $550 million loss for the fiscal year through March.

The dollar’s latest plunge also adds to concerns over China’s tight currency controls, which its trading partners say are giving it an unfair advantage in export markets.

While the yen, euro and Australian dollar are bearing the brunt of the dollar’s weakness, the Chinese yuan remains loosely pegged to the dollar — a level that American critics say is artificially low. Beijing has been cool to suggestions it ease its currency practices to allow the yuan to strengthen.

Finance Minister Hirohisa Fujii said Japan “will take appropriate steps if foreign exchange rates move abnormally.” But investors drove up the yen anyway, unconvinced that Tokyo — which hasn’t intervened in the currency markets since 2004 — will step in to sell the yen to try to weaken it.

“The perception is that Japanese authorities aren’t overly worried about the dollar and won’t intervene,” said Koji Fukaya, senior currency strategist with Deutsche Securities in Tokyo.

The dollar has also been falling against the 16-nation euro, which rose to a 15-month high Wednesday. It eased to $1.5103 on Thursday from $1.5132 late Wednesday.

The renewed slump in the dollar was driven largely by the publication Tuesday of the minutes to the Fed’s last rate-setting meeting on Nov. 3-4.

The Fed said at the time that it plans to keep interest rates at “exceptionally low levels” for an “extended period” — currently the Fed funds rate stands at a range between zero and 0.25 percent — and that the fall in the dollar had been “orderly.”

Currency traders seized on the reference to the dollar as the Fed is usually wary of talking about changes in currency values.

With the Fed likely to keep rates low, investors are looking to commodities and riskier assets for higher returns, said Masafumi Yamamato, chief foreign exchange strategist at Barclays Capital.

Japan seems to have adopted a policy of “benign neglect” regarding exchange rates, he said.

But with the government’s alarm over deflation, or falling prices, in the economy, policymakers may become more proactive, Yamamoto said. A strong dollar tends to fuel deflation by reducing the price of imports and raw materials. Falling prices can cut into corporate profits and could lead to lower wages.

“They must change if they want to stop deflation and they want to reduce the negative consequences on the Japanese economy through the currency market,” he said. “If there is no change, the dollar-yen will fall toward 85 yen.”

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No Thanksgiving rest for retailers in sales race

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Pedestrians pass a shop window display advertising Thanksgiving sales in New York, November 25, 2009.

No Thanksgiving rest for retailers in sales race

NEW YORK (Reuters) – U.S. shoppers may stretch tight budgets this year to reward loved ones after months of thrift, a softening of heart that store chains hope will erase the holiday season sales debacle of 2008.

Retailers from Wal-Mart Stores to Gap, RadioShack and Walgreens are opening their doors on Thursday as U.S. families celebrate Thanksgiving, aiming to capture early bird shoppers a day before the official start of holiday shopping on Black Friday.

The unsettled state of the U.S. economy, with a 26-year high in unemployment and tighter access to credit, has industry holiday sales forecasts varying from a decline of 3 percent to an increase of 2 percent.

“The consumer is confused. They don’t know whether to spend or not,” said Marshal Cohen, senior analyst at retail consultancy NPD Group.

As the holidays draw closer and deeper discounts beckon, consumers may splurge a bit more. Industry experts expect a strong turnout on the Black Friday weekend, but caution it will not mean a bumper holiday season as shopping trails off in the weeks before Christmas.

“The recession last year was a shock to the consumer. This year they are already tired of it,” Cohen said. “They might even reward themselves for being frugal for the whole year.”

The psyche of American shoppers is being closely watched, as a return to spending would drive overall U.S. economic growth. Early hopes for a consumer-led recovery have pushed retail shares up 47 percent this year, compared with a 23 percent rise for the Standard & Poor’s 500 Index.

Cohen, a 30-year industry veteran, travels to malls all along the U.S. East Coast over the holiday weekend. He now sets out on Thanksgiving Day as so many more stores open on the holiday itself. While traffic to stores on the Thursday is relatively light, people who do make it out are mostly hard-core shoppers and highly likely to buy.

“It’s the ultimate conversion factor,” he said.

MILLIONS TO SHOP, BROWSE

Up to 134 million U.S. consumers say they may shop for holiday gifts this weekend from Black Friday through Sunday, according to the National Retail Federation.

That is up from last year’s survey, taken weeks after a global financial crisis erupted, but still below consumer Black Friday plans reported ahead of the shopping season in 2007.

While most research in the last two months showed shoppers planned to spend less or the same in 2009 from a year ago during the holidays, that stance may be softening.

Nearly one-third of consumers surveyed by Deloitte said they now expect to spend more on the holidays than they had planned a month or two ago. Of those shoppers, 86 percent said they would spend more on gifts than previously thought.

The survey, conducted last week and released on Wednesday, polled 1,051 people with a margin of error of plus or minus 3 percent.

Retailers insist they will stand firm this year and not offer the profit-sapping discounts used to clear merchandise off shelves last year. Cohen estimates that markdowns won’t dip below 50 percent off, compared with the multiple discounts of 75 percent and more last year.

While that should help protect margins, it could prove to be a major disappointment to customers.

“With inventories so low, we don’t see the same level of promotion as we saw in prior years, which ought not to attract as many customers,” said David Berman of hedge fund Durban Capital in New York, which specializes in consumer and retail-related stocks.

Even the Black Friday tradition of midnight madness, in which consumers lined up ahead of store openings in the dead of night, may be waning. Many Walmart stores will be open straight through from Thanksgiving Day after a worker was trampled to death last year, while the nation’s biggest chains have already touted huge promotions online for days.

“This year, we are getting Black Friday sales for weeks before Black Friday at Sears, Kmart, Wal-Mart and Best Buy, among others, and have the ability to buy just about every ad online,” wrote Credit Suisse analyst Gary Balter in a note lamenting the lost thrill of Black Friday hunting.

“That is going to hurt sales of winter clothing, as we won’t have to stand in below-zero temperatures for that sliver of a savings,” he said.

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