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Euro under pressure in Asia amid ongoing debt woes

OKYO: The euro stayed under pressure in Asia on Friday amid investor jitters over the European debt crisis.

The common currency bought $1.3309 in Tokyo afternoon trade, compared with $1.3327 in London late Thursday. Against the Japanese currency it firmed to 103.03 yen from 102.87.

The dollar edged up to 77.42 yen from 77.11 as Japan’s finance minister said his ministry has been vigilantly watching for signs of speculative yen-buying movement in the foreign exchange markets.

The euro was on a downward trend as investors took a cue from Moody’s downgrade of Hungary’s credit rating, said a senior dealer at a major bank.

“You should expect volatile euro trading ahead as there’s much speculation going around, but what’s for sure is the euro is set to fall in the longer term as the debt woes are just too far from their end,” the dealer said.

German, French and Italian leaders pledged Thursday to propose modifications to European Union treaties to further integrate economic policy, but they played down suggestions that the European Central Bank would have a greater crisis-busting role.

Japanese Finance Minister Jun Azumi urged European leaders to take more steps to calm markets as the impact of the debt crisis spreads globally. (AFP

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Japan PM woes persist before vote; party in disarray

in.reuters.com

Japan PM woes persist before vote; party in disarray

TOKYO- july 14 – Japan’s ruling bloc voted down a no-confidence motion against embattled Prime Minister Taro Aso on Tuesday, but chaos deepened within his party as fears grew of a historic defeat in a national election next month.

A loss for Aso’s coalition in the Aug. 30 general election would end half a century of nearly unbroken rule by the pro-business ruling Liberal Democratic Party (LDP), struggling to revive the economy with massive stimulus spending.

The LDP’s woes have raised the chances of the opposition Democratic Party taking control of the lower house and breaking policy deadlocks in parliament, where opposition parties already control the upper chamber and can delay bills.

The Democrats, trying to make the most of the LDP’s falling popularity before the election, submitted a no-confidence motion in the lower house against Aso’s cabinet by criticising its economic policies.

“The cabinet has been spending large amounts of money for the economy but we can only think that it was aimed at winning support for the election,” said Democratic Party leader Yukio Hatoyama. “The measures won’t improve people’s livelihoods.”

As expected, the motion was rejected by the ruling bloc’s majority, although a non-binding but embarrassing censure motion against Aso was adopted by the opposition-controlled upper house. The Democrats plan to boycott debate in parliament before Aso dissolves the lower house early next week.

The Democrats hoped that by forcing LDP lawmakers to back Aso, it would make it harder for his critics in the party to persist in trying to dump him ahead of the election.

Alarmed by falling public support for Aso, lawmakers in the long-ruling party have openly called for him to quit ahead of the election and bring forward a vote for the party leadership set for September.

PARTY DISARRAY

Former LDP Secretary-General Hidenao Nakagawa repeated calls for a leadership change, but Aso has refused to quit.

“We must fight now and it is as a matter of course that we fight united,” Aso told a meeting of lawmakers. “Unless we are united, we won’t be able to fight well.”

Japan has had four LDP leaders in four years and voters may not be impressed with another change at the top. The party lacks an obvious successor who could guarantee a jump in popularity and boost the LDP’s chances in the national poll.

The Democratic Party was not without its own headaches after party leader Yukio Hatoyama apologised for the fact that some people listed as his political donors were dead.

The Democrats’ ambitious spending plans have also come under scrutiny from financial analysts, with some saying policies such as cash allowances for families and free highway tolls could lead to more government bond issuance and push up yields.

But domestic media have focused on the disarray spreading within the LDP. On Tuesday, its chief election strategist, Makoto Koga, offered to quit, although the party’s No. 2 said he would not accept the resignation.

LDP lawmaker Koichi Kato said party leaders had yet to reach consensus on whether to hold a meeting of lawmakers from both chambers of parliament, sought by many of Aso’s critics.

“The secretary-general talked at great length at the end,” he told reporters after a party gathering. “But then a lot of people started to leave the room and in the end there was no conclusion.”

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SCENARIOS – Japan PM in pinch, opposition has woes before poll

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Japan’s Prime Minister Taro Aso speaks during a joint news conference with U.N. Secretary-General Ban Ki-moon at Aso’s official residence in Tokyo July 1, 2009.

SCENARIOS – Japan PM in pinch, opposition has woes before poll

TOKYO (Reuters) – Moves to ditch unpopular Prime Minister Taro Aso are likely to grow ahead of a national election after the ruling bloc lost a key local race on Sunday, but the opposition has its own headache over a funding scandal.

The latest opinion polls showed the Democrats lead Aso’s Liberal Democratic Party (LDP) ahead of a lower house election due by October, but the gap has shrunk after the Democratic Party’s leader admitted misreporting donations.

Below are scenarios for how developments may unfold before the election. No major economic legislation is before parliament, so the jockeying is unlikely to have an immediate impact on policy, and ultimately what matters is who forms the next government.

The Democrats have pledged to reduce bureaucrats’ grip on policy, cut waste and pay more heed to consumers and workers’ interests than to companies. But like the LDP, they are putting priority on the need to foster an economic recovery rather than the repair of Japan’s tattered public finances.

PROSPECTS OF EARLY ELECTION FADING?

Aso is thought to want to dissolve the lower house for an election on Aug. 2, Aug. 8 or Aug. 9 after returning from this week’s G8 summit in Italy, for which he departs on Monday.

Some analysts say chances of that scenario are fading after an LDP candidate lost a tight race for governor of Shizuoka, central Japan, on Sunday.

A poor performance in a July 12 Tokyo Metropolitan Assembly election — seen as a bellwether for the national poll — would logically make it even less likely.

Others, though, said the possibility that a desperate Aso would dissolve parliament’s lower house soon after the Tokyo election could not be ruled out.

PARTY DUMPS ASO

Moves to dump Aso are expected to heat up following Sunday’s local election loss and intensify further if the LDP loses its status as top party in the Tokyo assembly, with possible successors including Health Minister Yoichi Masuzoe.

But Aso is the third prime minister to take office since the LDP won big in the last general election for the lower house in 2005, so changing leaders again might well outrage voters.

Finding a successor popular enough to turn the tide for the ruling bloc could be difficult.

The LDP’s poor outlook has also prompted talk of new parties, with former internal affairs minister Kunio Hatoyama, who quit the cabinet last month, and ex-financial service minister Yoshimi Watanabe, who left the LDP in January, possible focal points.

WAITING GAME

A weakened Aso might hold on in hopes that huge government stimulus steps will bolster signs of recovery from Japan’s worst recession since World War Two, encouraging voters to stick with the ruling bloc. Possible election dates in this scenario include Aug. 30, Sept. 6 and even Oct. 18.

LDP heavyweights will likely be more inclined to wait after recent surveys showed that a scandal over improper reporting of political donations by Democratic Party leader Yukio Hatoyama is eroding the opposition party’s lead over the long-ruling party.

The Democrats have already lost one leader to a funding scandal and some analysts said further erosion of voter support might even prompt them to ditch Hatoyama for Secretary-General Katsuya Okada, a policy-maven with a “Mr. Clean” image.

But the ruling party itself is far from immune to scandals.

DEMOCRATS’ WIN STILL LIKELY

The Democratic Party still looks on track to take power in the general election, although the scandal over Hatoyama’s donations is endangering its chances of winning a majority without two small allies, one leftist and one conservative.

Even if the Democrats win a majority on their own, they are expected to form a coalition with those allies, since their cooperation is needed to control the upper house. That could make policy formation a bit bumpy.

Should the ruling bloc manage to cling to power, it looks certain to lose the two-thirds majority that allows it to override the opposition-controlled upper house.

That means policies would become even harder to implement, unless lawmakers switch sides or form a “grand coalition”.

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