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) Japan Weakens
Yasuo Fukuda faces an uphill battle as Japan's new prime minister.The 71-year-old has to heal a rural community that feels left behind after five years of combative economic reforms while imposing structural changes to boost the world's second-biggest economy.The former cabinet secretary has to restore the battered credibility of his ruling Liberal Democratic Party after a scandalous 12 months and work with a hostile Upper House in Parliament.The son of Takeo Fukuda, a former prime minister in the late 1970s, has to face the policy dilemmas of an aging population and a massive public debt that is 150% of Japan's gross domestic product.He must deal with weak wages growth and stubbornly high unemployment in some areas.The bespectacled party veteran said he had "drawn the short straw" to replace Shinzo Abe, 53, who was hospitalised shortly after resigning as prime minister after only one year in power.Yasuo Fukuda says he will not reverse policies that have helped Japan's economy."We have to promote reform," he said."The world is changing, and if we don't change we will be left behind."And he has acknowledged the tough challenges."Japan is at a turning point," he said."The population is shrinking and greying and the social structure is changing."We have to raise labour productivity to meet these challenges."Fukuda, who spent many years as an oil company salaryman, has received mixed reviews.He has been described as mild-mannered, a foreign policy dove, shrewd and tough, a quiet compromiser, a moderate on international affairs and typically bland but sometimes testy.Some Japanese fear he could represent a return to the old days of Japan.Others have said he will be a "good caretaker" as the new prime minister, a reference to opinion polls showing a majority of the Japanese people want an early election in summer time next year."This is something that we should consider carefully," Fukuda said.An election is not legally required until September 2009.He has held out an olive branch to the main opposition Democratic Party of Japan: "I want to have dignified discussions with the aim of protecting the people's livelihoods and national interests."But financial markets will be unforgiving if the reform agenda stalls.Standard & Poor's, a credit ratings agency, said it might lower its AA credit rating on Japan if the new Fukuda government did not continue the path of fiscal restraint."The ratings of Japan could come under pressure if political gridlock resulted in a reversal of the government's fiscal consolidation," S&P said in a statement."Policy risks present a serious challenge to improvements in Japan's economic and credit outlook."Japan's official interest rates of 0.5% are the lowest among rich countries.Last year the Bank of Japan (BOJ) first raised its official rates by a quarter of a percentage point to 0.25% after five years of zero interest rates due to an anaemic economy for more than a decade.The ultra-low rates have fuelled demand for yen carry trades.These risky bets involve investors borrowing the low-yielding Japanese currency to fund investments in high-yielding currencies, such as the Australian and New Zealand dollars."There is little pressure for the BOJ to consider aggressive moves on rates in the absence of higher inflation," ANZ Investment Bank senior currency strategist Tony Morriss said in a weekly report.Analysts at Westpac said the August BOJ minutes indicated the central bank's outlook remained basically on track, implying the board was taking a "glass half full" attitude on recent soft data."The board has some thinkers who feel that normalisation should proceed as soon as stability in offshore financial markets is again apparent," Westpac analysts said in a report.UBS recently trimmed its 2008 growth forecast for Japan by 0.1 percentage point to 1.8%.Just over a year ago, Fukuda said low official rates in Japan were abnormal but putting Japan's public finances back in order was the main priority for the ruling LDP government.Some analysts believe Fukuda's election to the top job will be positive for financial markets."It was good for financial markets to see Fukuda chosen as the new leader because of his clear commitment to fiscal consolidation," Seiji Shiraishi, chief economist at HSBC Securities in Toyko, was quoted by Reuters as saying.Japan's Asian neighbours are also likely to welcome Fukuda, who has ruled out visiting the controversial Yasukuni Shrine, which is often at the centre of political storms.Although the shrine is dedicated to about 2.5 million people who have died in Japan's conflicts between 1853 to 1945, it also venerates 14 convicted Class A war criminals."Fukuda respects other Asian countries," Zhou Yongsheng, a professor at the Institute of China Foreign Affairs University, was quoted by the Wall Street Journal as saying. More>> - (
) Whoever becomes PM, Japan fiscal control may suffer
TOKYO - Whoever becomes prime minister of Japan next week after Shinzo Abe's shock resignation will inherit an unpopular administration and face pressure to boost rural spending to revive support, despite high government debt.Japan's economy has been growing steadily over the past six years but it contracted slightly in the April-June quarter and faces problems in the years ahead from an ageing population and growing competition in world trade.
Analysts see no big difference in economic thinking between frontrunner Yasuo Fukuda and Taro Aso in the race to lead the ruling Liberal Democratic Party, and hence the country, and their focus on rural issues has raised fears about budget discipline.
"They see the need for steps to win back votes in the rural areas after election defeat, while calling for continued efforts to push forward reforms and fiscal consolidation," said Masaaki Kanno, chief economist at JPMorgan Securities Japan. More>>
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) (AFX UK Focus) 2007-10-16 15:24 GMT: Rosneft Q2 net soars to 7.655 bln usd from 1.077 bln on Yukos auctions UPDATE
(updates to add details on payments from Yukos bankruptcy proceedings)MOSCOW (Thomson Financial) - OJSC Rosneft said its second-quarter net income soared more than seven-fold to 7.655 bln usd, up from 1.077 bln thanks to payments from Yukos bankruptcy auctions, the consolidation of its Tomskneft acquisition and organic growth.
Rosneft booked 7.920 bln usd in one-time gains from the Yukos proceedings.
Sales rose to 10.785 bln usd from 8.602 bln.
Russia's largest crude producer also issued a separate adjusted net figure that included one-off effects related to Yuganskneftegaz's tax debt as well as other penalties accrued by some of the numerous assets of bankrupt Yukos it has acquired. The figure also excluded the one-off payments.
By this measure, second-quarter adjusted net rose to 1.657 bln usd from 1.108 bln. More>>
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) Moody's Upgrades Japanese Government's Rating For Domestic Debt Securities To A1
(RTTNews) - Japanese government's rating for domestic debt securities was upgraded to A1 from A2, the Moody's Investors Service said Thursday. The rating agency expects continuity in fiscal policy under the new government of Prime Minister Fukuda.
The report added that the leveling off this year of Japan's government debt trajectory supports the stable outlook. Further, the agency said Japan's Aaa foreign currency country ceilings, government's Aaa rating for internationally issued bonds, the Prime-1 short-term foreign-currency ceiling, the Aaa local currency guideline, and the Aaa local-currency bank deposit ceiling upgrade were unaffected by the upgrade of Japanese government's rating for domestic debt securities.
Moody's Senior Vice President, Thomas Byrne said "The commitment by the new government of Prime Minister Yasuo Fukuda to continue a policy of fiscal consolidation, mainly through capital expenditure cutbacks, will likely lead to narrower general government budget deficits and the attainment of the government's objective to achieve a primary surplus on the general government budget balance by the targeted year of 2011."
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