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Wayne T. Gattinella, WebMD CEO, Resigns

by AP on January 10, 2012

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INDIANAPOLIS — WebMD Health Corp. CEO Wayne T. Gattinella has resigned, and the healthcare information services provider said it stopped talking to potential acquirers about a sale of the company. The New York company also said Tuesday it expects 2012 earnings to be “significantly lower” than in 2011 as it faces tough competition and its drug company customers deal with patent expirations. WebMD provides health and benefits information to consumers, employers, doctors and health plans. The company’s shares plunged in heavy trading after it made the announcements. Chief Financial Officer Anthony Vuolo will serve as interim CEO while the company looks for a permanent replacement. Vuolo also serves as chief operating officer, and that responsibility will be taken over by members of a newly formed management committee that will work with the interim CEO. Citi analyst Mark S. Mahaney saw the leadership change as a negative for the company. He said in a research note Gattinella served as CEO for about six years, and the analyst has long considered him to be “a very capable executive.” Citigroup Global Markets Inc. has provided investment banking services to WebMD. The analyst also saw WebMD’s decision to stop exploring a possible sale as another negative. He said the company likely didn’t think it could get high enough bids given its weak fundamental trends. WebMD said a special committee of independent directors has ended its review of a possible sale of the company after discussions with several potential acquirers. Billionaire investor Carl Icahn took a 9.5 percent stake in WebMD in November, and his firm, Icahn Capital LP, has said it opposes a sale. Icahn did not return a call from The Associated Press seeking comment. WebMD said its 2012 revenue may fall by 2 percent to 8 percent as some of its drug company customers deal with patent losses that will affect their marketing expenses. WebMD also said it expects expenses to rise in the new year, and it is facing more competition in its consumer product networks mainly from ad networks and social sites. It expects earnings to be “significantly lower” than in 2011, but it didn’t offer earnings per-share guidance for the new year. “While we face near-term challenges, I am confident that there is significant growth opportunity ahead for WebMD,” Chairman Martin J. Wygood said in a statement from the company. “I believe that the pressure facing the pharmaceutical industry will ultimately prove to be the strong catalyst for a meaningful shift by them to digital marketing solutions.” The company will offer more details on its 2012 expectations on Feb. 23 when it reports on 2011 earnings. In November, the company announced third-quarter results that missed analyst expectations and cut its revenue estimates for the fourth quarter. It earned $14.2 million, or 24 cents per share, in the quarter on $135.1 million in revenue. WebMD, which cut its revenue outlook twice last year, said in November it expects fourth-quarter revenue to be $147 million to $157 million, which fell short of analyst expectations at the time. Company shares sank almost 23 percent, or $9.81, to $26.92 in midday trading, while the Nasdaq exchange climbed 1 percent. WebMD shares topped $58 in May but have fallen steadily since then.

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Art Markman, Ph.D.: How To Win A Negotiation

by on July 31, 2011

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There are lots of opportunities for negotiation these days. Bargain hunters wander through weekend garage sales and haggle with the sellers. Car buyers have to settle on a final price for a car with a dealer. House hunters send proposals back and forth trying to decide on a selling price for a house. There is a lot of interesting psychology in these negotiations. The first thing that happens in most negotiations is that either the buyer or the seller makes an offer. That initial offer serves as an anchor. Research on the rules that people use to make judgments suggests that we often use a strategy called anchoring and adjustment . According to this strategy, we start with some anchor point and the adjust our belief about the true value based on other information. In the case of a negotiation, we know that people try to buy low and sell high. So, if the buyer makes an offer, the seller knows that the initial offer needs to be adjusted upward to get a fair price. The key question is how much that offer should be adjusted. This issue was addressed by Yossi Maaravi, Yoav Gonzach and Asya Pazy in a paper in the August, 2011 issue of the Journal of Personality and Social Psychology . They were interested in the role that persuasive arguments might play during negotiations. Because people use the initial offer as an anchor, many people have suggested that including a persuasive argument for why the anchor is correct may minimize the amount that people adjust the anchor when making their counteroffer in the negotiation. For example, if you are interested in buying a house, the seller might ask for $350,000, arguing that the house was newly-renovated and is near good schools. Maaravi, Gonzach and Pazy argued that when people hear an argument in favor of the initial offer, they think of counterarguments. These counterarguments may actually push the counteroffer further away from the initial offer than it would have been had there been no persuasive argument. Someone looking at a house might find all the areas that still need renovation and think about other houses even closer to the better schools in town and give a low offer on the house. They supported this view in a number of studies. In one of the four experiments in this paper, half the people played the role of the seller of a factory, while the rest played the role of the buyer. Everyone received detailed information about the factory. In some groups, the seller was asked to make the first offer. For half of these groups, the seller also had to give arguments in favor of their offer. In this case, the counteroffers by the buyer were lower when the seller made arguments in favor of the initial bid than when the seller gave no arguments. The buyers were asked to write down reasons for their counteroffers, and they gave more reasons for making a low bid when they were responding to arguments by a seller than when there were no arguments. The final price the group agreed on was also lower when the seller made arguments with the initial offer than when no argument was made. The opposite pattern was observed for groups where the buyer went first. In this case, sellers generated more reasons why the buyer’s initial offer was bad when the buyer made arguments along with the initial offer than when there were no arguments. The sellers made higher counteroffers when there were arguments along with the initial offer than when there weren’t. Finally, the purchase price was higher when the buyer made arguments than when there were no arguments made. Putting all this together, then, it appears that it is hard to be persuasive when negotiating. People enter negotiations knowing that the other party is an adversary. Each side wants to get the best deal, and so they treat every piece of information given by the other party with skepticism. They find reasons why persuasive arguments are flawed and use those counterarguments when adjusting the anchor set by the initial offer. What does this mean for you? If you are involved in a negotiation, it is probably a good idea to make the first offer. That initial offer serves as an anchor. However, after you make that initial offer, resist the temptation to give reasons to justify that initial bid. Instead, let the other party come back with a counteroffer. Chances are, that counteroffer will not be adjusted as far away from your initial offer as it would have been if you had made arguments in your own favor.

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Art Markman, Ph.D.: How To Win A Negotiation

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European Union Cracks Down On Mobile Roaming Charges To Spur Competition

July 6, 2011

(AP) BRUSSELS — The European Union is introducing new rules that would make it cheaper to use mobile and smartphones abroad. The proposals from the EU’s executive Commission Wednesday seek to spur competition among providers and put new caps on roaming charges. For the first time, the EU is slapping caps on the price individuals have to pay for going online from a smartphone or tablet computer when moving from one country to another. The EU is made up of 27 countries. The European Commission also said that from July 2014 operators will have to open their networks to providers from another EU state, which would give consumers more providers to choose from. At the same time, consumers will be able to sign a separate roaming contract, allowing them to take advantage of cheaper offers when moving about. The new rules will kick in when the bloc’s existing regulation on mobile roaming expires at the end of June next year. While the current rules have forced the price of making calls down to 35 euro cents (about 50 U.S. cents) a minute when traveling in another EU country and kept a lid on the cost of receiving calls and sending text messages, the Commission believes that charges remain way too high. The Commission’s goal is to bring roaming prices in line with national ones by 2015, an important step in getting the 27-country bloc closer together and spurring business and freedom of movement in the EU’s internal market. The new rules would also apply in non-EU states Iceland, Liechtenstein and Norway. “This proposal tackles the root cause of the problem – the lack of competition on roaming markets – by giving customers more choice and by giving alternative operators easier access to the roaming market,” Neelie Kroes, who is in charge of the EU’s digital agenda, said in a statement. For the first time, the rules would also cap the price of going online from a smartphone or tablet computer. Using mobile Internet in another EU country can quickly drive up phone bills, with prices for downloading one megabyte of data averaging euro2.23 ($3.22) but sometimes going up to euro12 ($17.35), according to the Commission. One megabyte is equivalent to about 100 e-mails without attachments or a few seconds of streaming video online. Under the new proposal, charges for data roaming would have to come down to 90 cents a megabyte by July next year and sink to 50 cents by 2014. By that date, the price of making calls would be capped at 24 cents a minute, while incoming calls and text messages would cost 10 cents. At the center of the Commission’s proposals are efforts to increase competition between providers. From July 2014, operators will have to open their networks to providers from another EU state, which would give consumers more services to choose from. At the same time, consumers will be able to sign a separate roaming contract, allowing them to take advantage of cheaper offers from a different provider while keeping their regular number and SIM card. The Commission believes that more competition is the best way of forcing operators to bring down prices and stop price ceilings from effectively becoming price floors. The new rules still have to be approved by EU states and the European Parliament.

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U.S. Banks Finally Increasing Lending In Good Sign For Investors

July 6, 2011

Major U.S. banks appear to be finally opening the lending spigot. Second-quarter earnings reports due this month are likely to reveal a slight reversal of the long-term shrinkage in bank loan books, one of several positive signs for investors, bank analysts said. A number of other long-term clouds over the weakened banking sector may be clearing. Credit quality is on the mend, signaling that many large banks will bolster their bottom lines with money that had been reserved to cover losses on bad loans. And Bank of America’s startling $8.5 billion settlement with mortgage bond investors last week adds clarity and may spur rival banks to clear up their own legal liabilities from home loans. Another big question mark — how much banks will be hurt by a new law limiting debit card fees — was answered last week when regulators finalized rules that were not as ferocious as initially proposed. “We’re chipping away at the problems here,” said analyst Jason Goldberg of Barclays Capital. The earnings reports begin on July 14 with JPMorgan Chase & Co. Danger Signs Banks, of course, are far from being in the clear. Weak fixed-income trading and market volatility are believed to have weighed heavily on the biggest banks in the second quarter, while their net interest revenue continues to be pummeled by low interest rates. And low rates are expected to continue for the indefinite future. A growing loan book, however, could cover a multitude of woes. The Federal Reserve said last week that loans and leases in bank credit grew about 1 percent on an annual basis in both April and May, with the biggest growth — over 11 percent each month on an annual basis — coming from commercial and industrial loans. Real estate lending is still shrinking, and consumer lending, while stabilizing, is still tepid. Consumer lending grew just 0.1 percent on an annual basis in the second quarter, primarily from increases in credit cards and other revolving loans. “Banks are beginning to lend again and that’s a good sign,” said Timothy Ghriskey, co-founder of Solaris Group, which owns bank stocks. “There are a lot of issues out there that still have a potential impact on future earnings. This is going to take years.” Large banks are starting to loosen their standards for credit card applications, according to a Fed survey of senior bank loan officers in April. JPMorgan Chase, widely considered the strongest of the top three U.S. banks, is expected to report a second-quarter profit of about $1.22 per share, up from $1.09 a year earlier, according to Thomson Reuters I/B/E/S. Citigroup will be next to report, on July 15, and is expected to post a profit of 97 cents per share. A year earlier it earned 90 cents, adjusted for 1-for-10 reverse stock split in May. Bank of America’s mortgage settlement will likely bring it to a quarterly loss of $8.6 billion to $9.1 billion, or 88 cents to 93 cents per share. It reports on July 19. Regional banks such as US Bancorp and BB&T could be the biggest beneficiaries of loan growth since they won’t have large trading businesses offsetting increased lending fees. Even Regions Financial , the only one of the 19 largest U.S. banks that has not yet repaid the government bailout it received during the financial crisis, is expected to see its loss shrink to 1 cent per share. It lost $335 million, or 28 cents per share, in the comparable 2010 period. Kitchen-Sink Quarter Investors breathed sighs of relief last week over two costly developments that answered questions long weighing on the banking sector. BofA complemented the$8.5 billion settlement of mortgage repurchase claims from institutional investors with notice that it would take an additional $11.9 billion of charges for other mortgage settlements, and write down the value of its 2008 purchase of Countrywide Financial, among other items. The settlement put a ceiling on what other banks, including JPMorgan Chase and Wells Fargo & Co , could be expected to pay to resolve their own legal issues, investors said. “Everyone can assume that Countrywide was as bad as it got … that’s the worst-case scenario,” said Nuveen Investments analyst Alan Villalon. On the same day that BofA announced its settlement, the Fed unveiled final guidelines for its long-debated crackdown on fees that banks can charge merchants who accept debit cards. The rules on the “swipe” fees, mandated by the 2010 Dodd-Frank financial reform law, are expected to shave $9.4 billion from an estimated $23 billion of annual debit card processing revenues in the banking industry, according to CardHub.com. That’s far better than the $14 billion hit that many analysts had forecast. New capital surcharges from bank regulators, announced last month, also resolved some questions about global regulatory requirements banks will have to meet. On top of a base of 7 percent risk-based capital that banks must set aside, the biggest banks will have to add as much as an additional 2.5 percent, depending on size and risk. “That’s been the largest overhang on these stocks, just the unknowns that are out there,” said Jason Ware, equity analyst at Salt Lake City-based Albion Financial Group. “On the debit card fees, the banks got a gift. With the capital guidelines, we’re starting to get some numbers we can use.” Large banks are starting to loosen their standards for credit card applications, according to the April Fed survey. Undervalued? The main thing going for bank stocks today is that they have been beaten down to cheap valuations, according to some analysts. Large banks on average are trading at about 1.25 times tangible book value, according to Nuveen’s Villalon, while Citigroup and Bank of America are closer to a multiple of 0.85. JPMorgan Chase is trading at about 1.33 times tangible book, he said. As Ghriskey notes, however, uncertainty about the economy and regulatory developments still loom over bank stocks. Trust banks such as Bank of New York Mellon , State Street and Northern Trust , which avoided many of the credit issues weighing on their competitors, are grappling with the same pesky issues that have dogged them for several quarters: low interest rates and few remaining opportunities to trim expenses. State Street and BNY Mellon also have an overhang of lawsuits accusing them of overcharging pension funds on currency trading. In coming years, analysts expect trust banks will have to adjust pricing for a number of products they sell, with currency trading likely taking in less money. Copyright 2011 Thomson Reuters. Click for Restrictions .

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New #2 In The Cola Wars

March 17, 2011

Coca-Cola is winning the fight for America’s soda drinkers. Diet Coke bubbled up into the second spot in the U.S. soft drink market, ending Pepsi’s decades-long run as the perennial runner-up to regular Coca-Cola. Coca-Cola sold nearly 927 million cases of its diet soda in 2010, to Pepsi’s 892 million, a report by trade publication Beverage Digest released Thursday said. Diet Coke was nearing a virtual dead heat with Pepsi a year earlier. Regular Coke remains the undisputed champion at 1.6 billion cases. For Coke, wresting the No. 2 spot from Pepsi capped a year in which it took more of the soda business from its rival. Diet Coke’s rise reflects a long-term trend toward diet sodas. Ten years ago, only two of the top 10 were sugar-free. Now, four are on the list: the diet versions of Coke, Pepsi, Mountain Dew and Dr Pepper. Overall, U.S. soft-drink sales have fallen for six straight years as consumers switched to healthier alternatives such as juices and tea and cut back on spending in the recession. While both Diet Coke and Pepsi sold less soda in 2010, the decline was more pronounced for Pepsi. The downward trend in U.S. soda sales intensifies pressure on the longtime rivals to compete. Coca-Cola has pumped up its traditional advertising, including online ads. PepsiCo, which has lost market share in recent years, maintained some traditional ads but also steered dollars toward it Pepsi Refresh Project, an online donation program meant to build brand awareness. Though the Refresh Project has proven popular, some have questioned whether it actually drives soda sales. Coca-Cola Co. sold 0.5 percent less soda in 2010. For PepsiCo, the figure fell 2.6 percent. The top 10 sodas in the U.S., in order of popularity, are: Coke, Diet Coke, Pepsi-Cola, Mountain Dew, Dr Pepper, Sprite, Diet Pepsi, Diet Mountain Dew, Diet Dr Pepper and Fanta.

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Bevis Longstreth: Congress and the SEC’s Starvation Diet

March 3, 2011

Over the past decade, the SEC’s lapses in handling its responsibilities to the financial marketplace and the investing public have become common knowledge. One thinks of the damage done by short-falls in regulatory oversight of Enron, Worldcom, Citicorp, AIG, Bear Stearns and Lehman. One recalls the repeated inspections of Madoff, all to no effect. And the SEC’s refusal to regulate, or support the CFTC in regulating, derivatives. And the waiver of net capital rules to allow the budge-bracket investment banks to decide for themselves how much leverage was safe and sound. And the creation of an obscenely profitable oligopoly of less than a handful of credit rating agencies, maintained at lavish cost through regulatory mandates compelling their use by financial intermediaries, to the ultimate sorrow of investors. What isn’t common knowledge, however, is the systematic starvation diet that Congress has imposed upon the SEC over decades, all the while expanding its responsibilities, which might best be described as ‘unfunded mandates.’ This diet, sustained over many years, deeply affected the quality of personnel and the morale of the agency. It was a chief cause of SEC lapses. And, now, with the Dodd-Frank Legislation, a large number of new responsibilities have been assigned to the SEC. And, despite the authorization in Dodd-Frank of additional appropriations, Congress is refusing to appropriate these funds or provide adequately for pre-Dodd-Frank duties, without in any way diminishing the burdens, both new and old, imposed on this beleaguered agency. Here’s how the SEC should deal with this situation. My solution is rooted in a simple principle: It ill serves the public welfare for a governmental entity to pretend to be protecting the public when, in fact, it cannot do so. A horse forced to carry too heavy a load collapses. So too an agency. Far better, in such circumstances, for the public not to be misled, not to be lulled into complacency by reliance on the Government, but rather to be informed that the Government should not be counted on as a source of protection — in short, to be told that one must fend for one’s self. Beyond the dangerous prospect of misleading the public, trying to do with inadequate resources what one knows one cannot do creates profound problems of morale, followed swiftly by a deteriorating quality in staff. The SEC already suffers from these issues. They must not be allowed to grow larger. With this sound principle as its guide, the SEC should review all its responsibilities in light of available funds, and decide what it can undertake with sufficient funding to assure success and what it must declare publicly it lacks the funds to undertake. This review should involve a prioritization of its responsibilities, such that its most important functions are preserved with assured funding and its least important functions are abandoned. Thus, for example, the budget for the Enforcement Division should be robust, in recognition that the presence of a hard-driving “cop on the beat” is the SEC’s most fundamental duty, functioning as it can, if adequately funded and organized with talented lawyers, as the source of both punishment for and deterrent against wrong-doing. In contrast, for example, the Dodd-Frank mandate for the SEC to regulate the compensation of brokerage firms and investment advisers is a highly questionable, costly, and intrusive step into private ordering, with potential for large unintended consequences hurtful to the public interest. Agency review of its priorities will uncover many other areas within its statutory responsibilities that pale in importance to others. By taking a principled stand in regard to serving the public interest well, or not at all, the SEC will not only capture the country’s attention, a necessary pre-condition to bringing Congress to its senses, but restore in the SEC its former spirit and pride in being among the best agencies in Government.

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eDiets.com(R) Appoints Jennifer Hartnett as Chief Marketing Officer

February 9, 2011

FORT LAUDERDALE, FL–(Marketwire – February 9, 2011) – eDiets.com, Inc. ( NASDAQ : DIET ), a leading provider of convenient at-home diet, fitness and healthy lifestyle solutions, today announced that Jennifer Hartnett has been appointed Chief Marketing Officer. Reporting directly to Kevin McGrath, President and Chief Executive Officer of eDiets.com, Ms. Hartnett will be responsible for all of the Company’s marketing initiatives, with a focus on customer acquisition, retention and reactivation.

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Inder Sidhu: Profiles in Doing Both: Mike Yurosek, Father of the ‘Baby Carrot’

September 7, 2010

Imagine you’re a farmer working under the hot sun in Bakersfield, Calif., where daytime temperatures in September average nearly 90 degrees. You grow carrots, which take 12 weeks to reach full maturity. After watering, fertilizing and then harvesting your crop, you load your carrots onto trucks and haul them to a processing facility. There, you empty your bounty down a “cull” chute where individual carrots are placed a conveyor belt. As the carrots move along, good-looking, elegantly shaped plants are separated from twisted, malformed ones. Now the moment of truth arrives, the time when you learn how much of your crop is fit for market–and how much is agricultural waste. So how did you do? If the question were posed to you in the 1980s, the answer would likely be “dismal,” no matter how skilled a farmer you happened to be. Then, as much as 70 percent of a carrot harvest wound up being discarded. Today, however, things are much different, thanks in no small measure, to one man: Mike Yurosek. A California native, he is widely considered to be the “father” of the baby carrot, which literally transformed the U.S. carrot industry. Here’s how. Neither a botanist nor a genetic horticulture expert, the late Yurosek (he died in 2005) deplored waste. But waste was a huge part of his business for decades. Some days, he’d discard as much as 250 tons worth of twisted carrot culls that could not fit into the clear plastic bags sold to grocers. Most farmers didn’t mind because their massive yields represented excellent farming. But Yurosek thought the traditional way of farming carrots was wrong. What good is producing so many carrots if the majority aren’t relevant to the grocers who sell them or the consumers who buy them?, he wondered. Frustrated, Yurosek–who prided himself on a tendency to “think outside the carrot patch”–decided one day in 1986 to try something new. Rather than the discard the misshapen carrots that came from his fields, Yurosek and his small team hand-cut them into shorter, “baby-sized” lengths with the help of an industrial potato peeler. Yurosek hoped that improving their appearance would make the knobby-looking carrots more appealing to local grocers. So he sent a bag to the supermarket chain Vons. To his surprise, Vons got back to him quickly with crystal-clear instructions: “We only want those.” From that moment, the “baby carrot” industry was off and running. But like any nascent market, it needed some refinements. So Yurosek worked to improve baby carrot processing at every turn. To simplify the cutting and packaging process, he bought a green-bean cutter, which made perfect, 2-inch cuts every time. Then he invested in additional peeling technology. After perfecting the shaping of baby carrots, Yurosek and other growers turned to improving the taste and hardiness of the crop. They bred new varieties and developed new planting techniques that transformed carrot misfits into carrot must-haves. Once they realized how much more convenient baby carrots were than traditional, uncut carrots, consumers gobbled them up by the bagfuls–literally. Consider: before the advent of baby carrots, the average American ate roughly 6 pounds of carrots a year. Today, carrot consumption has climbed to more than 10 pounds annually. As for growers and processors, the introduction of baby carrots transformed their lives. Before baby carrots, for example, Yurosek and other growers sold their full-length products for 10 cents a bag. Supermarkets, in turn, would sell the bags to consumers for less than a quarter dollar. After baby carrots became popular, however, growers could command 50 cents for a 1-lb bag, while grocers could resell them for more than $1. By simply cutting carrots into 2-inch sections, Yurosek won a well-earned place in agricultural history. Equally deserved is his legacy in business lore. Yurosek transformed an industry by addressing a common problem. Whereas most growers focused their energies on production excellence, Yurosek addressed another ingredient required for success: customer relevance. By making his product more convenient to consumers, Yurosek increased the relevance of the 2,000 year-old plant. Then he worked to redefine excellence by making his products better through innovative growing and harvesting techniques.. Striving for both excellence and relevance both proved transformative . The proof, of course, is in the pudding–and the cakes and the casseroles and soups and other carrot dishes . Next time your doctor compliments you for getting the required vitamin A in your diet, remember the father of the baby carrot, and his simultaneous pursuit of both excellence and relevance. Doing both not only made it easier for you to get your nutrients, it also changed agriculture forever. Inder Sidhu is the Senior Vice President of Strategy & Planning for Worldwide Operations at Cisco , and the author of Doing Both: How Cisco Captures Today’s Profits and Drives Tomorrow’s Growth . Follow Inder on Twitter at @indersidhu .

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Hatoyama to Discuss Future With Ozawa as Support Slumps Over Base Backlash

May 31, 2010

By Takashi Hirokawa June 1 (Bloomberg) — Prime Minister Yukio Hatoyama said he will do “what’s best for the people of Japan” and consider his political future in the face of plunging approval ratings six weeks before parliamentary elections. “The important thing is the livelihoods of the people,” Hatoyama said today at his office in Tokyo when asked whether he would step down. “This new administration will continue to take action in a way that’s appropriate.” The prime minister’s popularity has plummeted since his Democratic Party of Japan ’s landslide August victory, with voters disenchanted over campaign finance scandals and his vacillating over where to move a U.S. military base. Three polls released yesterday showed his approval rating at or below 20 percent and six in 10 voters think he should quit. Hatoyama will meet later with Ichiro Ozawa , the DPJ’s No. 2 official, to discuss the party’s future before July elections for the Diet’s upper house. The DPJ-led coalition’s majority in the chamber was cut when the Social Democratic Party left two days ago, having refused to endorse a deal with the U.S. to relocate a Marine base in Okinawa. “Hatoyama has totally screwed things up,” said Gerald Curtis , professor of Japanese politics at Columbia University in New York. “Clearly, the party sees a disaster looming.” DPJ Voices ‘Overwhelming’ Sentiment for Hatoyama to step down is growing within the party, especially among upper-house lawmakers up for re-election, DPJ legislator Yoshimitsu Takashima told reporters yesterday. “These voices are increasingly overwhelming,” he said. Hatoyama last night vowed to stay in his post after a meeting with Ozawa and Azuma Koshiishi, head of the Democrats’ upper house members. “I intend to work hard for the people of this country,” Hatoyama said yesterday. Asked if he would continue as premier, Hatoyama replied: “Of course,” while adding that “I understand I’ve caused trouble” within the party. Japanese stocks fell on concerns political turmoil will slow the domestic recovery, with the Nikkei 225 Stock Average down 0.8 percent to 9,692.02 at 9:07 a.m. in Tokyo. Half of the 242 upper-house seats are at stake in the July balloting. The DPJ and its other junior partner, the People’s New Party , have 122 legislators, and losing that majority could slow Hatoyama’s legislative goals of increasing social welfare spending while aiming to cut the world’s largest public debt. To contact the reporter on this story: Takashi Hirokawa in Tokyo at thirokawa@bloomberg.net

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Yen Weakens, Japan Stocks Gain on Central Bank Speculation; Ringgit Rises

March 12, 2010

By Darren Boey and Masaki Kondo March 12 (Bloomberg) — Japanese stocks gained and the yen weakened on speculation the central bank will add more funds to its financial system. Emerging-market currencies strengthened as rising confidence in Greece’s ability to pay its debt shored up demand for riskier assets. The Nikkei 225 Stock Average climbed 0.7 percent to 10,741.85 as of 1:45 p.m. in Tokyo. The MSCI Asia Pacific Index rose 0.2 percent. The yen weakened against 15 of 16 major counterparts. It dropped to 124.14 per euro in Tokyo from 123.82 in New York yesterday, the weakest since Feb. 23. Malaysia’s ringgit advanced 0.2 percent to the strongest in 19 months. The Bank of Japan may seek to expand a 10 trillion-yen ($110 billion) fund that provides loans to banks in a March 16- 17 policy meeting, according to two central bank officials who spoke on condition of anonymity. Finance Minister Naoto Kan said in parliament today foreign-exchange intervention is an option. Emerging-market and high-yield bond funds each took in more than $1 billion in the week to March 10, EPFR Global said yesterday. “I would think highly of any additional easing by the BOJ to preempt the yen’s appreciation,” said Hiroshi Morikawa , a senior strategist at MU Investments Co., which manages the equivalent of $14 billion in Tokyo. “The economy is improving, so investors aren’t bearish.” Japan’s Topix advanced 0.5 percent. Hong Kong’s Hang Seng Index lost 0.1 percent. The Philippine Stock Exchange Index sank 1.7 percent after the central bank pared a lending program for banks yesterday and said it will consider doing more to reduce cash in the economy. Shares of automakers in Japan gained on speculation government policies will weaken the yen, boosting the value of overseas income converted into the country’s currency. Nissan Motor Co. , which gets 57 percent of its revenue in North America and Europe, climbed 2.4 percent to 764 yen. Honda Motor Co. advanced 0.9 percent to 3,300 yen. Foreign Investors The yen traded at 90.66 per dollar from 90.51 in New York yesterday. It fell to 90.82 on March 10, the lowest level since Feb. 23. Finance Minister Kan told the Diet he’s “aware” that currency intervention is an option if markets move too abruptly. “Expectations remain strong especially among foreign investors that the BOJ will do more easing,” said Daisaku Ueno , president in Tokyo at Gaitame.Com Research Institute Ltd., a unit of Japan’s largest currency margin company. “Some foreign investors seem to be using the expectations in order to make yen-sell positions.” Health-care companies rose the most among the MSCI Asia Pacific Index’s 10 industry groups on speculation proposed changes to the U.S. health system will be harder to pass. Takeda Pharmaceutical Co. , Asia’s biggest drugmaker, increased 1.6 percent to 4,140 in Tokyo, the second-biggest boost to the MSCI index. North America accounts for 34 percent of the company’s sales. Growing Confidence Speculation over the passage of the health-care system changes helped the Standard & Poor’s 500 Index rise 0.4 percent yesterday. Futures on the S&P 500 fell less than 0.1 percent. Emerging-market currencies gained as improved confidence in Greece’s ability to pay its debt shored up demand for riskier assets. Emerging-market and high-yield bond funds each took in more than $1 billion in the week to March 10, EPFR Global said yesterday, the strongest net inflows since the company started publishing weekly data on the sectors a decade ago. Malaysia’s ringgit advanced 0.4 percent to 3.307 per dollar, reaching the strongest level in 19 months. The Taiwan dollar strengthened 0.2 percent to NT$31.77 per dollar. Overseas investors bought $711 million more Korean shares than they sold in the last four days, taking net purchases for the month to $1.4 billion. The risk premium investors demand to buy Greece’s debt over comparable German bonds has narrowed from an 11-year high on Jan. 28. Riskier Assets “It’s a global story with the improvement in European sovereigns translating into stronger demand for emerging-market assets,” said Sebastien Barbe , head of emerging-markets research at Credit Agricole CIB in Hong Kong. The yield on the 10-year German bund touched 3.2 percent yesterday, the highest level since Feb. 23, after reaching 3.11 percent two days ago, a signal investors are seeking riskier assets as Greece tackles its debt woes. Greece has a budget shortfall that, at 12.7 percent of gross domestic product, was the European Union’s largest in 2009. The cost of protecting corporate bonds from default fell in Australia and Japan today. The Markit iTraxx Japan index fell 1.5 basis points to 120.5 basis points, according to Morgan Stanley prices. That’s the lowest since Jan. 12. The Markit iTraxx Australia index fell 1 basis point to 81 basis points, according to Australia & New Zealand Banking Group Ltd. Oil, Copper Crude oil traded above $82 a barrel in New York after the Organization of Petroleum Exporting Countries said it’s set to increase shipments at the end of the month on strong demand from China, the world’s second-biggest energy user. Oil for April delivery gained 0.1 percent to $82.22 a barrel in electronic trading on the New York Mercantile Exchange at 9:52 a.m. Sydney time. Yesterday, the contract rose 2 cents to $82.11. Futures have risen 0.9 percent this week, after last week’s 2.3 percent increase. Copper for three-month delivery dropped 0.5 percent to $7,429 a metric ton. Chile’s state-owned company Codelco, the world’s biggest producer, said output was normal after a series of tremors shook central Chile yesterday. To contact the reporter for this story: Darren Boey at dboey@bloomberg.net ; Masaki Kondo in Tokyo at mkondo3@bloomberg.net .

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Hatoyama as Technology Salesman Woos Customers to Counter Stigma of Toyota

March 8, 2010

By Sachiko Sakamaki and Takashi Hirokawa March 9 (Bloomberg) — French President Charles de Gaulle once labeled a Japanese premier a “transistor salesman.” Now Prime Minister Yukio Hatoyama is hawking bullet trains and nuclear plants after Toyota Motor Corp. ’s recalls hurt the country’s image as a top manufacturer. Hatoyama is promoting Japan’s expertise in nuclear power and high-speed railways overseas. He has some work to do: A group including Hitachi Ltd. in December lost a $20-billion bid to build nuclear plants in the United Arab Emirates to South Korea, after its president helped clinch the deal. The Hatoyama government is struggling to sustain an economic recovery hampered by a rising currency and falling prices, and has come under criticism from the corporate community for pushing labor-friendly policies. Toyota’s global recall of about 8 million vehicles over unintended acceleration threatens to curb exports. “It’s about time,” said Kazutaka Kirishima , an economics professor at Josai University near Tokyo. “Toyota’s problem made the government realize they must cooperate with the business sector, which considers Asia and other rising countries as the engines for growth more than domestic demand.” Increased exports, which account for about 14 percent of the economy, helped boost gross domestic product to an annualized 4.6 percent pace in the last quarter of 2009. Consumer prices fell for an 11th month in January, and wages rose 0.1 percent for the first time in 20 months. The yen is up almost 10 percent against the dollar in the past year. Vietnamese Power Hatoyama wrote a letter last week to Vietnamese Premier Nguyen Tan Dung to solicit an $11-billion nuclear power plant project and is supporting a Japanese group bidding to build an $18-billion high-speed rail line in Brazil. Tokyo-based Hitachi, Mitsubishi Heavy Industries, Ltd. , and Toshiba Corp ., which mounted a joint bid for the project, lost the Vietnam order to Russia’s state-run OAO Rosatom in Moscow, the Nikkei business daily reported on Feb. 9, without citing anyone. Spokesmen from the companies declined comment. Hatoyama told parliament he would strive to work harder in promoting Japan, the world’s third-biggest nuclear power generator, and said the Vietnamese bid wasn’t lost. “I think there’s still a good chance with the second phase” of the project, Hatoyama said in the Diet on March 3. “I regret the government’s sales efforts haven’t been good enough compared with other countries. I’ll work hard to be a top seller from now on.” U.A.E. Contract Seoul-based Korea Electric Power Corp. won the $20 billion U.A.E. contract a day after President Lee Myung Bak visited the Middle Eastern country. While Japanese Chief Cabinet Secretary Hirofumi Hirano last week denied Hatoyama’s decision to write an appeal to Vietnam was an effort to duplicate Lee’s personal touch, administration officials emphasized the need to step up their efforts. “There are several things we regret about the U.A.E. nuclear bid,” trade minister Masayuki Naoshima told parliament on March 3. “Japan is good at exporting plants, but in addition to facilities clients also want know-how on safety management and staff supply.” Hatoyama, 63, came into office pledging to raise the minimum wage and has proposed new restrictions on the hiring of temporary workers by manufacturers. The limits are opposed by the Tokyo-based Japan Business Federation, the country’s biggest business lobby. Polls show his administration is weighed down by scandals involving him and the party’s No. 2 official, Ichiro Ozawa . Poll Ratings The prime minister’s approval rating was at 41 percent, the Yomiuri newspaper said yesterday, compared with 75 percent right after taking office in September. The paper polled 1,088 voters from March 5-7 and provided no margin of error. The prime minister yesterday met with Toyota President Akio Toyoda , 53, saying afterward that he had told Toyoda “I hope you make every effort to regain the trust of your customers.” Hatoyama is also putting his weight behind a group seeking to win a 1.7 trillion yen ($19 billion) rapid train project in Brazil, competing against French, Chinese and South Korean companies. The government is considering providing financial assistance to the group, which may include Hitachi, Toshiba, Mitsubishi Heavy, and Tokyo-based Mitsui & Co. Ltd. , Nikkei reported on March 2. East Japan Railway Co. , the nation’s largest rail operator, may join in the bid, President Satoshi Seino said the same day. Tokyo-based JR East’s Shinkansen “bullet trains” can run at 300 kilometers (186 miles) per hour. Bullet Train Vietnam may choose a group of Sumitomo Corp. and Mitsubishi Heavy, or Itochu Corp. and Kawasaki Heavy Industries Ltd. for a $56-billion project to build Southeast Asia’s first bullet train, Nguyen Huu Bang , chairman and chief executive officer of Vietnam Railways Corp. , said in February. The prime minister also offered to assist Kenya’s nuclear power development in a meeting with Prime Minister Raila Odinga last month. “Japan has the world’s top nuclear power technology, and the world’s best bullet train,” said Kiyoshi Ishigane , a strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees about $65 billion. “The government is doing what it should for Japan’s national interest.” To contact the reporters on this story: Sachiko Sakamaki in Tokyo at Ssakamaki1@bloomberg.net ; Takashi Hirokawa in Tokyo at thirokawa@bloomberg.net

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Obama Likely to Remain in `Excellent Health,’ Doctor Says After Checkup

February 28, 2010

By Nicholas Johnston and Julianna Goldman Feb. 28 (Bloomberg) — President Barack Obama is in “excellent health,” his doctor said today after an annual checkup of the U.S. chief executive. Obama, who spent about 90 minutes with doctors at the National Naval Medical Center in Bethesda, Maryland, flashed a thumbs up sign and said “really good” when asked by reporters how the examination went as he arrived back at the White House. Navy Captain Jeff Kuhlman, the head of the White House Medical Unit who conducted the exam, said in a summary that Obama “is in excellent health” and that “all clinical data indicate he will remain so for the duration of his presidency.” Kuhlman recommended that Obama, 48, get his next physical when he turns 50, in August 2011. According to the summary, Obama is 6’1” tall and weighs 179.9 pounds when wearing shoes and workout attire. The president’s body mass index is 23.7, which is considered “normal,” and his resting heart rate is 56 beats per minute and his blood pressure is 106/62. The president last received a physical in July 2008, according to the summary. A 2007 examination released during the presidential campaign reported Obama in “excellent health” with a resting heart rate of 60 and a blood pressure of 90/60. Obama adheres to a healthy diet and a strict exercise regimen. He works out nearly every day with his Chicago trainer and plays basketball and golf regularly. Kuhlman recommended that Obama change his exercise routine because of some weakness in his left knee and change his diet to get his LDL cholesterol, which is currently 138, below 130. Smoking Issue The president’s doctor also recommended that Obama continue his “smoking cessation efforts.” He noted the president uses “nicotine replacement therapy.” The president and White House officials have indicated that Obama hasn’t been able to totally kick his smoking habit. While first lady Michelle Obama has pushed Obama to quit smoking, the struggle followed him to the White House. When asked last year whether he has smoked since moving into 1600 Pennsylvania Ave., Obama was coy. “I haven’t had one on these grounds,” he told CNN. “Sometimes it’s hard, but, you know, I’m sticking to — sticking to it.” In June, when he signed a law strengthening regulation of tobacco products, Obama invoked his own troubles with the No. 1 preventable cause of death in the U.S. “I know how difficult it can be to break this habit when it’s been with you for a long time,” he said. After his checkup, Obama met with wounded military servicemen and women being treated at the Bethesda facility before returning to the White House. To contact the reporters on this story: Nicholas Johnston in Bethesda, Maryland, at njohnston3@bloomberg.net ; Julianna Goldman in Washington at jgoldman6@bloomberg.net

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Kan Handed Job of Averting New Japan Recession, Managing Record Bond Sales

January 6, 2010

By Keiko Ujikane and Toru Fujioka Jan. 7 (Bloomberg) — Naoto Kan became Japan’s sixth finance minister in 18 months, tasked with preventing a relapse into the nation’s worst postwar recession as deflation threatens to erode companies’ earnings. Kan, the 63-year-old deputy prime minister, was named by premier Yukio Hatoyama yesterday to replace Hirohisa Fujii , 77, who stepped down because of ill health. Kan said in Tokyo today it will be a “challenge” to maintain fiscal discipline this year and he will try to secure funds to fulfill the Democratic Party of Japan’s pledges while containing the country’s debt. He is seeking to succeed where his predecessors failed: to reverse a contraction in Japan’s economy that’s left gross domestic product, unadjusted for prices, at the smallest since 1991. Any move to ease fiscal restraint and inject greater stimulus runs the risk of unsettling investors and endangering the credit rating of the world’s biggest sovereign debtor. “If the economy slows down, we may get a revised budget or additional spending — we’ll have to see if Kan can handle these issues without losing fiscal discipline,” said Masaaki Kanno , chief economist at JPMorgan Securities Japan Co. in Tokyo, who used to work at the Bank of Japan. Kan will remain deputy prime minister, Hatoyama told reporters late yesterday. The statement ended days of speculation over the future of Fujii, who was hospitalized Dec. 28 for high blood pressure and exhaustion after battling colleagues to prevent a rise in bond issuance. Stocks Rise Investors shrugged off Fujii’s departure, with the Nikkei 225 Stock Average climbing 0.1 percent to 10,743.25 at 10:37 a.m. in Tokyo, a fourth straight gain. Yields on benchmark 10-year notes fell half a basis point to 1.33 percent. The yen traded at 92.31 per dollar from 92.38 shortly before the personnel change was announced late yesterday. Kan’s stature rose as health minister in the 1990s, when he exposed that agency’s role in allowing up to 5,000 Japanese to contract HIV through contaminated blood products. A co-founder of the DPJ, he was later tarnished by revelations he failed to pay his full pension contribution, forcing him to step down as party leader in 2004. Fujii was the first Cabinet member to depart after the DPJ gained power in September by unseating the Liberal Democratic Party, which dominated the nation’s political landscape for half a century. Hatoyama had asked Fujii, who headed the Finance Ministry in 1993, to postpone retirement and run in the August lower-house election. Debt Issuance In the run-up to the Dec. 25 budget unveiling, Fujii had insisted on keeping new bond sales for the next fiscal year around 44 trillion yen ($480 billion), the same as the previous government budgeted for the year ending in March. Takahide Kiuchi , chief economist at Nomura Securities Co. in Tokyo, said it’s unclear whether Kan will hew to such a stance. “Kan may shift to the fiscal and economic policies that focus more on the economy, compared with Fujii who tends to put more focus on fiscal discipline,” said Kiuchi, who was ranked the nation’s top economist by Nikkei Research Inc. in March. Japan is poised this year to lose its title as world’s second-largest economy, with China projected by the International Monetary Fund to slot behind the U.S. The country, with a shrinking population and trenchant deflation that’s seen 13 years of price declines since 1994, may face a jump in its debt to 246 percent of GDP by 2014, according to the IMF. Sony Corp. Vice Chairman Ryoji Chubachi warned this week that deflation, squeezing companies’ earnings, may cause a “double-dip” recession this year. Deflation Fight Kan has been vocal in recent months in discussing the nation’s economic challenges, pressing the Bank of Japan to step up its efforts to end deflation, and favoring a retreat in the yen’s exchange rate that threatened exporters. On Dec. 17, he said that a weaker Japanese currency was “favorable” and that he was glad that it had fallen from the previous month’s 14-year peak. Fujii roiled traders after taking office in September by indicating he favored a stronger yen, as part of the DPJ-led government’s campaign to bolster households’ spending power. He said in September it’s “absurd” that a lower exchange rate helps exporters, and that market interventions can “destroy a free economy.” After the yen soared, he warned in November that Japan was ready to act to stem “abnormal” currency moves. Weak-Yen Policy “Kan is likely to continue the shift from strong to weak yen policy,” said Lee Hardman , a foreign-exchange strategist at Bank of Tokyo-Mitsubishi in London. “On balance we believe Kan’s appointment will be at the margin yen-negative — through raising political and fiscal uncertainty.” Japan’s currency has fallen about 9 percent since reaching a 14-year high of 84.83 on Nov. 27. The Finance Ministry, through the Bank of Japan, is in charge of deciding on yen purchases or sales, and officials haven’t intervened since 2004. One of Hatoyama’s campaign pledges was to lessen the power of bureaucrats and give elected politicians greater sway over policymaking. Fujii, a veteran Finance Ministry budget examiner, had been perceived as a less combative pick for that post. By contrast, Kan took on bureaucrats as health minister in 1996, forcing them to surrender documents on the blood scandal. He told reporters outside his home in western Tokyo today that he wants to increase transparency at the Finance Ministry. The new finance chief was born in Yamaguchi, western Japan, and went to high school in Tokyo. He earned a bachelor’s degree in applied physics at the Tokyo Institute of Technology, and became a patent attorney before entering politics. DPJ Co-Founder Kan and Hatoyama helped found the DPJ in 1998. Kan told reporters in July 1996 that he was seeking “to work with politicians who will control the executive branch with the backing of the people.” Staying as deputy premier risks stretching Kan’s portfolio too far, Hiroaki Muto , a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo, said before the appointment. Hatoyama earlier yesterday urged ailing Fujii to remain in his post. He later told reporters that “given concerns over his health, there was nothing else to be done. I had to accept his resignation.” “It goes without saying that Finance Minister Fujii was the primary person in formulating the budget, but Deputy Prime Minister Kan was closest in giving support,” Hatoyama said. “I have no worries in Kan being able to do this.” The personnel reshuffle comes as Hatoyama’s popularity falls. His Cabinet had an approval rating of 50 percent in a Dec. 25-27 poll by Nikkei Inc. and TV Tokyo Corp., down from 75 percent backing in mid-September. The Diet is scheduled to convene later this month, when Kan will face lawmakers’ questions over the proposed budget. Finance ministers and central bank governors from the Group of Seven nations are scheduled to gather in Canada next month. Kan told reporters yesterday he will tackle “various issues aggressively,” and pledged to make sure the proposed 92.3 trillion yen 2010 budget is passed by the Diet. To contact the reporters on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net ; Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

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Hatoyama Hopeful Japan Finance Minister Fujii Won’t Quit on Health Grounds

January 6, 2010

By Keiko Ujikane and Takashi Hirokawa Jan. 6 (Bloomberg) — Japanese Prime Minister Yukio Hatoyama urged ailing Finance Minister Hirohisa Fujii to stay in his post, declining to confirm reports Fujii will step down because of deteriorating health. “He fathered the budget so I would strongly like him to raise his child,” Hatoyama told reporters in Tokyo today. The government has accepted Fujii’s resignation, Kyodo News reported earlier, citing an unnamed ruling party lawmaker. Fujii, 77, deferred retirement at Hatoyama’s request to oversee a record 92.3 trillion yen ($1 trillion) budget that aims to arrest economic stagnation without swelling the world’s largest public debt . His exit would expose the inexperience of a party that took power for the first time last year. “Hatoyama needs someone who is heavyweight and has expertise” and his Democratic Party of Japan “lacks experienced personnel,” said Susumu Kato chief economist for Japan at Calyon Securities. “Fujii gave a sense of security in a relatively young Cabinet as he’s a veteran politician who has already been finance minister.” Investors would examine any successor’s credentials on fiscal discipline after Fujii championed avoiding an increase in new bond sales, Tokyo-based Kato said. Fujii’s potential loss increases focus on two vice-finance chiefs, Yoshihiko Noda and Naoki Minezaki , and Deputy Prime Minister Naoto Kan , who heads economic policy. Yoshito Sengoku , minister for administrative reform, ruled out that he might take the position, Kyodo News reported him saying in a speech. Retirement Postponed Hatoyama asked Fujii last year to postpone retirement and run in the election that brought the DPJ to power, ending almost five decades of unbroken rule by the Liberal Democratic Party. Fujii, who is being treated for high blood pressure and exhaustion, previously headed the Finance Ministry in 1993. He is also a former budget examiner at the agency, giving him the most experience of any lawmakers in the party. Investors have signaled little immediate concern that Fujii’s departure would heighten risk. The Nikkei 225 Stock Average rose 0.7 percent as of 2:02 p.m. in Tokyo, the highest level since October 2008. Yields on benchmark 10-year notes climbed one basis point to 1.335 percent after an auction of the debt. The yen traded at 92.05 per dollar from 91.71 yen in New York yesterday. Limited Impact “The impact of his resignation on the market will be limited” because the budget has already been compiled, said Masaru Hamasaki , chief strategist at Tokyo-based Toyota Asset Management Co., which oversees the equivalent of $14 billion. “A negative effect may be that his broad experience can’t be fully applied anymore.” Japan’s Diet is scheduled to convene later this month, when the finance minister would typically face lawmakers’ questions over the proposed budget . While the DPJ-led coalition’s majority in the Diet means Hatoyama’s 2010 budget is likely to be little affected by a Fujii departure, it could complicate any effort to compile an additional fiscal stimulus, said Hiroaki Muto , a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “There’s a chance that the government may have an additional stimulus” package to submit before elections for the upper house of the Diet in July, Muto said. “If that happens, the government will be in trouble unless it chooses a person who has strong political leadership.” Recession Warning The latest warning on the durability of Japan’s recovery from its deepest postwar recession came yesterday from Sony Corp. Vice Chairman Ryoji Chubachi . He said “there’s a risk of a double-dip recession,” citing the damage of deflation to companies’ earnings. Chubachi spoke at a New Year’s party attended by government officials and business leaders in Tokyo. In the course of compiling the 2010 budget, Fujii said the government must keep its promise of holding bond sales around 44 trillion yen, even after Hatoyama indicated he wouldn’t strictly adhere to the cap should more spending be necessary. “There’s no finance-ministry type other than Fujii” within the DPJ, said Takahide Kiuchi , chief economist at Nomura Securities Co. in Tokyo. “If Fujii steps down, fiscal discipline may loosen regardless of who takes over the post.” Fujii, Japan’s fifth finance minister since August 2008, was admitted to hospital on Dec. 28 for high blood pressure and exhaustion, three days after the budget release. “My examination is continuing, and I’ll respect my doctor’s judgment,” he said. He canceled his regular Wednesday press briefing for today. Tumbling Support For Hatoyama, losing his finance chief would come as his public support tumbles. The Cabinet had an approval rating of 50 percent in a Dec. 25-27 poll by Nikkei Inc. and TV Tokyo Corp., down from 75 percent backing in mid-September. Some analysts said Fujii wouldn’t necessarily be missed by investors after he indicated he supported a stronger yen, only to later say that the government is prepared to step into the currency market to stem its gains. As finance minister, Fujii is responsible for overseeing Japan’s exchange-rate policy. The yen climbed to a 14-year high of 84.83 per dollar on Nov. 27, hurting exporters by eroding their profits earned abroad. The currency has since retreated about 8 percent. “Investor estimation of Fujii’s steadiness isn’t that high because of his currency gaffes,” Hirokata Kusaba , a senior economist at Mizuho Research Institute in Tokyo. “The budget has been already drafted and the government bill will pass because the ruling coalition controls both chambers,” meaning the impact of his departure “will be limited.” To contact the reporters on this story: Takashi Hirokawa in Tokyo at thirokawa@bloomberg.net ; Keiko Ujikane in Tokyo at kujikane@bloomberg.net ;

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Hatoyama Hopeful Japan Finance Minister Fujii Won’t Quit on Health Grounds

January 6, 2010

By Keiko Ujikane and Takashi Hirokawa Jan. 6 (Bloomberg) — Japanese Prime Minister Yukio Hatoyama urged ailing Finance Minister Hirohisa Fujii to stay in his post, declining to confirm reports Fujii will step down because of deteriorating health. “He fathered the budget so I would strongly like him to raise his child,” Hatoyama told reporters in Tokyo today. The government has accepted Fujii’s resignation, Kyodo News reported earlier, citing an unnamed ruling party lawmaker. Fujii, 77, deferred retirement at Hatoyama’s request to oversee a record 92.3 trillion yen ($1 trillion) budget that aims to arrest economic stagnation without swelling the world’s largest public debt . His exit would expose the inexperience of a party that took power for the first time last year. “Hatoyama needs someone who is heavyweight and has expertise” and his Democratic Party of Japan “lacks experienced personnel,” said Susumu Kato chief economist for Japan at Calyon Securities. “Fujii gave a sense of security in a relatively young Cabinet as he’s a veteran politician who has already been finance minister.” Investors would examine any successor’s credentials on fiscal discipline after Fujii championed avoiding an increase in new bond sales, Tokyo-based Kato said. Fujii’s potential loss increases focus on two vice-finance chiefs, Yoshihiko Noda and Naoki Minezaki , and Deputy Prime Minister Naoto Kan , who heads economic policy. Yoshito Sengoku , minister for administrative reform, ruled out that he might take the position, Kyodo News reported him saying in a speech. Retirement Postponed Hatoyama asked Fujii last year to postpone retirement and run in the election that brought the DPJ to power, ending almost five decades of unbroken rule by the Liberal Democratic Party. Fujii, who is being treated for high blood pressure and exhaustion, previously headed the Finance Ministry in 1993. He is also a former budget examiner at the agency, giving him the most experience of any lawmakers in the party. Investors have signaled little immediate concern that Fujii’s departure would heighten risk. The Nikkei 225 Stock Average rose 0.7 percent as of 2:02 p.m. in Tokyo, the highest level since October 2008. Yields on benchmark 10-year notes climbed one basis point to 1.335 percent after an auction of the debt. The yen traded at 92.05 per dollar from 91.71 yen in New York yesterday. Limited Impact “The impact of his resignation on the market will be limited” because the budget has already been compiled, said Masaru Hamasaki , chief strategist at Tokyo-based Toyota Asset Management Co., which oversees the equivalent of $14 billion. “A negative effect may be that his broad experience can’t be fully applied anymore.” Japan’s Diet is scheduled to convene later this month, when the finance minister would typically face lawmakers’ questions over the proposed budget . While the DPJ-led coalition’s majority in the Diet means Hatoyama’s 2010 budget is likely to be little affected by a Fujii departure, it could complicate any effort to compile an additional fiscal stimulus, said Hiroaki Muto , a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “There’s a chance that the government may have an additional stimulus” package to submit before elections for the upper house of the Diet in July, Muto said. “If that happens, the government will be in trouble unless it chooses a person who has strong political leadership.” Recession Warning The latest warning on the durability of Japan’s recovery from its deepest postwar recession came yesterday from Sony Corp. Vice Chairman Ryoji Chubachi . He said “there’s a risk of a double-dip recession,” citing the damage of deflation to companies’ earnings. Chubachi spoke at a New Year’s party attended by government officials and business leaders in Tokyo. In the course of compiling the 2010 budget, Fujii said the government must keep its promise of holding bond sales around 44 trillion yen, even after Hatoyama indicated he wouldn’t strictly adhere to the cap should more spending be necessary. “There’s no finance-ministry type other than Fujii” within the DPJ, said Takahide Kiuchi , chief economist at Nomura Securities Co. in Tokyo. “If Fujii steps down, fiscal discipline may loosen regardless of who takes over the post.” Fujii, Japan’s fifth finance minister since August 2008, was admitted to hospital on Dec. 28 for high blood pressure and exhaustion, three days after the budget release. “My examination is continuing, and I’ll respect my doctor’s judgment,” he said. He canceled his regular Wednesday press briefing for today. Tumbling Support For Hatoyama, losing his finance chief would come as his public support tumbles. The Cabinet had an approval rating of 50 percent in a Dec. 25-27 poll by Nikkei Inc. and TV Tokyo Corp., down from 75 percent backing in mid-September. Some analysts said Fujii wouldn’t necessarily be missed by investors after he indicated he supported a stronger yen, only to later say that the government is prepared to step into the currency market to stem its gains. As finance minister, Fujii is responsible for overseeing Japan’s exchange-rate policy. The yen climbed to a 14-year high of 84.83 per dollar on Nov. 27, hurting exporters by eroding their profits earned abroad. The currency has since retreated about 8 percent. “Investor estimation of Fujii’s steadiness isn’t that high because of his currency gaffes,” Hirokata Kusaba , a senior economist at Mizuho Research Institute in Tokyo. “The budget has been already drafted and the government bill will pass because the ruling coalition controls both chambers,” meaning the impact of his departure “will be limited.” To contact the reporters on this story: Takashi Hirokawa in Tokyo at thirokawa@bloomberg.net ; Keiko Ujikane in Tokyo at kujikane@bloomberg.net ;

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Hatoyama to Accept Resignation of Japan Finance Minister Fujii, Kyodo Says

January 5, 2010

By Sandrine Rastello and Keiko Ujikane Jan. 6 (Bloomberg) — The Japanese government has decided to accept the resignation of Finance Minister Hirohisa Fujii because of poor health, Kyodo News reported, citing an unnamed ruling party lawmaker. Fujii, 77, told Prime Minister Yukio Hatoyama he wanted to step down, Kyodo said today. While Hatoyama earlier asked him to stay, the government eventually decided to accept the finance minister’s request because Fujii was adamant, Kyodo cited the lawmaker as saying. Fujii’s resignation would come after he was treated last week for high blood pressure and exhaustion. His departure would increase focus on two vice-finance chiefs, Yoshihiko Noda and Naoki Minezaki , as well as Deputy Prime Minister Naoto Kan , who heads economic policy, and Yoshito Sengoku , minister for administrative reform. Investors would examine any successor’s credentials on fiscal matters after Fujii championed avoiding an increase in new bond sales, said Susumu Kato at Calyon Securities in Tokyo “Hatoyama needs someone who is heavyweight and has expertise” and his Democratic Party of Japan “lacks experienced personnel,” said Kato, Calyon’s chief economist for Japan. “Fujii gave a sense of security in a relatively young Cabinet as he’s veteran politician who has already been finance minister.” Retirement Postponed Hatoyama asked Fujii last year to postpone retirement and run in the August election that brought the DPJ to power for the first time. Fujii previously headed the Finance Ministry in 1993, and is a former budget examiner at the agency, giving him a deeper background in the area than other lawmakers in the party. Financial markets indicated little immediate concern over doubts about Fujii’s future, with Japanese government bonds little changed and the Nikkei 225 Stock Average closing at the highest level since October 2008. Yields on benchmark 10-year notes were at 1.325 percent. The yen rose 0.9 percent to 91.71 per dollar as of 4:47 p.m. on Jan. 5 in New York. The Diet is scheduled to convene later this month, when the finance minister would typically face lawmakers’ questions over the proposed record 92.3 trillion yen ($1 trillion) budget . While the DPJ-led coalition’s majority in the Diet means Hatoyama’s 2010 budget is likely to be little affected by a Fujii departure, it could complicate any effort to compile an additional fiscal stimulus, said Hiroaki Muto , a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. Stimulus Weighed “There’s a chance that the government may have an additional stimulus” package to submit before elections for the upper house of the Diet in July, Muto said. “If that happens, the government will be in trouble unless it chooses a person who has strong political leadership as a next finance minister.” The latest warning on the durability of Japan’s recovery from its deepest postwar recession came yesterday from Sony Corp. Vice Chairman Ryoji Chubachi . He said “there’s a risk of a double-dip recession,” citing the damage of deflation to companies’ earnings. Chubachi spoke at a New Year’s party attended by government officials and business leaders in Tokyo. Kato at Calyon Securities said a Fujii departure may have an impact on debt markets, depending on the dedication of any successor to avoiding an increase in government bond issuance. Spending Restraint In the course of compiling the 2010 budget, Fujii urged ministers to restrain outlays after their requests amounted to an unprecedented 95 trillion yen. He said the government must keep its promise of holding bond sales around 44 trillion yen to contain the world’s largest public debt burden — even after Hatoyama indicated he wouldn’t strictly adhere to the cap should more spending be necessary. “There’s no finance-ministry type other than Fujii” within the DPJ, said Takahide Kiuchi , chief economist at Nomura Securities Co. in Tokyo. “If Fujii steps down, fiscal discipline may loosen regardless of who takes over the post.” Fujii, Japan’s fifth finance minister since August 2008, was admitted to hospital on Dec. 28 for high blood pressure and exhaustion, three days after the budget release. “My examination is continuing, and I’ll respect my doctor’s judgment,” he said. He canceled his regular Wednesday press briefing for today. For Hatoyama, losing his finance chief would come as his public support tumbles. The Cabinet had an approval rating of 50 percent in a Dec. 25-27 poll by Nikkei Inc. and TV Tokyo Corp., down from 75 percent backing in mid-September. Yen Policy Some analysts said Fujii wouldn’t necessarily be missed by investors after he indicated he supported a stronger yen, only to later say that the government is prepared to step into the currency market to stem its gains. As finance minister, Fujii is responsible for overseeing Japan’s exchange-rate policy. The yen climbed to a 14-year high of 84.83 per dollar on Nov. 27, hurting exporters by eroding their profits earned abroad. The currency has since retreated about 8 percent. “Investor estimation of Fujii’s steadiness isn’t that high because of his currency gaffes,” Hirokata Kusaba , a senior economist at Mizuho Research Institute in Tokyo. “The budget has been already drafted and the government bill will pass because the ruling coalition controls both chambers,” meaning the impact of his departure “will be limited.” Kusaba said Sengoku or Noda would be the most likely candidates to replace Fujii. Kiuchi at Nomura said the yen may weaken no matter who succeeds Fujii because he “is labeled as tolerating a stronger yen and opposing intervention.” To contact the reporters on this story: Sandrine Rastello in Washington at srastello@bloomberg.net Keiko Ujikane in Tokyo at kujikane@bloomberg.net ;

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Fujii Refrains Committing to Attend Japan’s Diet, Will Heed Doctor’s Call

January 4, 2010

By Kyoko Shimodoi and Aki Ito Jan. 5 (Bloomberg) — Japan’s Finance Minister Hirohisa Fujii refrained from committing to attend the next session of parliament, saying he will follow his doctor’s judgment as checks on his health continue. “My examination is continuing, and I’ll respect my doctor’s judgment,” Fujii said at a news conference after a Cabinet meeting in Tokyo. Fujii, who was admitted to hospital for high blood pressure and exhaustion Dec. 28, met separately with Prime Minister Yukio Hatoyama after the Cabinet session. The Diet is scheduled to convene later this month, when the Finance minister would typically face lawmakers’ questions over the government’s proposed budget . “If it becomes clear that Fujii can’t fulfill his duties because of his health, clearly he’ll be replaced,” said Kyohei Morita , chief economist at Barclays Capital in Tokyo. For Hatoyama, losing his finance chief would come just as his public support tumbles and record government debt forces cutbacks to campaign promises. Hatoyama asked 77-year-old Fujii last year to postpone retirement and run in the August election that brought his Democratic Party of Japan to power for the first time. Fujii previously headed the Finance Ministry in 1993, and is a former budget examiner at the agency, giving him a deeper background in the area than other DPJ lawmakers. Fujii said today that the results of his medical checks will be released soon. Record Budget Fujii’s hospitalization followed weeks of deliberations over the administration’s record budget of 92.3 trillion yen ($1 trillion) unveiled on Dec. 25. Hatoyama was forced to pare back some campaign pledges to prevent an increase in debt issuance that risked swelling the nation’s borrowing costs. His Cabinet had an approval rating of 50 percent in a Dec. 25-27 poll by Nikkei Inc. and TV Tokyo Corp., down from 75 percent backing in mid-September. Morita said Fujii’s health concerns were unlikely to disrupt budget debate in the Diet. “Considering that the DPJ on its own has a majority in the lower house, it’s unlikely that budget discussions will stall simply because of Fujii’s hospitalization,” he said. Japan’s parliament must approve the budget for it to take effect as laid out for the year starting April 1. Hatoyama’s party has a majority in the lower house, and his two coalition partners in the upper body have backed the proposed spending. In the course of compiling the budget, Fujii urged ministers to restrain outlays after their requests amounted to an unprecedented 95 trillion yen. Fujii said the government must keep its promise of containing bond sales around 44 trillion yen to contain the world’s largest public debt burden — even after Hatoyama indicated he wouldn’t strictly adhere to the cap should more spending be necessary. To contact the reporters on this story: Kyoko Shimodoi in Tokyo at kshimodoi@bloomberg.net ; Aki Ito in Tokyo at aito16@bloomberg.net

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Hatoyama Proposes Record Japan Budget for 2010, Deepening Deficit Concern

December 27, 2009

By Toru Fujioka Dec. 26 (Bloomberg) — Prime Minister Yukio Hatoyama unveiled a record budget of 92.3 trillion yen ($1 trillion) aimed at increasing the wealth of Japanese households and reducing the economy’s reliance on exports. The proposal for the fiscal year that starts April 1, released yesterday in Tokyo, said the government will sell 44.3 trillion yen of new debt to help fund a revenue shortfall. Hatoyama’s budget, the first since his Democratic Party of Japan took office in September, reflects campaign promises to address economic stagnation by lifting the spending power of the nation’s households. Economists have criticized the plans for deepening concerns about the nation’s indebtedness and failing to address regulatory constraints on businesses. “It’s impossible to keep tolerating this massive spending,” said Takeshi Minami , chief economist at Norinchukin Research Institute in Tokyo. “Japan’s fiscal health will continue to be exceedingly severe given revenue won’t grow and a stagnant recovery may require additional economic measures.” The extra yield, or spread, on 30-year government bonds over two-year notes was at 2.11 percentage point yesterday in Tokyo. The level is near a four-year high, reflecting concerns about the government’s debt management. The budget gap has already increased to the equivalent of 10.5 percent of gross domestic product this year from 2.5 percent two years ago, according to International Monetary Fund estimates released last month. Total bond and note sales to the market will swell to a record 144.3 trillion yen, according to the proposal, lower than the 145 trillion yen median estimate of 15 primary dealers surveyed by Bloomberg News. Fiscal Discipline “The government will need to be careful about maintaining fiscal discipline or some investors may start to think government finances are heading for a collapse,” Minami said. Japan’s expanding deficit forced the DPJ to pare back some campaign promises this week. Hatoyama abandoned plans to end a provisional gasoline tax, securing about 2.5 trillion yen. The premier also cut about 3 trillion yen off the unprecedented 95 trillion yen in budget requests he received from ministries, restraint that analysts including Hideo Kumano say indicates he doesn’t want to lose control of the government’s finances. “Some people have been critical of the DPJ’s change of heart,” said Kumano, chief economist at Dai-Ichi Life Research Institute and a former Bank of Japan official. “But it is a sign they are now steering along a more realistic course.” Record Cuts Spending on public works will be cut by a record to 5.8 trillion yen, the proposal said. The construction industry has underperformed the nation’s stock market since Hatoyama won an election on Aug. 30, with the Topix Construction Index losing 13 percent compared with a 6 percent decline in the overall Topix index. Tokyo-based Kajima Corp., Japan’s biggest builder by assets, has lost 30 percent in that period. Hatoyama has sought to increase spending on childcare and reduce tuition costs to help bolster families’ incomes and strengthen consumer spending. Japan’s recovery from its worst postwar recession has relied on exports. GDP growth slowed to 1.3 percent in the third quarter from 2.7 percent in the previous three months. The government estimates tax revenue will be around 37 trillion yen next year, the same as this year’s forecast. Gross domestic product will expand 1.4 percent in the period, the first expansion in three years, the government said. Hatoyama was able to fulfill his pledge of keeping new bond sales around 44 trillion yen, the same amount issued by the previous administration. ‘Best We Could Do’ “This was the best we could do in order to maintain fiscal discipline,” the premier said at a press conference in Tokyo. “We were able to fulfill our obligation to future generations by maintaining that goal.” Hatoyama’s popularity has dropped to 48 percent this month from 71 percent after he took the office in September, according to the Asahi Newspaper. His budget proposal must be approved by Japan’s parliament, known as the Diet, before taking effect. Sentiment among merchants and households declined last month, when the government cited the threat of deflation for the first time in three years. Reports yesterday showed the unemployment rate rose to 5.2 percent last month, the first increase since July, and consumer prices slid for a ninth month. Along with declining revenue, Japan’s ballooning spending results from an aging population. Social-security expenses, which have increased 63 percent since 2000, will account for more than half of general spending for the first time next year. Japan’s finances are “in a very severe situation,” said Ryutaro Kono , chief economist at BNP Paribas in Tokyo. “The DPJ’s message is that fiscal sustainability won’t recover and it won’t show a plan to improve it until the middle of next year.” To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

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Hatoyama Proposes Record Japan 2010 Budget Criticized for Deeper Deficit

December 25, 2009

By Toru Fujioka Dec. 25 (Bloomberg) — Prime Minister Yukio Hatoyama unveiled a record budget of 92.3 trillion yen ($1 trillion) aimed at shifting spending toward Japan’s households and away from construction projects. The proposal for the fiscal year that starts April 1, released today in Tokyo, said the government will sell 44.3 trillion yen of new debt to help fund a revenue shortfall. Hatoyama’s budget, the first since his Democratic Party of Japan took office in September, reflects campaign promises to address economic stagnation by lifting the spending power of the nation’s households. Economists have criticized the plans for deepening concerns about the nation’s indebtedness and failing to address regulatory constraints on businesses. “It’s impossible to keep tolerating this massive spending,” said Takeshi Minami , chief economist at Norinchukin Research Institute in Tokyo. “Japan’s fiscal health will continue to be exceedingly severe given revenue won’t grow and a stagnant recovery may require additional economic measures.” The extra yield, or spread, on 30-year government bonds over two-year notes was at 2.11 percentage point today in Tokyo. The level is near a four-year high, reflecting concerns about the government’s debt management. The budget gap has already increased to the equivalent of 10.5 percent of gross domestic product this year from 2.5 percent two years ago, according to International Monetary Fund estimates released last month. Bond Sales Bonds and note sales to the market will swell to a record 144.3 trillion yen, according to the proposal, lower than the 145 trillion yen median estimate of 15 primary dealers surveyed by Bloomberg News. “The government will need to be careful about maintaining fiscal discipline or some investors may start to think government finances are heading for a collapse,” Minami said. Japan’s expanding deficit forced the DPJ to pare back some campaign promises this week. Hatoyama abandoned plans to end a provisional gasoline tax, securing about 2.5 trillion yen. The premier also cut about 3 trillion yen off the unprecedented 95 trillion yen in budget requests he received from ministries, restraint that analysts including Hideo Kumano say indicates he doesn’t want to lose control of the government’s finances. ‘Realistic Course’ “Some people have been critical of the DPJ’s change of heart,” said Kumano, chief economist at Dai-Ichi Life Research Institute and a former Bank of Japan official. “But it is a sign they are now steering along a more realistic course.” Spending on public works will be cut by a record to 5.8 trillion yen, the proposal said. The construction industry has underperformed the nation’s stock market since Hatoyama won an election on Aug. 30, with the Topix Construction Index losing 13 percent compared with a 6 percent decline in the overall Topix index. Tokyo-based Kajima Corp., Japan’s biggest builder by assets, has lost 30 percent in that period. Hatoyama has sought to increase spending on childcare and reduce tuition costs to help bolster families’ incomes and strengthen consumer spending. Japan’s recovery from its worst postwar recession has relied on exports. GDP growth slowed to 1.3 percent in the third quarter from 2.7 percent in the previous three months. The government estimates tax revenue will be around 37 trillion yen next year, the same as this year’s forecast. Gross domestic product will expand 1.4 percent in the period, the first expansion in three years, the government said. Fulfills Pledge Hatoyama was able to fulfill his pledge of keeping new bond sales around 44 trillion yen, the same amount issued by the previous administration. “This was the best we could do in order to maintain fiscal discipline,” the premier said at a press conference in Tokyo. “We were able to fulfill our obligation to future generations by maintaining that goal.” Hatoyama’s popularity has dropped to 48 percent this month from 71 percent after he took the office in September, according to the Asahi Newspaper. His budget proposal must be approved by Japan’s parliament, known as the Diet, before taking effect. Sentiment among merchants and households declined last month, when the government cited the threat of deflation for the first time in three years. Reports today showed the unemployment rate rose to 5.2 percent last month, the first increase since July, and consumer prices slid for a ninth month. Along with declining revenue, Japan’s ballooning spending results from an aging population. Social-security expenses, which have increased 63 percent since 2000, will account for more than half of general spending for the first time next year. Japan’s finances are “in a very severe situation,” said Ryutaro Kono , chief economist at BNP Paribas in Tokyo. “The DPJ’s message is that fiscal sustainability won’t recover and it won’t show a plan to improve it until the middle of next year.” To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

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Hatoyama Means Stocks Plummeting as Yen Rises With Unfilled Japan Mandate

December 11, 2009

By John Brinsley and Sachiko Sakamaki Dec. 11 (Bloomberg) — Japanese Prime Minister Prime Minister Yukio Hatoyama swept into power 10 weeks ago with a pledge to revive the economy and stand up to the U.S. He has governed as if his mandate were to tread water instead. Hatoyama delayed an emergency budget this week to add more spending to appease a coalition partner with eight parliamentary seats to his 421. His administration has given mixed signals about its tolerance for a strong yen, and irritated its own constituents and the Obama administration by failing to resolve a dispute over American troop deployments. “In terms of decisiveness, there’s something lacking in Hatoyama,” said Koichi Nakano , a political science professor at Sophia University in Tokyo. “The economic situation as well as tension with the U.S. over the base issue has spun out of control.” The yen is trading at almost a 14-year high, 88 yen per dollar, eroding export earnings at Tokyo-based Honda Motor Co. and Sony Corp. Japan’s Topix index has fallen 8 percent since the Democratic Party of Japan took power on Aug. 30, missing out on a 6.3 percent rally in global stocks in that period. The DPJ won voters by promising to boost child care, address the fiscal stresses posed by a shrinking and aging population and wean the economy’s dependence on public works. A third of Hatoyama’s 7.2 trillion yen ($81.5 billion) stimulus plan announced Dec. 8 is paid for with funds frozen from the previous government’s extra budget. Putting It Back “About half will be spent on helping local areas, so it basically means that they’re putting back the money they cut in the first place,” said Takeru Ogihara , chief strategist at Mizuho Trust & Banking Co. in Tokyo, who helps manage about 3.5 trillion yen. “That sounds confused to me. It’s better than not doing anything, but I don’t think it’ll help push up the economy.” The package includes employment assistance , subsidies to regional governments and incentives to buy energy-efficient products. A government report on Dec. 9 revised third-quarter annualized growth down to 1.3 percent from 4.8 percent, underscoring concern the world’s second-largest economy is entering a bout of deflation that may set off another recession. Hatoyama, 62, planned to announce the stimulus on Dec. 4 before objections from Financial Services Minister Shizuka Kamei , head of the People’s New Party, who demanded more spending. Kamei, 73, whose party has a combined eight seats in the Diet’s two chambers, has roiled markets by criticizing the Bank of Japan and business organizations. He agreed to the stimulus after Hatoyama added 100 billion yen. The government needs Kamei’s votes to smooth passage of legislation through the upper house. Falling Favor The prime minister’s popularity, at record levels when he took office, is souring as the economy sputters. His approval rating dropped to 59 percent this month from 75 percent in mid- September, the Yomiuri newspaper said this week. The paper polled 1,092 households between Dec. 4 and Dec. 6 and didn’t provide a margin of error. “Kamei is shaking the DPJ by promoting obsolete, old- fashioned LDP policies,” said Kazutaka Kirishima , an economics professor at Josai University northwest of Tokyo. “The public has questions about Hatoyama’s leadership, and this won’t help much.” Further complicating matters is a dispute over where to move the U.S. Futenma Air Base on Okinawa, home to more than half the 47,000 American military personnel in Japan. Okinawa Base The DPJ campaigned on revising a 2006 bilateral agreement to build replacement facilities at a separate base on Okinawa, saying it should be moved elsewhere in response to local complaints of noise, crime and pollution. The accord is part of a $10.3-billion plan that would also relocate 8,000 Marines from the island to Guam. President Barack Obama , while reiterating his support for the 2006 pact, agreed during his Tokyo visit last month to talks to resolve the issue “expeditiously.” Since then, Hatoyama has given conflicting statements on how and when he will resolve the issue. Mizuho Fukushima , head of the Social Democratic Party , last week said it may quit the coalition unless the government moves the base off the island. On Dec. 2 Hatoyama told reporters in Tokyo that he may not make a decision until next year. The next day he said “the time is now” for a resolution. Two days ago he told reporters he hoped to meet Obama at the United Nations climate summit in Copenhagen this month to present a proposal. Chief Cabinet Secretary Hirofumi Hirano yesterday said at press conference that no summit was scheduled and the prime minister hasn’t decided on a course of action. Foreign Minister Katsuya Okada on Dec. 8 told reporters that bilateral talks on the issue had been suspended, signaling disagreement between the two sides. “It’s an impossible situation to be in and he’s got himself to blame for it, at least partly,” Sophia’s Nakano said. “There’s no way he’s going to be able to satisfy everybody.” To contact the reporters on this story: John Brinsley in Tokyo at jbrinsley@bloomberg.net ; Sachiko Sakamaki in Tokyo at Ssakamaki1@bloomberg.net ;

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