The ruling coalition’s choice to lead Japan’s central bank pledged to defend the economy against mounting global threats in parliament Tuesday, but the opposition quickly vowed to block his confirmation - setting the stage for a lengthy showdown in parliament.
In confirmation hearings, Toshiro Muto, currently No. 2 at the Bank of Japan, asked for support for his candidacy as central bank governor and vowed to promote economic growth and ensure stable prices amid growing risks, including a possible U.S. slowdown and surging oil prices.
The leading opposition party, the Democratic Party of Japan, however, announced after the hearing that it officially rejected Muto’s candidacy, claiming his years as a former top Ministry of Finance bureaucrat would hurt the central bank’s independence.
A battle in parliament - where the opposition controls the upper house - would be an embarrassment for the beleaguered government of Prime Minister Yasuo Fukuda. A delay could require Bank of Japan Gov. Toshihiko Fukui to stay as an interim caretaker after his five-year term is up March 19.
"I don’t understand why they are opposed," Fukuda said, defending his nomination of Muto. "It is irresponsible to oppose his nomination simply because he was formerly a member of the bureaucracy."
The DPJ is also angry that the ruling party has rammed through parliament other bills that required approval only from the more powerful lower house.
"The whole situation is ludicrous," said DPJ legislator Yukio Hatoyama, although he told reporters the party has no plans to nominate someone else.
While few expect the political scuffling to have an immediate impact on monetary policy, the prospect of a vacuum in such a high-profile spot could undermine investor confidence in the world’s second-largest economy.
The Bank of Japan has kept its key rate at a low 0.5% in an effort to sustain the country’s modest economic growth - although analysts say the economy is showing signs of slowing.
Muto, 64, needs approval from both the upper and lower houses of parliament to become the next governor, and the opposition controls the upper house since its victory last year paydayloans. The Liberal Democratic Party-led ruling coalition holds a vast majority in the lower house.
During the hearing before a lower house steering committee Tuesday, Muto said he would "continue respecting the independence of the Bank of Japan."
"Whatever my assignment, I have done my utmost, and I have been true to the principles of the Bank of Japan," he said in the lower house of parliament.
The proceedings were fed to reporters live on a monitor in the Diet building.
A senior ruling party legislator accused the opposition of using the selection of the Bank of Japan chief as a political ploy, noting they were voicing their protest even before the hearings got started.
"They are using the nomination process politically, and it’s become a power game," Bunmei Ibuki, the Liberal Democratic Party secretary-general, said on nationally televised news.
The standoff highlighted the confusion in Japan’s political world caused by a split legislature. The LDP has ruled Japan almost continuously for half a century.
Two nominated deputy governors are also up for confirmation, and some observers speculate the opposition may agree to them, and that one of them could act as interim governor while the battle rages over Muto.
Former BOJ Executive Director Masaaki Shirakawa, 58, now a Kyoto University professor, and Takatoshi Ito, 57, professor at the University of Tokyo, were nominated last week as BOJ deputies.
Investor confidence in Germany probably fell in March on concern that a possible U.S. recession will spread to Europe and hurt company earnings, a survey of economists showed.
The ZEW Center for European Economic Research will say its index of investor and analyst expectations declined to minus 40 from minus 39.5 in February, according to the median of 40 forecasts in a Bloomberg News survey. The index reached a 15-year low of minus 41.6 in January. ZEW will publish the report at 11 a.m. in Mannheim today.
Germany's benchmark DAX share index has dropped 20 percent this year, the biggest decline among major European stock markets. While growth in Europe's largest economy is holding up, the economic outlook is deteriorating as the U.S. teeters on the brink of a recession, record oil prices sap consumers' purchasing power and the euro's appreciation erodes export competitiveness.
“What started as a credit crisis in the U.S. will spread to the real economy in Europe soon,'' said Holger Schmieding, chief European economist at Bank of America Corp in London. “We all thought in February that the worst in the credit crisis was over. It's not, and real economy data from across the Atlantic is getting worse.''
Rising U.S. mortgage defaults pushed up borrowing costs globally last year, threatening investment and causing about $188 billion in asset writedowns and credit losses so far at the world's biggest banks and securities firms.
The U.S. unexpectedly lost jobs in February for the second consecutive month, the Labor Department said March 7, adding to evidence the world's biggest economy is contracting paydayloans.
Borrowing Costs
While central bank cash injections eased money-market tensions early this year, borrowing costs have crept up again.
The cost of borrowing euros for three months rose to 4.56 percent yesterday, the highest level since Jan. 14. That's 56 basis points above the European Central Bank's benchmark lending rate of 4 percent and double the 27-point average in the first half of last year.
The International Monetary Fund said Feb. 27 that the U.S. slowdown and “weaker'' world trade will curb Germany's expansion. The economy may grow 1.5 percent this year after 2.5 percent in 2007, the Washington-based fund said. The IMF on Jan. 29 also cut its forecast for global growth in 2008.
Adding to investors' concerns, exporters are grappling with an 18 percent gain in the euro against the dollar over the past year and an increase in energy prices. Crude oil rose above $107 a barrel for the first time yesterday and is 80 percent more expensive than it was a year ago.
Deutsche Lufthansa AG, Europe's second-biggest airline, said yesterday it will raise the fuel surcharge for domestic and European flights by 21 percent this month because of rising crude prices.
Still, German exports jumped 3.8 percent in January from December and industrial output rose more than economists expected. Investor confidence unexpectedly rose in February and business optimism increased for a second month, confounding economists' forecasts for a decline.
General Motors Corp. said Thursday that Chief Executive Rick Wagoner will earn a salary of $2.2 million in 2008, restoring his base pay to the level it was before he took a pay cut in 2006 as part of the company’s turnaround plan.
GM said its board of directors, which met Monday, also voted to give the company’s new president and chief operating officer, Fritz Henderson, a salary of $1.8 million.
The board’s action restores Wagoner’s salary to the level it was from 2003 to 2005. Wagoner accepted a pay cut in 2006, and his salary was $1.28 million that year. The company made a profit of $2.2 billion in 2006 despite continuing losses in North America.
GM will release Wagoner’s 2007 pay level later this spring.
Some critics were calling for Wagoner’s ouster as recently as 2005, when the company lost $10.4 billion and Wagoner announced a plan to cut thousands of jobs and shutter 12 plants amid talk of a possible bankruptcy. In 2006, GM shareholder Kirk Kerkorian, dissatisfied with GM’s progress, led an unsuccessful effort to force GM into an alliance with Renault SA and Nissan Motor Co.
But since then, GM has cut $9 billion in annual costs, persuaded 34,000 hourly workers to leave with buyouts and early retirement offers, and signed a historic agreement with the United Auto Workers that will slash labor and health care costs. It has also pushed further into emerging markets.
GM was profitable in every region outside North America in 2007 and remained the world’s largest automaker by outselling Toyota Motor Corp. (TMC) by a slim margin.
"I think he’s done a good job. It’s not been an easy couple of years," said Pete Hastings, an auto industry corporate bonds analyst with Morgan Keegan & Co. "I think it was right for him to sacrifice fast cash loans. He needed a push and he took it and did a nice job."
Hastings said the sagging U.S. economy doesn’t allow GM’s results to shine as fully as they might, but the company will be leaner and more prepared when the economy improves.
The board also voted to grant Wagoner and Henderson shares of GM stock and will make additional money if they meet internal targets for earnings, cash flow, market share and quality and warranty performance, GM spokeswoman Julie Gibson said. Gibson wouldn’t reveal specifics about those targets.
Wagoner is eligible for up to $3.5 million in incentive payments and a grant of 165,563 shares of GM stock if he meets the targets. He will also receive 500,000 stock options that will vest over three years and 75,000 restricted stock options that will vest in three to five years.
Henderson is eligible for up to $2.4 million in incentive payments and a grant of 110,376 shares of GM stock, in addition to 250,000 stock options and 60,000 restricted options.
GM’s board also voted to give Ray Young, who is replacing Henderson as executive vice president and chief financial officer, a base salary of $900,000, with an incentive payment worth up to $945,000 and 16,557 shares of GM stock. Young was also awarded stock options.
GM lost a record $38.7 billion in 2007, largely due to a charge for unused tax credits. Excluding the charges and other one-time items, the company lost $23 million. That was down from a profit of $2.2 billion in 2006.
GM (GM, Fortune 500) shares fell 62 cents, or nearly 3%, to close at $22.35 on the New York Stock Exchange.
Lawmakers grilled bank regulators Tuesday about why they didn’t intervene as lax lending standards led to a meltdown in the mortgage market and a credit crunch that threaten the economy.
"Again and again the question has been asked over the past year as our credit markets have grown increasingly impaired: Where were the regulators?," said Sen. Christopher Dodd, D-Conn., chairman of the banking committee. "Why didn’t they do more? Were they asleep at the switch? And when the alarm went off, did they merely hit the snooze button?"
Federal Reserve Vice Chairman Donald Kohn and Comptroller of the Currency John Dugan were among those who said they were aware of the loosening of underwriting standards before the collapse and spoke to banks about it.
"We did recognize the risk in a general way somewhat better than the banks did," Kohn said. "We tried to warn people in speeches and in conversations that we thought they were taking risks. … It’s quite possible we could have been more forceful."
In response, Sen. Jack Reed, D-R.I., questioned whether talking with the banks about risk was the best way to regulate them.
"That might not be the most effective way to make a point when there is literally billions of dollars at stake," Reed said.
Years of loose underwriting guidelines have now come back to haunt the financial industry as homeowners increasingly fall behind in their mortgage payments. These defaults and foreclosures have sent tremors through the credit markets, chilling lending in many sectors including commercial real estate and municipal bonds. Banks are pulling back on all sorts of credit, including mortgages to student loans to credit cards.
The crisis has forced Wall Street banks to write down more than $130 billion in assets and to get capital infusions of more than $100 billion $1500 payday loan. More of both are expected, regulators said. Credit losses will continue to tick up as more people struggle to pay their mortgages, Federal Deposit Insurance Company Chairwoman Sheila Bair told the committee.
Regulators sought to assure the senators that the current troubles will not topple the banking industry. Banks entered this difficult period after years of record profits and strong capitalization, a measure of a bank’s soundness. Bair repeatedly said that 99% of all insured institutions met or exceeded capital standards.
"Despite these strains, the banking system remains fundamentally sound, in part because it entered this period of stress in such strong condition," Dugan said.
But the senators were concerned that banks’ soundness might be jeopardized when they implement new capitalization and risk management standards under Basel II, as new global banking guidelines are called. The new guidelines rely more heavily on internal bank risk models, which helped lead to the current crisis, Dodd said.
Regulators responded that they will still oversee banks’ capitalization levels and can require adjustments.
Dodd said he will hold another hearing within 60 days to learn what measures regulators are putting into place to address the industry’s current problems.
The U.S. State Department intends to issue a permit this month for a $5.2 billion pipeline that would transport crude oil from Canada through seven states.
The State Department, in a decision published Monday in the Federal Register, said that if no other federal agency objects, a permit will be issued within 15 days for the Keystone pipeline, a project of TransCanada Corp. of Calgary, Alberta.
A permit would allow the project to move forward this spring, TransCanada spokeswoman Cecily Dobson said.
The entire 2,148-mile pipeline would be able to carry 590,000 barrels of oil daily by late 2010, Dobson said
Canadian regulators already have approved the route through Canada, she said.
The pipeline will be equally owned by TransCanada (COP, Fortune 500) and Houston based-ConocoPhillips, (COP, Fortune 500) Dobson said.
It would carry crude oil across Saskatchewan and Manitoba, through North Dakota, South Dakota, Nebraska, Kansas, Missouri, on the way to refineries in Patoka, Ill online payday advance. and Cushing, Okla.
Because it crosses the U.S.-Canadian border, the project requires a presidential permit from the State Department. The department in January issued a statement saying the pipeline would result in limited environmental harm.
State Department officials did not immediately return telephone calls on Monday seeking further comment.
Elizabeth Orlando, the State Department’s project manager working with the pipeline, said earlier that the review of the project was the largest in the agency’s history.
Dobson said the company plans to start work on the pipeline this spring and complete it in 2009. The company is expecting crude to be piped to the refinery in Illinois late next year, and to the refinery in Oklahoma a year later, she said.
Supervalu Inc. is predicting its fiscal 2009 earnings will rise above analyst expectations, and its stock price jumped at the news.
The company's shares rose to $27.90 in morning trading on Wall Street Monday, after closing Friday at $26.25.
Eden Prairie-based grocery chain Supervalu (NYSE: SVU) said it expects it 2009 earnings to come in between $3.06 and $3.22 per share. Excluding one-time acquisition related costs, the company expects earnings of $3.10 to $3.25 per share.
Analysts polled by Thomson Financial are expecting $3.04 per share, excluding one-time items.
In a statement, CEO Jeff Noddle commented, "Our fiscal 2009 earnings guidance reflects modest operating growth, including the benefits of synergies, lower interest expense and the 53rd week" of the leap year fast cash advance.
The company also reaffirmed fiscal 2008 earnings guidance of $2.71 to $2.77 per share, or $2.92 to $2.98 excluding one-time charges. Analysts are expecting a profit of $2.74 per share.
The company added that it expects identical store sales growth, or growth at non-renovated stores open at least one year, to range from 1 to 2 percent for fiscal 2009.
cwyant@bizjournals.com | (612) 288-2108
I have completed four years of a 5.25 percent seven-year balloon mortgage loan. For peace of mind, I want to refinance to a 30-year fixed loan. Will rates go lower?
Lately, mortgage holders have been asking, "Should I refinance my home now, or wait until rates go lower?"
Fixed-rate mortgages and longer-term adjustable-rate mortgages are closely tied to mortgage-backed securities that trade on the bond market. Historically, these securities tend to move in the opposite direction of the Nasdaq composite index. When Nasdaq declines, mortgage-backed securities will increase in price, which will lower fixed-mortgage rates.
Trying to time the mortgage-backed securities market is a lot like trying to time when to take money off the blackjack table in Vegas quick payday loan. If someone could benefit by refinancing into a fixed-rate product right now, it is highly recommended to act now and not to gamble. Keep in mind that most mortgage companies offer a no-cost refinance option. So, if rates slide significantly after you refinance, it would possibly make sense to refinance again with no money out of pocket.
Viacom Inc. says its fourth-quarter earnings rose 16% on gains in its cable channels and movies.
New York-based Viacom, which also owns the Paramount movie studio, earned $559.5 million or 86 cents per share in the last three months of 2007, the company reported Thursday.
That was up from $480.8 million or 69 cents per share in the same period a year ago.
Revenue rose 19% to $4.25 billion, from $3.57 billion.
Excluding discontinued operations, Viacom’s (VIA) earnings came in at 83 cents per share, in line with the estimates of analysts surveyed by Thomson Financial.
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