Business Blog Posts

With new debt issuance seen topping tax revenues for the second straight year in the initial budget, Economics Minister Banri Kaieda stressed the need to rectify the severe fiscal situation as soon as possible, calling it "abnormal."

"The fact that new bond issuance exceeds tax revenues is not at all normal. We need to rectify this as soon as possible," Kaieda told reporters after a cabinet meeting.

Finance Minister Yoshihiko Noda said he hoped the 2011/12 budget, set to be approved by the cabinet later on Friday, will help to boost the flagging economy and job market.

But a divided parliament clouds the outlook for its implementation, creating an additional headache for Prime Minister Naoto Kan as he confronts low voter support and a bitter feud inside his ruling party over scandal-plagued powerbroker Ichiro Ozawa.

The budget, the first that the Democratic Party-led government has compiled from scratch, keeps new borrowing at about 44.3 trillion yen ($534 billion), in line with its promise to hold fresh debt issuance to this year's level.

Noda also said the government had adhered to a self-imposed cap on spending, excluding debt servicing, at this year's level around 71 trillion yen, aiming to rein in a public debt that is about the twice the size of Japan's $5 trillion economy.

The budget is almost certain to be enacted, since the ruling Democratic Party of Japan (DPJ) controls parliament's powerful lower house and the budget would take effect even if rejected by the opposition-controlled upper chamber.

But passage of bills needed to implement and fund the spending, such as one on issuing deficit-financing bonds, is far from certain as they need approval by both houses of parliament.

"Market players are well aware of risks such as a delay in parliamentary deliberations on the budget," said Takahide Kiuchi, chief economist at Nomura Securities.

"Although opposition parties are unlikely to take the budget hostage for fear of public criticism, they could win concessions such as resignation of the entire cabinet in return for passage of budget bills."

The main opposition party Liberal Democratic Party wants the government to drop some of its key campaign pledges including payments to families with children, while the government has scaled back such spending plans due to lack of revenue.

Tax revenues are seen rising to about 41 trillion yen, falling short of new debt issuance despite an increase of about 4 trillion yen compared with this year's initial budget figure as the economy recovered from a deep recession.

To balance the 2011/12 budget, the cash-strapped government is expected to scrape together about 7 trillion yen of non-tax revenues, the bulk of it by raiding cash reserves from special accounts and administrative agencies.

Government officials say non-tax revenues are only a near-term solution and it will be even harder to compile budgets from next year onwards without raising the sales tax or making deep spending cuts to tackle rising welfare costs due to fast-aging society.

The government says it will seek to implement comprehensive tax reform -- coded wording for a sales tax hike -- in fiscal 2012/13, but it could face stiff resistance from ruling party lawmakers wary of alienating voters.

(Additional reporting by Linda Sieg; Editing by Michael Watson)

The family's lawsuit, filed in March in San Diego Superior Court, was part of a wave of product-liability and wrongful-death actions brought against Toyota Motor Corp and subsidiaries over complaints of sudden, unintended acceleration in its vehicles.

But the fiery August 28, 2009, crash near San Diego of a Lexus ES 350 sedan driven by off-duty California Highway Patrol Officer Mark Saylor drew intense media attention and renewed government scrutiny of safety problems leading to the recall of over 6.5 million Toyota vehicles in the United States.

Those recalls in 2009 and 2010 were ordered by Toyota for repairs of ill-fitting floor mats that can jam the accelerator and for gas pedals that did not spring back as designed.

The amount of the Saylor settlement had been kept confidential since it was reached in September. But ruling in favor of the media and others, the judge on Monday ordered the sum made public, and two lawyers connected with the case revealed the amount to Reuters before a non-redacted version of the settlement documents could be filed in court.

The National Highway Traffic Safety Administration is investigating reports that as many as 89 crash deaths since 2000 may be linked to sudden, unintended acceleration in Toyotas and the company's luxury-line Lexus vehicles.

But the circumstances of the Saylor crash stood out, even to Toyota President Akio Toyoda, grandson of the founder of the Japanese automaker, who extended his condolences to the Saylor family in an apology he delivered to a congressional hearing in February.

According to the lawsuit, Saylor was driving his wife, their 13-year-old daughter and his brother-in-law on a family outing when their car "began to accelerate on its own" and sped out of control despite Saylor's attempts "to apply the brakes and otherwise do everything possible to stop" the car.

CHILLING CALL FOR HELP CAUGHT ON TAPE

The vehicle reached speeds of up to 120 miles per hour before it struck another vehicle, plowed through a fence, hit a berm and flew through the air, then rolled several times into a field and burst into flames.

The family's final moments before impact were captured in the recording of a frantic 911-emergency cell phone call placed by Saylor's brother-in-law, Christopher Lastrella, in which he is heard telling the dispatcher, "Our accelerator is stuck ... We're in trouble ... there is no brakes."

Others in the car are heard saying, "hold on" and "pray" as the call ended.

San Diego County Sheriff's investigators concluded the crash likely was caused by the gas pedal becoming stuck in an all-weather rubber floor mat designed for a larger vehicle but placed by the Lexus dealership in the sedan loaned to Saylor.

But the accident report said "other avenues of unintended acceleration could not be explored," mechanical or electrical, due to catastrophic damage to the vehicle.

The report also revealed that another driver who had been loaned the same car a few days earlier told investigators the vehicle raced out of control on him when the gas pedal jammed in the floor mat, which he managed to free after placing the gear shift into neutral.

Initial claims fell 3,000 to a seasonally adjusted 420,000, the Labor Department said on Thursday, matching economists' expectations.

A separate report from the Commerce Department showed spending rose 0.4 percent after increasing by an upwardly revised 0.7 percent in October.

Economists polled by Reuters had expected spending, which accounts for about 70 percent of U.S. economic activity, to rise 0.5 percent last month after a previously reported 0.4 percent gain in October.

"It hasn't been such a bad year for the economy -- we think it will grow around 2.5 percent this year and 3.5 percent next year. Unfortunately, it's been a jobless recovery," said Michael Woolfolk, a senior currency strategist at BNY Mellon in New York.

U.S. Treasury prices fell slightly after the data, while stock index futures edged lower. The dollar held losses against the yen, but maintained gains versus the euro.

In another report, the Commerce Department said orders for long-lasting manufactured goods excluding transportation increased 2.4 percent, the largest increase since March, after a 1.9 percent drop in October.

But overall orders dropped by a larger-than-expected 1.3 percent last month, dragged down by a plunge in bookings for civilian aircraft and motor vehicles.

"Durable goods orders were reassuring in that we saw a manufacturing plateau over the summer and while the number released today was not strong, at least it showed some resilience in terms of capital goods orders apart from aircraft," said Pierre Ellis, a senior economist at Decision Economics in New York.

The reports were the latest in a series to suggest growth accelerated in the fourth quarter. The economy grew at a 2.6 percent annualized pace in the third quarter and many forecasters expect gross domestic product to expand at a 3 percent to 3.5 percent pace in the current quarter.

The spending report also showed the Federal Reserve's preferred measure of consumer inflation -- the personal consumption expenditures price index, excluding food and energy -- rose 0.1 percent after being flat for four straight months.

In the 12 months through November, the core PCE index rose 0.8 percent, the same margin as in October and still the smallest year-on-year gain since records started in 1960.

Spending was supported by a 0.3 percent increase in incomes, which was slightly more than the 0.2 percent rise that economists had expected. Incomes rose 0.4 percent in October. Consumers also dipped into their savings to fund purchases.

Spending adjusted for inflation rose 0.3 percent after advancing 0.5 percent in October. The seventh straight month of gains bolstered views the spending pace gathered momentum in the current quarter after growing at a 2.4 percent rate in the July-September period.

The saving rate slipped to 5.3 percent last month, the smallest since March, from 5.4 percent in October. Savings dropped to $614.8 billion, the lowest level since March. (Reporting by Lucia Mutikani and Emily Kaiser; Additional reporting by Ellen Freilich in New York; Editing by Andrea Ricci)

The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment came in at 74.5, up from 71.6 in November.

It was slightly below the median forecast of 74.7 among economists polled by Reuters.

"The overall tenor of news about recent economic developments was on balance more favorable than at any time during the past six years," wrote Richard Curtin, the survey's director.

Twenty-seven percent of consumers spontaneously reported upbeat news about employment gains, the highest proportion since 1983, he wrote.

The survey's barometer of current economic conditions was 85.3 in December, up from 82.1 percent in November but below a forecast of 86.

The survey's gauge of consumer expectations, which more closely projects the direction of consumer spending, rose to 67.5, also the highest level since June. That was above November's 64.8 percent, and in line with expectations.

Households said they expect an inflation rate of 3 percent a year from now, unchanged from November. Americans' forecast for inflation over the next five years held at 2.8 percent for a third month in a row.

(Reporting by Kristina Cooke, Editing by Chizu Nomiyama)

Energy shares will be in the spotlight as oil prices climbed to near a two-year high on Thursday, boosted by an unexpected surge in global demand that has fueled the biggest drop in U.S. crude oil stockpiles in more than a decade.

Bed Bath & Beyond (BBBY.O) beat quarterly profit estimates and gave a strong outlook for the period covering the holidays as U.S. consumers spent more on their homes, sending its shares up.

Rovi Corp (ROVI.O) will pay $720 million in cash and stock to buy Sonic Solutions (SNIC.O), which owns the popular digital video player software DivX, in a bid to broaden its footprint across the digital entertainment space.

Defense contractor Raytheon Co (RTN.N) recommended on Wednesday that shareholders reject an unsolicited "mini-tender offer" by TRC Capital Corp to buy up to 2 million common shares, or about 0.5 percent of its outstanding stock.

South Korean President Lee Myung-bak said its military should launch a "merciless counter-attack" if its territory is attacked again by North Korea, as Seoul's military held major land and sea exercises on Thursday. North Korea responded to the show of military might by denouncing its neighbor as a warmonger, but stopped short of threatening a retaliatory strike as tensions simmered following the North's shelling of a southern island last month.

European shares inched higher in morning trade, extending their sharp December rally as buoyant oil prices boosted energy shares such as BP (BP.L) and ENI (ENI.MI). At 0833 GMT (3:33 a.m. ET)the FTSEurofirst 300 .FTEU3 index of top European shares was up 0.05 percent at 1,148.11 points, on track to record its best monthly performance since mid-2009.

The S&P 500 rose on Wednesday to its highest level since the collapse of Lehman Brothers, led by bank stocks that have leapfrogged other sectors in December.

The Dow Jones industrial average .DJI added 26.33 points, or 0.23 percent, to 11,559.49. The Standard & Poor's 500 Index .SPX gained 4.24 points, or 0.34 percent, to 1,258.84. The Nasdaq Composite Index .IXIC edged up 3.87 points, or 0.15 percent, at 2,671.48.

(Reporting by Blaise Robinson; Editing by Greg Mahlich)

Rio's first big acquisition since its ill-timed Alcan buy in 2007 is a play on soaring Asian demand for the key steel-making ingredient, but needs the backing of at least one of Riversdale's three large shareholders, including India's Tata Steel (TISC.BO) and Brazilian steel group CSN (CSNA3.SA).

While fund managers said the steelmakers may oppose Rio's offer, Riversdale's Managing Director Steve Mallyon told Reuters he expected a positive response.

The company's third largest shareholder, U.S.-based fund Passport Capital, had committed an unspecified number of its shares to a pre-bid agreement that gives Rio Tinto options over 14.9 percent of Riversdale's stock, Mallyon said.

"There has been no reaction either way although Passport has put some of its shares into the pre-bid agreement," Mallyon told Reuters. "I would think the reaction from CSN and Tata would be generally positive."

Tata Steel, whose Riversdale board nominee abstained from voting on the bid, declined to comment.

Rio, which wants access to Riversdale's coking coal deposits in Mozambique, raised its offer to A$16 per share cash on Thursday from an earlier indicative bid of A$15.

Resuming trade after a two-day suspension, Riversdale's shares closed 1.7 percent firmer at A$16.57, indicating investors were expecting a higher offer.

"I think there is a strong potential (for rival bids)," said Andrew Harrington, an analyst at Paterson Securities in Sydney.

"There aren't that many big new coking coal assets out there and this one is very large and it's near to production."

A group of state-run Indian firms including NTSC (NTPC.BO) have indicated they were looking at Riversdale, with a source at a member of the consortium telling Reuters on Wednesday it would decide soon whether to bid.

Other interested parties taking a look at Riversdale include Anglo American (AAL.L), ArcelorMittal (ISPA.AS) and Strata (XTA.L), sources familiar with the matter and fund managers have said.

Riversdale had held discussions with a number of parties on potential partnerships but was not in takeover talks with anyone else, Mallyon said, before heading to the beach after intensive negotiations to secure a deal with Rio ahead of the Christmas break.

"I've got the board on the (car) roof. When I told everyone I was going to a board meeting it wasn't the kind they were thinking about. I am ready for a nice surf," he said.

Rio needs acceptances from 50 percent of Riversdale shareholders, which would require getting agreement from at least one of the three big shareholders that together own about half of the company, according to Reuters data.

Riversdale's executive chairman and founder Michael O'Keeffe and Mallyon have offered their shares into the pre-bid agreement.