European Central Bank President Jean-Claude Trichet

LONDON, Dec. 24--European Central Bank President Jean-Claude Trichet pledged, in an interview published Monday, to focus on eurozone inflation, and not let interest-rate cuts in the United States and Britain distract the bank from tightening monetary policy, AFP reported.
Speaking to the Financial Times from Frankfurt, Trichet said any evidence of “second-round effects“ leading to acceleration in inflation would be “decisive“.
“Other colleagues are in a different situation,“ Trichet told the business daily, while noting that the ECB was in contact with other major central banks to coordinate a response to the global credit crunch.
“I was very clear on behalf of the governing council (of the ECB); we would not let those second-round effects materialize,“ he added, referring to effects such as demands for wage increases among eurozone workers.
The ECB’s main interest rate currently stands at four percent.
Eurozone inflation hit 3.1 percent in November, the highest level in six and a half years owing to rising costs of energy and food products.
ECB directors have a mandate to keep inflation slightly below two percent.
Trichet, whom the FT named as its “Person of the Year“, downplayed the impact of the global credit crunch on the 13-nation eurozone economy, telling the paper that “is not our baseline scenario“.
He noted, though, that risks were inevitable in any market economy, and it would be wrong “to say, now we want to eliminate creativity“.

TOKYO, Dec. 24--Japan’s regulators have announced the country’s biggest financial market reforms in a decade amid hot competition in Asia to be the region’s financial hub, AFP wrote on Monday.
The Financial Services Agency on Friday unveiled “a plan to strengthen the competitiveness of financial and capital markets“ with deregulation and liberalization.
The agency plans to submit bills to parliament early next year to revise existing regulations, agency officials said.
The package represents the first comprehensive financial reforms by Japan since it launched “Big Bang“ deregulations in 1996.
Under the latest package, Japan will remove a ban on creating a comprehensive financial market to handle the trading of stocks, bonds and financial and commodity derivatives in about two years.
The package also wants to cut barriers between banks, securities and insurance firms while calling on the government to upgrade financial infrastructure.
“I hope to implement the plan as soon as possible so that the competitiveness of Japanese markets will revive,“ Financial Services Minister Yoshimi Watanabe said according to Kyodo News.
Japanese financial markets face competition from centers such as Singapore and Shanghai, with investors warning Japanese regulations fall short of global standards.
Meanwhile, Japan’s Cabinet approved a budget that includes increased spending on rural areas and social welfare, making it harder for Prime Minister Yasuo Fukuda to balance the books by 2011, Bloomberg wrote.
Japan’s deficit is set to widen for the first time in five years and spending will rise 0.2 percent to 83.1 trillion yen ($728 billion) in the year starting April 1, according to a budget proposal released in Tokyo.
Fukuda may struggle to meet his deadline as cooling global growth dims the outlook for Japan’s export-dependent economy. The ruling Liberal Democratic Party is under pressure to assist ailing regions and elderly voters after it lost control of the upper house in July, making it difficult for it to cut debt.
“The current political situation is forcing Fukuda to spend more,“ said Hidenori Suezawa, chief strategist at Daiwa Securities SMBC Co. in Tokyo. “Given that the nation’s public debt is rising, the government needs to make drastic reforms in spending and revenue.“
The government’s budget proposal will be submitted to parliament in January for approval by March 31.

Americans are falling behind on their credit card payments at an alarming rate, sending delinquencies and defaults surging by double-digit percentages in the last year and prompting warnings of worse to come.
An Associated Press analysis of financial data from the country’s largest card issuers also found that the greatest rise was among accounts more than 90 days in arrears.
Experts say these signs of the deterioration of finances of many households are partly a byproduct of the subprime mortgage crisis and could spell more trouble ahead for an already sputtering economy.
“Debt eventually leaks into other areas, whether it starts with the mortgage and goes to the credit card or vice versa,“ said Cliff Tan, a visiting scholar at Stanford University and an expert on credit risk. “We’re starting to see leaks now.“
The value of credit card accounts at least 30 days late jumped 26 percent to $17.3 billion in October from a year earlier at 17 large credit card trusts examined by the AP. That represented more than 4 percent of the total outstanding principal balances owed to the trusts on credit cards that were issued by banks such as Bank of America and Capital One and for retailers like Home Depot and Wal-Mart.
At the same time, defaults--when lenders essentially give up hope of ever being repaid and write off the debt--rose 18 percent to almost $961 million in October, according to filings made by the trusts with the Securities and Exchange Commission.
Serious delinquencies also are up sharply: Some of the nation’s biggest lenders--including Advanta, GE Money Bank and HSBC--reported increases of 50 percent or more in the value of accounts that were at least 90 days delinquent when compared with the same period a year ago.
The AP analyzed data representing about 325 million individual accounts held in trusts that were created by credit card issuers in order to sell the debt to investors--similar to how many banks packaged and sold subprime mortgage loans. Together, they represent about 45 percent of the $920 billion the Federal Reserve counts as credit card debt owed by Americans.
But what is coming into sharper focus from the detailed monthly SEC filings from the trusts is a snapshot of the worrisome state of Americans’ ability to juggle growing and expensive credit card debt.
The trend carried into November. As of Friday, all of the trusts that filed reports for the month show increases in both delinquencies and defaults over November 2006, and many show sequential increases from October.
Many economists expect delinquencies and defaults to rise further after the holiday shopping season.
Mark Zandi, chief economist and co-founder of Moody’s Economy.com Inc., cited mounting mortgage problems that began after this summer’s subprime financial shock as one of the culprits, as well as a weakening job market in the Midwest, South and parts of the West, where real-estate markets have been particularly hard hit. “Credit card quality will continue to erode throughout next year,“ Zandi said.
Economists also cite America’s long-standing attitude that debt--even high-interest credit card debt--is not a big deal. “The desires of consumers to want, want, want, spend, spend, spend-- it’s the fabric of our nation,“ said Howard Dvorkin, founder of Consolidated Credit Counseling Services in Fort Lauderdale, Fla., which has advised more than 5 million people in debt. “But you always have to pay the piper, and that can be a very painful process.“
Filing for bankruptcy is no longer a solution for many Americans because of a 2005 change to federal law that made it harder to walk away from debt.

ASTANA, Kazakhstan,
Dec. 24--Kazakhstan and an Eni-led consortium of oil majors have set Jan. 15 as the new deadline for talks over the fate of the giant Kashagan oilfield, Kazakh energy minister Sauat Mynbayev said on Monday.
The Central Asian state is seeking a cash payment and a stake increase as compensation for cost overruns and delay in the start of production at the world’s largest oil find in the last 30 years, Reuters wrote.
“We have agreed with everyone but Exxon,“ Mynbayev told reporters. Exxon said last week it was not against cutting its stake in favor of Kazakh state company KazMunaiGas, but had its own view on valuing the deal.
Mynbayev said Kazakhstan did not like Exxon’s offer. “Such an approach bears risks for the project,“ he said.
Sources familiar with the talks said last week the group had already agreed to pay Kazakhstan between $2 billion and $4 billion cash and change the profit distribution formula in favor of the government.
Operator Eni, Royal Dutch Shell, Total and ExxonMobil have 18.52 percent in Kashagan each.
Smaller stakes belong to ConocoPhilips, with 9.26 percent, Japan’s Inpex and KazMunaiGas, with 8.33 percent each.
The Caspian Sea field is at the heart of Kazakhstan’s ambition to triple oil output by 2017.
It is now due to start pumping oil in 2010 instead of the original 2005 target. Its total costs have soared to $136 billion from $57 billion.

A ship being built at Hyundai Heavy Industries shipyard in Ulsan, South Korea.

aSEOUL, South Korea, Dec. 24--Hyundai Heavy Industries Co., the world’s largest shipbuilder, and its closest rival Samsung Heavy Industries Co. led South Korean yards higher in Seoul trading on optimism vessel prices will continue to increase next year.
Hyundai Heavy rose 4.7 percent to 442,000 won at noon on the Seoul exchange. Samsung Heavy advanced 6.2 percent to 41,250 won, its biggest gain in three months. The benchmark Kospi index added 2 percent, Bloomberg reported.
“New ship prices will continue to rise next year because of a shortage in shipbuilding docks and as yards still have a significant backlog of orders,“ Song Jae Hak, an analyst at Woori Investment & Securities Co. in Seoul, wrote in a report today. An index measuring new vessel prices gained on Dec. 21 from a week earlier, Song said, citing data from Clarkson Plc, the world’s biggest shipbroker.
Yards in South Korea, the largest shipbuilding nation, predict record earnings this year on demand for vessels to transport raw materials to China and finished goods to the rest of the world. Hyundai Heavy last week said sales in the first 11 months of this year climbed 25 percent to 14.14 trillion won ($15 billion), exceeding last year’s total figure.
Separately, Samsung Heavy said on Monday it received orders for two drill ships worth 1.19 trillion won and for two floating drilling rigs valued at 1.08 trillion won.
Daewoo Shipbuilding & Marine Engineering Co., the world’s third-largest shipbuilder, advanced 5.4 percent, while Hyundai Mipo Dockyard Co., a unit of Hyundai Heavy, gained 5 percent.

DUBAI, UAE, Dec. 24--Persian Gulf Arab countries should not rush to decide on revaluing their dollar-pegged currencies because volatility in the US currency is normal, said Bahrain’s central bank governor, Reuters reported.
“You cannot take a short-term view and start ripping up your economic and monetary policy because of volatility during one snapshot of economic conditions,“ Middle East Economic Digest (MEED) quoted Rasheed al-Maraj as saying.
The weekly magazine had asked Al-Maraj if Persian Gulf Arab oil producers preparing for monetary union as early as 2010 aimed to revalue their currencies. “We are aware that there is volatility in the markets, and that sometimes volatility is higher at certain adverse economic points in the cycle,“ Al-Maraj said.
Pressure on Persian Gulf Arab currency pegs was building as the dollar tumbled to record lows against the euro last month, pushing the Saudi Arabian riyal to a 21-year high and the UAE dirham to a 17-year peak.
Last week the US currency climbed to six-week peaks against the yen and two-month highs versus the euro and a basket of currencies.
Al-Maraj said Bahrain would stand by its peg to the dollar because it has “served the economy well and allowed it to grow“.
“We are sticking with the current policy,“ he said.
The dollar pegs force Saudi Arabia and four of its neighbors with dollar pegs to shadow US interest rates. The US Federal Reserve has cut rates by 100 basis points since September 18 to contain the fallout from a mortgage crisis, and Persian Gulf central banks are following to prevent currency appreciation.

GENEVA, Dec. 24--Switzerland’s Federal Banking Commission (EBK) is to investigate how UBS became one of the banking sector’s worst victims of the credit crunch.
The Swiss bank has been forced to write off about $14 billion (£7 billion) because it owned debt linked to US mortgages, BBC wrote.
EBK spokesman Alain Bichsel told a number of newspapers that there would be an investigation into the losses once the current crisis had eased.
The regulator welcomed UBS actions to strengthen its position so far. The world’s biggest wealth manager has sold new shares to Singapore and Saudi Arabia, scrapped this year’s dividend and sold some shares held by the bank.
Many banks have been hit by their exposure to securities based on US mortgage debt.
Record default levels in the US have cast doubt on the value of the instruments, which were originally packaged as relatively safe investments.
“We will investigate how these enormous writedowns could arise,“ Bichsel told the Swiss Sonntagszeitung newspaper. “One aspect of that is who was responsible for it.“

BEIJING, Dec. 24--China will subsidize farmers’ purchases of televisions, refrigerators and cell phones to narrow the wealth gap with city dwellers and boost consumption in the world’s fourth-biggest economy.
The government will pay 13 percent of product prices for farmers in Shandong, Henan and Sichuan provinces in a pilot program that may be extended nationwide, the finance and commerce ministries said on their websites on Dec. 22, Bloomberg wrote.
Almost 740 million of China’s 1.3 billion people live in the countryside, where incomes are less than a third of those in the cities. Boosting rural spending may help to curb the nation’s dependence on investment and exports for growth.
“Up until now, rural households have spent most of their incomes on food and clothing,“ said Qi Jingmei, a researcher in Beijing at the State Information Center, an affiliate of China’s top economic planning agency. “There’s tremendous potential in the rural market.“
Fifteen companies including Haier Group Corp., China’s largest home-appliance maker, will sell 197 product types in the trial through May 31, according to the state-run Xinhua News Agency.
The plan will “significantly“ increase rural spending, improve farmers’ living standards, narrow China’s record trade surpluses and boost consumer-goods manufacturers, according to the ministries’ statement. They didn’t give costs.
Rural ownership of home appliances at the end of last year was at the urban level of almost 20 years ago, Xinhua reported Dec. 22, citing government data.