Japan strengthening strategic partnership

Japan is stepping up cooperation with the Philippines and other Asian countries to establish common rules in business and other fields.

Japanese Prime Minister Yoshihiko Noda and Philippine President Benigno Aquino on Tuesday signed a joint statement on a strategic partnership.

Japan forms this partnership with countries sharing mutual interests such as democracy and a market economy.

The aim is to ensure free navigation in Asian seas and promote cross-border business activities.

The Philippines is the third Asian signatory of the joint statement after Indonesia and Vietnam.

The Japanese government apparently wants to boost cooperation with the signatories to deal with China's increasing maritime activities.

The idea of a strategic partnership is included in the Japan-US joint objectives agreed in June.

Japan intends to boost cooperation with Asian nations at the East Asia Summit scheduled in November.

Bank shares rally on hopes of eurozone debt deal

European bank shares have risen as investors react to the latest attempts to stabilise the eurozone debt crisis.

A number of measures are being discussed according to reports from the weekend's international meeting in Washington.

They are expected to involve a 50% write-down of Greece's massive government debt, the BBC's business editor Robert Peston says.

French and German bank shares were up 10% at one stage in Monday trading.

European governments hope to have measures agreed in five to six weeks, in time for a meeting of the leaders of the G20 group in Cannes at the beginning of November.

But EU officials in Brussels stress that they should not be seen as "a single grand plan", the BBC's correspondent Chris Morris says.

The measures being discussed are:

Institutions that have lent money to Athens writing off about 50% of the money they are owed
The size of the eurozone bailout fund, the European Financial Stability Facility (EFSF), increasing dramatically to 2 trillion euros (£1.7tn; $2.7tn)
Strengthening big European banks that could be hit by any defaults on national debt obligations.

However, on Monday evening AFP reported that German Finance Minister Wolfgang Schaeuble had told television news channel NTV that there was no plan to boost the size of the EFSF.

"We are giving it the tools so it can work if necessary," Mr Schaeuble was reported as saying.

"Then we will use it effectively but we do not have the intention of boosting its volume."Pan-Europe gains

Uncertainty over how to tackle Greece's problems has led to some European bank shares losing half their value in recent months due to concerns about their holdings of Greek debt.

But on Monday, French banks, which are particularly exposed to Greece, rallied, with BNP Paribas and Societe Generale up 4% and 5.4% respectively, and Credit Agricole up 3.7%.

Eurozone rescue plan 'emerging' as IMF and Greece talk

The outline of a large and ambitious eurozone rescue plan is taking shape, reports from the International Monetary Fund (IMF) in Washington suggest.

It is expected to involve a 50% write-down of Greece's massive government debt, the BBC's business editor Robert Peston says.

The plan also envisages an increase in the size of the eurozone bailout fund to 2 trillion euros (£1.7tn; $2.7tn).

European governments hope to have measures agreed in five to six weeks.

Turning the present outline into a practical reality will be immensely difficult, our editor says.

But he adds that the price of failure could be a financial crisis that would probably turn anaemic growth into a recession or worse.

Investors have so far been unimpressed with the speed at which policymakers have dealt with the eurozone debt crisis, and analysts say that action, not words, are needed to calm volatile stock markets.

Noda expresses resolve for rebuilding Japan at UN

Prime Minister Yoshihiko Noda has expressed his resolve to rebuild and revive Japan from the devastating earthquake and tsunami at the UN General Assembly.

Noda addressed the annual UN meeting in New York on Friday.

The prime minister said this year has been far from ordinary for Japan. He stated that nearly 20,000 people were left dead or missing by the March disaster, and almost 40,000 people are still forced to live away from their homes.

Noda expressed gratitude for support extended by the international community, saying the Japanese will never forget the ties they felt with people from around the world.

On the troubled Fukushima Daiichi nuclear power plant, Noda said steady progress is being made to contain the accident.

He said the affected areas face many challenges, but that he will put priority on recovery and reconstruction work to revive Japan as soon as possible.

Noda spoke about Japan's readiness to provide maximum support for the UN peacekeeping mission in South Sudan, which gained independence in July.

He said Japan wants to contribute to UN activities in areas in which it excels, and is preparing to send personnel to the UN operation headquarters in South Sudan.

He said Japan will send a survey team to that country soon to decide on whether to send a Self-Defense Force engineering unit there.

Noda also announced a plan to provide one billion dollars in yen loans to support reform and democratization efforts in the Middle East and North Africa

Stock markets end flat after volatile trading

European share indexes have ended flat after a week of volatile trading.

The main indexes in the UK, France and Germany rose slightly on Friday, but over the week the FTSE fell 3.6%, the Cac 40 shed 4.4% and the Dax lost 4%.

The volatility prompted the G20 to put out a statement late on Thursday reassuring that it was ready to take action to stabilise markets.

IMF chief Christine Lagarde said the challenge the world faced "could not be more urgent".

"There are dark clouds over Europe and there is huge uncertainty in the US," she said in an address to the annual meeting of the World Bank and the IMF in Washington.

"And with that we could risk a collapse in global demand.

"We are all in it together and nobody should be under any illusion that there could be a de-coupling."
Capitalisation problem

Global shares had slumped on Thursday, sparked by a Federal Reserve warning late the previous day about the outlook for the US economy.

Gloomy comments about weak global growth from the International Monetary Fund (IMF) and the World Bank knocked sentiment further.

On Thursday, IMF head Christine Lagarde said the global economic situation was entering a "dangerous place", while World Bank president Robert Zoellick said he thought the world was in a "danger zone".

Doubts about the strength of European banks also resurfaced on Friday, after the head of France's markets regulator, Jean-Pierre Jouyet, said "there is indeed a problem with the capitalisation of banks".

He said 15 to 20 banks needed additional funds, none of which were based in France.Meanwhile, Greece has denied media reports it was contemplating defaulting on its debts, with creditors taking a 50% hit on Greek government bonds.

Finance Minister Evangelos Venizelos said Athens was focusing on reducing its debt levels.

"All other discussions, rumours, comments and scenarios which are diverting our attention from this central target and Greece's political obligation... do not help our common European task," he said.

On Friday, credit rating agency Moody's downgraded eight Greek banks due to concerns about Greece's ability to pay back its debts.

Two of the Greek banks downgraded, the Emporiki Bank of Greece and General Bank of Greece, are majority-owned by France's Credit Agricole and Societe Generale respectively.
'Bold action'

The IMF and World Bank comments, following the Fed's warning about "serious downside risks" to the US economy, helped to push global markets sharply lower on Thursday, with the main European indexes falling about 5%, and the Dow Jones on Wall Street closing down 3.5%.

Overnight, Asian shares fell sharply, with South Korea's main Kospi index slumping 5.7% and Hong Kong's Hang Seng losing 1.4%. Japan's Nikkei was closed for a public holiday.The European and US falls sparked the G20 to announce a commitment "to take all necessary actions to preserve the stability of banking systems and financial markets as required".It said it would follow up this pledge with a "bold action plan" at the beginning of November.

Analysts said investors were unimpressed by the announcement.

"The statement from the G20 last night may have taken the edge off the current bitter market sentiment, but the reassurances from the finance ministers lack substance," said Jane Foley at Rabobank.

"Until politicians back their actions with words in respect to moving closer to a solution to the eurozone debt crisis, markets will continue to worry about a messy and painful outcome from the eurozone debt crisis."

The G20 has given little hint of what action it may take, but markets have long been calling for a substantial increase in the eurozone's communal bailout fund, the European Financial Stability Facility (EFSF), from its agreed level of 440bn euros ($596bn; £385bn).

Many investors also want the eurozone to issue bonds guaranteed by every one of the 17-member nations - so-called eurobonds. However, a number of policymakers, particularly those in Germany, have resisted the idea.

In July, European finance ministers proposed making the EFSF more flexible, allowing it to buy individual government bonds - which would bring down the cost of borrowing for heavily indebted nations - and to offer emergency credit lines to banks. However, the proposals have not yet been ratified.
'Drip feed'

Analysts say far swifter action is needed in order to soothe investors' jittery nerves."Markets work on a second by second basis, while politicians seem to be working to a monthly calendar," Jeremy Stretch from CIBC told the BBC.

He highlighted the "drip feed effect" of this week's IMF downgrade of global growth, the Fed's warning, the further comments from both the IMF and World Bank and Thursday's weak figures on eurozone private sector growth as undermining investors' confidence even further.

Gerard Lyons at Standard Chartered Bank also highlighted political inertia, telling the BBC: "My biggest worry is that there is not the sense of urgency that there really needs to be to force policymakers to take decisive action".

The G20 is gathering later in Washington, a meeting which Jim O'Neill, chairman of Goldman Sachs Asset Management, suggested could mark the beginning of concerted action to tackle the debt crisis in Europe which is the cause of so much stock market volatility.

"The thing that really brought the world to a better place in 2008 was genuine collective action involving both the developed and the developing world through the G20," he told the BBC.

"The fact that they're all there together in [Washington] DC this weekend should lay the framework for thoughts about quite significant actions... sometime between now or possibly at the November G20 in France."

Lib Dem conference: Clegg to defend cspending cuts

Nick Clegg will defend the government's economic strategy and his party's role in the coalition in his leader's speech to the Liberal Democrat conference.

The deputy PM is expected to say they will not change course on spending cuts but can do more to encourage growth.

He will argue the economic crisis shows the party made the "right call" in entering power with the Conservatives.

The BBC understands ministers are discussing how to inject up to £5bn into the economy.

BBC political editor Nick Robinson says some Cabinet members believe the chancellor could raise capital spending on infrastructure.

The news comes as Mr Clegg prepares for his big speech at his party conference in Birmingham, in which he is expected to focus heavily on the state of the economy after the International Monetary Fund warned of the risk of a double-dip recession in the UK and other countries unless policymakers took urgent action.

Mr Clegg is expected to reject accusations from Labour that the deficit reduction strategy is not working, saying the course of action is tough but right.

Economic challenge

But despite the squeeze on the public finances, Mr Clegg will say the government is not "helpless" to do anything about the problems of flagging growth and rising unemployment.

Critics say recent Lib Dem initiatives to kick-start local infrastructure projects and ensure money earmarked for national projects - like Crossrail - is actually being spent, are far too modest.

Although it is understood the speech will not contain any new announcements on infrastructure, Mr Clegg is expected to say ministers will do more to help boost economic activity and create jobs.

A succession of senior Lib Dem figures have warned about the difficulties facing the UK, with Business Secretary Vince Cable comparing the task of securing prosperity to the "economic equivalent of war".

While defending the austerity drive as being necessary for economic credibility, Mr Clegg is expected to say it will be done in the fairest possible way with the wealthiest in society contributing.

'Summer schools'

Mr Clegg has said that were the 50p tax rate to be scrapped, it would have to be replaced by other taxes on the wealthy - such as on property or land.

He will use the speech to reassure party members that they remain a distinct political force and that manifesto commitments on reducing the tax burden of the lowest-paid, providing more money for the most disadvantaged pupils and restoring the link between earnings and pensions, have been delivered.

Responding to last month's riots in England, Mr Clegg will say the disorder showed there were a group of people who "had fallen through the cracks" and had "nothing to lose" by their actions.

"It was about what they could get, here and now, not what lies in front of them, tomorrow and in the years ahead," he will say.

Some of those involved "lost touch with their own future" years before the riots, he will argue. The Lib Dem leader will announce a programme of catch-up summer classes for children "most in need" prior to starting secondary school.

"So often the people who have gone off the rails are the ones who were struggling years earlier," he will say. "This is a £50m investment to keep them all on the right path."

Electoral setbacks

The Lib Dems have been trying to regroup after suffering a double setback in the polls in May.

The party suffered heavy losses in council elections in England and Scotland. Nearly 800 councillors lost their seats, including all those up for election in Manchester and Liverpool.

The Lib Dems also suffered a defeat in a referendum on the UK voting system when the alternative vote campaign they backed was overwhelmingly rejected by the voters.

Despite these reverses and continuing poor poll ratings, the Lib Dem leader has dismissed speculation about his own future.

He has insisted he will remain in his job "well beyond" the end of the current Parliament and lead his party into the next general election in 2015.

Berlusconi blasts Italy downgrade

Italian Prime Minister Silvio Berlusconi Tuesday blasted the downgrading of his country's debt by ratings agency Standard & Poor's, saying it was more influenced by politics and newspaper reports than by economic reality.

"Italy has issued interventions that aimed at balancing the budget in 2013 and the government is preparing measures in favor of growth, the fruits of which will be seen in the short-long term period," Berlusconi said in a statement.

Markets were up in Europe Tuesday morning, even in Italy, after the downgrade.

The agency cut Italy's sovereign credit rating late Monday, saying the nation's weakening economic growth and political uncertainty have dented its financial stability.Italy's debt downgraded

S&P now rates Italy's credit at A, down from A+ , and kept its outlook on the country as negative, the agency said in its report.

Analyst Gary Jenkins of Evolution Securities warned that the downgrade could be "very damaging," since it came from the rating agency that already gave Italy the worst marks. Moody's and Fitch's, the other two major ratings agencies, did not change their outlooks for Italy.

A top analyst at Fitch's said that fears for the future of the euro were "greatly exaggerated," despite nervousness about debt across the continent.

"Concerns over the risk of a break-up of the eurozone are greatly exaggerated," said David Riley, head of global sovereign ratings at the agency.

Italy's is the third largest economy in the eurozone, the group of 17 European Union nations that use a common currency.

Its economy was worth about 394 billion euros ($539 billion) at the end of June, according to Michael Symonds, an analyst at Daiwa Capital Markets.

That's about 17% of the entire eurozone economy -- nearly seven times bigger than the economy of Greece, which is negotiating for its latest infusion of international bailout money in the face of its own debt crisis.

Italy has largest outstanding debt in the euro area -- about 1.9 trillion euros ($2.6 trillion), according to Elisabeth Afseth of Evolution Securities, although Greece has the highest debt as a percentage of GDP.

The downgrade could reverberate into French and German banks, Symonds warned.

"French banks have been active lenders to the private sector in Italy, with $256 billion of exposure reported as of end-March," he said.

Italy has covered about three-quarters of its debt funding needs for the year, but still needs to raise 100 billion euros before the end of 2011, Deutsche Bank's "Early Morning Reid" analysis newsletter said Tuesday.