Japan Democrats take power, fiscal challenges loom

TOKYO (Reuters) - Japan's next prime minister began forming a government on Monday as investors worried that the untested Democratic Party would overspend in a bid to revive the economy or would ruffle ties with Tokyo's closest ally, Washington.

Sunday's historic election win by Yukio Hatoyama's party breaks a deadlock in parliament and will usher in a government that has promised to focus spending on consumers, cut wasteful budget outlays and reduce the power of bureaucrats.

The defeated Liberal Democratic Party (LDP) was left to lick its wounds after its worst election performance since the conservative party was founded in 1955. The party had ruled Japan for most of the last half-century.

"It's taken a long time, but we have at last reached the starting line," Hatoyama told a news conference at his home a day after voters gave his party a sweeping mandate for change.

"This is by no means the destination. At long last we are able to move politics, to create a new kind of politics that will fulfil the expectations of the people."

The yen rose to a 7-week high, buoyed by the end of electoral uncertainty. Japanese stocks, after hitting a near 11-month high earlier in the day, closed slightly down as the stronger yen sent shares of exporters lower.

Hatoyama is to set up a transition team to organise the change of government, but has said he will not announce his cabinet until he is officially elected prime minister by a special session of parliament, probably in about two weeks.

The Democratic Party's landslide win failed to lift a downbeat mood in a rainy Tokyo, where there was little post-election euphoria. Many voters and analysts said the victory was driven more by frustration with the LDP than broad support for the decade-old opposition.

"It's not that the Democrats were good. I voted for them as a punishment for the LDP. The LDP has to change," said Etsuji Inuzuka, 47, who works in the furniture business.

SPENDING WORRIES

Investors welcomed the end to a political deadlock that has stymied policies as Japan struggled with its worst recession since World War Two. The Democrats and its small allies won control of the upper house in 2007, enabling them to delay bills.

But many were concerned about whether the party would be able to maintain fiscal discipline after promising policies such as cash handouts for families with young children and the abolition of expressway tolls, a Reuters survey showed.

"Fiscal issues, together with diplomacy and security, will be a major issue," said Junko Nishioka, chief Japan economist at RBS Securities.

Media forecasts show the Democrats won about 308 seats in the lower house, nearly tripling their strength in the 480-member chamber. The LDP won only 119 seats, down from 300.

"The problem is how much the Democrats can truly deliver in the first 100 days," said Koichi Haji, chief economist at NLI Research Institute.

The Democrats, who will face an upper house election in less than a year, must move fast to keep support among voters worried about a record jobless rate and a rapidly ageing population that is inflating social security costs.

Japan is ageing more quickly than any other rich country. More than a quarter of Japanese will be 65 or older by 2015.

Analysts say the Democrats' spending plans might give a short-term lift to the economy, just now emerging from recession, but worry that its programmes will boost a public debt already equal to about 170 percent of GDP.

"I hope that the new government will implement appropriate policies to overcome the various challenges Japan is facing," Bank of Japan Governor Masaaki Shirakawa told a news conference.

STRAINS IN U.S. TIES?

A fourth-generation politician, Hatoyama is known less for economic policies than for his stance on security and diplomacy.

He has advocated revising Japan's pacifist constitution to acknowledge the nation's right to defend itself and said Tokyo's foreign policy was too subservient to Washington.

Tokyo's contributions to U.S. military operations abroad could cause friction under the Democrats, although the party has stressed continuity in ties with Washington.

Hatoyama himself raised eyebrows this month in an essay that railed at the "unrestrained market fundamentalism" of U.S.-led globalisation. He played down those comments late on Sunday.

"Washington can take some comfort from knowing that dire predictions of a dramatic leftward-course shift from the Japanese ship of state are wrong," said Bruce Klingner of the Heritage Foundation think tank in Washington.

"But even minor policy changes or alterations in tone will have far-reaching implications and cause strains."

The Democrats have also vowed to improve ties with Asian neighbours, often frayed by bitter wartime memories.

The party's victory ended the "iron triangle" -- a three-way partnership between the LDP, big business and bureaucrats that turned Japan into an economic juggernaut from the ashes of the country's ruin in World War Two.

That strategy foundered when Japan's "bubble" economy burst in the late 1980s and growth has stagnated since.

(Additional reporting by David Dolan, Yumi Otagaki, Yoko Kubota, Yoko Nishikawa, Risa Maeda and Paul Eckert)

Copyright © 2008 Reuters

Terrorist was not traded for oil, British PM insists

Story Highlights

• # British Prime Minister's office insists there was no deal to free al Megrahi
• # Libyan was serving life sentence for bombing Pan Am Flight 103 in 1988
• # Passenger jet exploded over Scottish town, killing 270 people
• # Newspaper alleged UK government allowed release to smooth oil deal

In Taiwan, Dalai Lama disputes China's claims

JIA SHI'AN, Taiwan (CNN) -- The Dalai Lama -- on a visit to Taiwan that includes prayers for recent typhoon victims -- has rebutted China's claims that he is there for political reasons.

In a Monday interview with CNN's Sara Sidner, the Tibetan spiritual leader said he was visiting the island to comfort victims of Typhoon Morakot. He added that he would not meet Taiwan's President Ma Ying-jeou, to avoid politicizing the trip.

"As soon as I received the invitation, I know there's some complications maybe. But it is my sort of moral responsibility to come and to see, show my face, to those people who are passing through a difficult period," he said.

The Dalai Lama was in southern Taiwan on Monday to meet and pray with survivors of the disaster, a day after he arrived from India. Morakot caused heavy flooding in the south and killed more than 500 people when it struck August 8.

"As a Buddhist monk, it is my moral principle to go there, see them and at least share some of their sorrow, some of their sadness," he told CNN shortly after he arrived on Sunday.

China's state-run Xinhua news agency said Sunday that Beijing maintained "resolute opposition" to the visit, which it said "is bound to have a negative influence on the relations between the mainland and Taiwan."

"We will keep a close eye on the situation," Xinhua quoted an unnamed spokesman for the government's Taiwan Affairs Office as saying.

Beijing considers Taiwan a renegade province and accuses the Dalai Lama of advocating Tibetan independence from China.

Asked about Taiwan's relations with mainland China, the Dalai Lama said he has told Taiwanese leaders that should have close relations with China.

"Your case, of course ultimately up to your people. But in any case because of economic reasons, because of defense, (you) should have very close relations with mainland China, that's how I feel," the spiritual leader said.

"So now in recent times seems closer relations with mainland China, this is good. I think it reduces fear here, obviously."

The Buddhist leader is to give a public talk on compassion and religious harmony before returning to India on Friday, his spokesman, Tenzin Taklha, said last week.

Typhoon Morakot dumped more than 3.3 meters (100 inches) of rain on the island before moving onto the mainland. The resulting flooding and landslides killed at least 543 people, Taiwan's Central Emergency Operation Center said last week, with at least 117 more still missing.

Rescuers struggled to find many of those who were missing in the island's remote southern mountains, and Ma apologized last week for the government's slow response to the disaster.

Price of RON 95 at RM1.80 from Tuesday

KUALA LUMPUR: The newly introduced RON 95 fuel is now priced at RM1.80 - five sen higher than the previous RM1.75.

Meanwhile, RON 97 is upgraded as a premium product and has gone up to RM2.05 from RM1.80.

Domestic Trade, Cooperative and Consumerism Minister Datuk Seri Ismail Sabri Yaakob said the new prices were decided based on the current method of Automatic Pricing Mechanism (APM).

“Although the price is now 5 sen higher, the Government is still subsidising 33.81 sen per litre (of RON 95) which is equivalent to RM304mil monthly,” he told reporters after the launch of Primax 95 by Petronas here on Monday.

Currently, the Government is subsidising RON 97 by 42.72 sen per litre.

The cost for RON 95 went up 102% from USD$ 40.75 per barrel to USD$ 82.30 in December last year and August respectively.

“If there is any changes in the global prices, we would revise it accordingly. It is up to the Economic Council to decide.

“RON 95 also adheres to the EURO2M specification where it can lessen pollution,” said Ismail Sabri, adding that consumers would get quality petroleum at a subsidised price.

With the new pricing, Ismail Sabri added that RON 92 was phased out from the market as the usage was only 5% from total petrol sale in the country.

In April last year, then Domestic Trade and Consumer Affairs Minister Datuk Shahrir Samad said the Government was considering the use of petrol with higher research octane number (RON) to reduce fuel subsidies without hurting the lower-and-medium income groups.

A higher octane number means higher resistance to engine “knocking”. “Knocking” could possibly damage the engine over time.

Petrol Dealers Association of Malaysia president Datuk Hashim Othman said petrol stations could easily recalibrate their pumps to adjust to the new price.

“With technology, all you need to do is push some buttons. It is almost automatic in most stations now, except for a few in the rural areas which are still using the manual system,” he told The Star.

He added that petrol dealers would make a slight gain with the price increase as they had bought their current stock at the old price.

“It is only a little as the price increase is small,” he said.

MCA president calls for EGM

KUALA LUMPUR: MCA president Datuk Seri Ong Tee Keat has instructed party secretary-general Datuk Wong Foon Meng to convene an emergency general meeting (EGM) within 30 days.

Ong, who is also the Transport Minister, said he had decided to call for an EGM under Article 30.1 of MCA’s constitution just as the country was celebrating Merdeka Day to give party members to reflect on where it should be heading next.

“It is also to allow members to deliver a verdict on the decisions made by the MCA leadership - whether on its renewal and rejuvenation efforts, on disciplinary cases or in the handling of the Port Klang Free Zone (PKFZ) issue.

“With the EGM, I also hope to quell speculations, end uncertainties and put to rest elements that will split MCA as it seeks to regain public support in time for the next general election.

“I am prepared to accept whatever verdict the EGM delivers,” he wrote in his blog on Monday.

Describing the holding of the EGM as a “serious matter”, Ong said he believed in listening to the members’ voice, which was the reason he made direct election of the MCA presidency part of his electoral pledges in last year’s party poll.

“I fervently believe in transparency and accountability. If I were afraid or do not subscribe to these principles, I would have easily brushed aside dissenting views in the party and carry on with what I am doing.

“But that’s not me, as one can see from the level of transparency and accountability I place in dealing with the PKFZ issue,” he said.

Ong said he believed that with sufficient explanation and briefings, members would make the right choice on what was best for the party.

“I have faith that at the end of the day, we will be able to see past fiery emotions and will put the party above everything else,” he said.

When contacted, Wong confirmed that he had received the instruction and said he would start making preparations for the EGM today by issuing a notice to inform delegates of the date, time and venue for the meeting.

Issues expected at the meeting are the PKFZ project, the presidential council’s decision on Aug 26 to sack deputy president Datuk Seri Dr Chua Soi Lek and other matters.

Wong said to convene an EGM, it would require 200 central delegates or one third of its total number of 2,402 delegates, which was around 800 - whichever was less - to meet the quorum.

“The EGM may dismiss any party official if at least two-thirds of the delegates present at the meeting voted for such a resolution,” Wong said.

Ong’s call for an EGM came at a time when Dr Chua’s supporters were gathering signatures from central delegates to convene an EGM of their own under Article 30.3, of which they would need 800.

They started collecting signatures in Federal Territory, Selangor and Johor from Sunday.

Among others, they sought to nullify the council’ s decision to expel him and reinstate him as deputy president, and a no confidence vote against Ong.

Selangor MB told to pay RM66mil

KUALA LUMPUR: Selangor Mentri Besar Tan Sri Abdul Khalid Ibrahim has been ordered by the High Court to pay RM66.67mil to Bank Islam Malaysia for a loan he took to purchase Guthrie shares in 2001 when he was the company’s chief executive officer.

Justice Rohana Yusuf, who made the order in chambers yesterday, however, granted Khalid’s application for an interim stay of execution pending a formal application on Sept 16.

Khalid’s counsel, Malik Imtiaz Sarwar, told reporters that Rohana allowed Bank Islam’s application for a summary judgment on grounds that the case need not enter into a full trial as there were no triable issues.

A summary judgment is a final decision by a judge which resolves a lawsuit in favour of one of the parties. A motion for summary judgment is made after discovery is completed but before the case goes to full trial.

Malik Imtiaz said an appeal would be lodged with the Court of Appeal against today’s outcome as he felt the matter should go before a full trial.

He said he would file a proper stay application by next week.

The court fixed Sept 16 to hear the formal stay application and to mention Khalid’s suit against Bank Islam.

Khalid had sued the bank on May 18, 2007, seeking damages and a declaration that there existed a collateral contract between him and the bank in the Al BaiBithaman Ajil (BBA) loan agreement dated April 30, 2001.

He also wanted a declaration that the BBA facility, in isolation, and without the collateral contract, was null and void and that Bank Islam had breached the collateral contract and the BBA facility.

The bank counter-sued Khalid on May 24, 2007, claiming that he had breached its contract in the loan agreement in the purchase of Guthrie shares.

Khalid was not present in court while Bank Islam was represented by counsel Tommy Thomas. — Bernama

Insurance firms to cover claims

PETALING JAYA: Insurance companies have decided to allow payouts on claims for treatment, hospitalisation and death as a result of Influenza A(H1N1).

The Life Insurance Association of Malaysia (LIAM) said yesterday that its 16 member companies would honour such claims.

Its president, Md Adnan Md Zain said policyholders could contact their respective insurance companies for further details.

“Even though a majority of medical policies carry exclusions on communicable diseases requiring quarantine by law, life insurers are responding to an immediate need of the nation in light of the increasing number of people who have been infected,” said Md Adnan.

“In the event of any review of this decision on life insurance coverage, the policyholders will be duly informed,” he added.

On Thursday, Depu-ty Prime Minister Tan Sri Muhyiddin Yassin told insurance companies to explain clearly whether those infect-ed with Influenza A(H1N1) could make claims for treatment, hospitalisation and in the event of death.

Etiqa Insurance Berhad said it would be paying out on claims made by its medical and health plan policyholders if they are hospitalised for A(H1N1).

Great Eastern Life Assurances Berhad and Overseas Assurances Corporation (Malaysia) Berhad also released statements saying their companies would compensate policyholders hospitalised for treatment of the disease.

An ING Malaysia agent said the guidelines on claims varied for different policies but the company generally covered hospitalisation claims for those with the illness.

Children with lead poisoning jam China hospital

FENGXIANG COUNTY, China (CNN) -- At the Fengxiang County Hospital in Shaanxi Province, children are sleeping two to a bed. Cots line the hallways and hospital beds crowd offices to accommodate the ceaseless flow of new patients. In the last two weeks, so many children have been diagnosed with lead poisoning that there's barely enough room for everyone.

Their parents are outraged and confused.

"My toddler is a year and nine months old," says Pen Xiaoxia holding her daughter in the hospital ward. "Her hair isn't growing and she's sick all the time."

"My older daughter's nails stopped growing, and her hands are bigger than normal," Pen told CNN. "She doesn't listen to me and she's very rebellious. She can't remember what I told her and she always has a headache."

Holding their children in one arm, every parent in the hospital clutched a thin white sheet of paper in the other, showing the results of their child's blood tests.

In the room next door, nine-year-old Lei Xinyuan was said to have one of the most serious cases in the hospital. She looked like she could be six or seven years old.

"She stopped growing last year," says her father, Mr. Lei.

In total, more than 850 children in the area have tested positive for excessive levels of lead in their blood, according to government officials. All of them live in Madaokou, Sunjianantou, and other villages clustered around the Dongling Lead and Zinc Smelting Plant. Angry parents attacked the plant this week and police were called in to restore order.

After repeated phone calls, company officials said they could not comment and referred all questions to the county government.

County officials said they have ordered the plant to shut down within days.

"We are planning to relocate all residents as fast as possible," says He Hongnian, Vice Governor of Fengxiang County.

State-run media reports the relocation could take as long as two years. Environmentalists say the area is already polluted and extremely dangerous. Lead poisoning can continue to occur via contaminated air, water, soil or food, especially crops grown in tainted areas.

Doctors say chronic exposure can lead to life-long consequences, even death.

"[With] children in international settings, you see a lot more fatalities from lead poisoning," says Dr. Mary Jean Brown with the Atlanta-based Centers for Disease Control.

"Children can become mentally retarded, and even children who don't have serious symptoms, you might look at them and not even know they've had lead poisoning," Brown adds. "Those children will later have problems in school, they'll have attentional deficits, they may have behavioral problems that will make it difficult for them to learn how to control themselves and their tempers."

China has faced problems with pollution as the country has moved forward with industrial development and economic growth. The government has committed to clean-up measures. But concerns remain.

Chinese authorities closed a second metal smelter this month after more than 1,300 children were found to have elevated levels of lead in their blood, according to state-run media. That case involved children living near a manganese plant near Wugang, in Hunan Province, Xinhua news agency said. Angry parents there also protested.

Back in Shaanxi province, on the streets of Sunjianantou village, which is situated right next to the Dongling plant, parents clamored to discuss their children's test results, scribbled onto white pieces of official paper.

Only the most serious cases of lead poisoning are being treated at the county hospital, all expenses paid by the government.

Zhang Juntao is the father of two children who both tested positive for abnormal blood-lead levels, but not high enough to go to the hospital.

"They always bite their fingers. Sometimes they even bite other kids when they get mad," Zhang says. "I've been reading in books that those are symptoms of lead poisoning."

He says his four-year-old son, Zhang Yicong, is two years behind in school and is underperforming in math. His four-year-old daughter, Zhang Jia, has chronic stomach aches.
advertisement

Their father says he feels helpless, like he can't protect his children from being poisoned in their own home.

"If I had the means, I wouldn't allow my children to go to school here," he says. "The only way is to leave this place, but we can't afford it."

Condemnation over Suu Kyi sentence

YANGON, Myanmar (CNN) -- The White House criticized the sentencing of Myanmar's opposition leader Aung San Suu Kyi to 18 more months of house arrest Tuesday, joining a chorus of condemnation from figures ranging from the Dalai Lama to the U.N. secretary-general.

"This is not somebody that should be tried and not somebody certainly that should have been convicted," White House spokesman Robert Gibbs said, adding that President Barack Obama was likely to make a statement later. British Prime Minister Gordon Brown said he was "saddened and angry at the verdict... following the sham trial of Aung San Suu Kyi." "The U.N. Security Council -- whose will has been flouted -- must also now respond resolutely and impose a world wide ban on the sale of arms to the regime," he said, calling the verdict a "purely political sentence designed to prevent her from taking part in the regime's planned elections next year.

" A military court found Suu Kyi guilty earlier on Tuesday of violating the terms of her house arrest. The court initially sentenced Suu Kyi to three years in prison, but the head of the country's ruling junta commuted it to a year and a half of house arrest. "We continue to call for her release from continuing house arrest," U.S. Secretary of State Hillary Clinton said on a diplomatic trip to Africa. "We also call for the release of more than 2,000 political prisoners, including the American John Yettaw," who swam, uninvited, across a lake to Suu Kyi's residence earlier this year, prompting the charge she had violated her house arrest.

The Dalai Lama, Archbishop Desmond Tutu and former Soviet leader Mikhail Gorbachev were among a group of Nobel laureates who also condemned the verdict. They demanded that the U.N. Security Council investigate "war crimes and crimes against humanity" committed by the military junta that rules the country, which is also called Burma.

"This illegal verdict is just one more instance of the junta's contempt for justice, security and democracy for the Burmese people," said Nobel Laureate Jody Williams. The United Nations issued a statement saying U.N. Secretary-General Ban Ki-moon "strongly deplores this decision" and calls for the immediate and unconditional release of Suu Kyi and "all other political prisoners.

" In many ways, the court's decision is a continuation of Suu Kyi's current punishment. The 64-year-old has spent 14 of the past 20 years in one form of confinement or another -- most recently under house arrest. Yettaw, who Suu Kyi said she did not know, was sentenced to seven years of hard labor. He was convicted of violating immigration laws, municipal laws and the house arrest terms.

Hundreds missing in Taiwan after typhoon hits

(CNN) -- Hundreds of people remained unaccounted for Tuesday in Taiwan after Typhoon Morakot ravaged the island, triggering mudslides, damaging homes and killing at least 62 people.
The number of missing remained elusive Tuesday night because of the breadth of destruction in Taiwan, officials said.

Morakot dumped 83 inches of rain on parts of the island over the weekend, unleashing the worst flooding there in half a century, according to the U.S. National Oceanic and Atmospheric Administration. Buildings collapsed in the floodwater, and mudslides buried everything in their paths.

After hitting Taiwan Sunday, the storm roared on to mainland China and sowed chaos there, killing at least six people and displacing 1.4 million, authorities said.

Yet the death toll was much higher in Taiwan. And there were fears that it could rise amid reports that several hundred people may have been buried in mudslides that struck two villages in Kaohsiung County on the southern part of the island