China, Japan to Back Direct Trade of Currencies

By Toru Fujioka - Dec 25, 2011 7:15 PM GMT+0700

Japan and China will promote direct trading of yen and yuan without using dollars and will encourage the development of a market for the exchange, to cut costs for companies, the Japanese government said.

Japan will also apply to buy Chinese bonds next year, the Japanese government said in a statement after a meeting between Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing today.

The deals between the world’s second and third-largest economies come as the two-year-old European debt crisis keeps global financial markets volatile. Japan will start to buy “a small amount” of China’s bonds, a Japanese government official said on condition of anonymity because of the ministry’s policy, without elaborating on when and how much of the debt the nation plans to purchase.

“Given the huge size of the trade volume between the Asia’s two biggest economies, this agreement is much more significant than any other pacts China has signed with other nations,” said Ren Xianfang, a Beijing-based economist with IHS Global Insight Ltd.

Finance Minister Jun Azumi said Dec. 20 buying of Chinese bonds would be beneficial for Japan because it would help reveal more information about financial markets in China, the world’s largest holder of foreign currency reserves.

Biggest Trading Partner

Encouraging direct yen-yuan trades will aim to reduce currency risks and trading costs, Japan’s government said. Currently, about 60 percent of trade transactions between the two nations are settled in dollars, according to Japan’s Finance Ministry. China is Japan’s biggest trading partner.

Then-finance minister Noda said in September 2010 that Japan should be able to invest in China’s market given that China buys Japanese debt. Japan holds $1.3 trillion of foreign- currency reserves, the world’s second largest.

Austria has already been granted the eligibility to buy Chinese bonds, according to the Japanese government official. Central banks from Thailand to Nigeria plan to start buying yuan assets as slowing global growth has capped interest rates in the U.S. and Europe.

Investing in Chinese debt has become easier for central banks as issuance of yuan-denominated bonds in Hong Kong more than tripled to 112 billion yuan ($18 billion) this year and institutions were granted quotas to invest onshore.

China sold the second-biggest net amount of Japanese debt on record in October as the yen headed for a postwar high against the dollar and benchmark yields approached their lowest levels in a year. It cut Japanese debt by 853 billion yen, Japan’s Ministry of Finance said on Dec. 8.

Separately, the Japan Bank for International Cooperation, JGC Corp., Mizuho Corporate Bank Ltd., the Export-Import Bank of China and other Chinese companies will establish a $154 million fund to invest in environment-related businesses such as recycling and energy, the Japanese government said.

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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Gingrich, Perry Fail to Make Virginia Primary

By Jonathan D. Salant - Dec 25, 2011 10:17 PM GMT+0700

Former House Speaker Newt Gingrich, atop a recent opinion poll among Virginia Republicans, won’t be on the party’s March 6 primary ballot because he couldn’t get enough signatures.

The Republican Party of Virginia said yesterday that neither Gingrich nor Texas Governor Rick Perry obtained signatures from 10,000 registered voters, including 400 from each of the state’s 11 congressional districts. Two other Republicans, former Massachusetts Governor Mitt Romney and U.S. Representative Ron Paul of Texas, qualified for the primary scheduled for so-called Super Tuesday.

“It speaks volumes to me about the particular organizational skills of the candidates,” said Carl Tobias, a law professor at the University of Richmond. “It’s hard for me to understand how they could miss this opportunity.”

Gingrich’s campaign director, Michael Krull, issued a statement calling Virginia’s ballot requirement “a failed system” and said the former House speaker would launch a write- in campaign. Virginia law, however, doesn’t allow for write-ins in primary elections.

“Voters deserve the right to vote for any top contender, especially leading candidates,” Krull said.

‘Exploring’ Alternatives

Krull said last night on Gingrich’s Facebook page that the campaign was “exploring alternative methods to compete” in the primary, and likened the failure to make the ballot to December 1941, when the Japanese bombed Pearl Harbor.

“We have experienced an unexpected setback, but we will regroup and refocus with interested determination, commitment and positive action,” Krull wrote. “In the end, we will stand victorious.”

Krull said the campaign will make other deadlines for getting on the ballot in state primaries.

Gingrich, who has risen in national surveys to become a frontrunner for the Republican nomination, launched a last- minute effort last week to get on the primary ballot in a state he led in a recent opinion poll.

Gingrich Lead

A Quinnipiac University survey of 489 registered Republican voters taken Dec. 13-19 put Gingrich in the lead in Virginia, with 30 percent, followed by Romney with 25 percent and Paul at 9 percent. Perry had 6 percent. The margin of error was plus or minus 4.4 percentage points.

The exclusion of Gingrich from the Virginia ballot highlights the difference between his and Romney’s campaign apparatus.

“A real presidential campaign is more than just appearing at a bunch of debates,” Republican consultant John Feehery, who is not supporting any of the candidates, said yesterday in an e- mail.

Such organizational advantage may also help Romney if the Republican nomination contest lasts longer than in previous years. This time, states voting in March will no longer award all of their delegates to the winner of their primaries, instead awarding them proportionally. Romney has raised $32.6 million through Sept. 30, more than any of his rivals.

Romney Resources

“We now have adopted the Democratic Party’s approach for allocating the early delegates on a proportional basis,” Romney said Dec. 18 on “Fox News Sunday.” “So, we are prepared. If we go on for months and months, we will have the resources to carry a campaign to each of the states.”

Gingrich held a rally in Arlington, Virginia, on Dec. 21, where he said he had obtained enough signatures to get on the ballot. “We’re going to disappoint the Republican establishment, because tomorrow in Virginia we’re going to turn in vastly more signatures than we need,” he said at the time.

Even as volunteers were collecting signatures of eligible voters to make sure Gingrich could appear on the ballot, the former House speaker said he wasn’t prepared for the surge that made him a frontrunner for the Republican presidential nomination.

“We weren’t ready for it yet because we don’t have the structure and we don’t have the money to compete at that level, so we had to scramble a little bit,” Gingrich said.

To contact the reporter on this story: Jonathan D. Salant in Washington at jsalant@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.

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