ASIA: Launching Pad for Tomorrow's Emerging Markets

July 1, 2010

• Enduring lessons from Asia's dynamic emerging markets
• Asia's low-income countries have enormous potential
• New development challenges, opportunities in today's world

Following in the footsteps of Asia’s dynamic emerging markets, low-income countries in the region are poised to become the emerging markets of tomorrow, in the view of IMF economists. This will further help to propel Asia’s global economic leadership.

With the Fund predicting that Asia will become the largest economic region in the world in about 20 years, the future of low-income countries in the region is a keenly debated topic. Speaking at an IMF-sponsored conference in Vietnam earlier this year, IMF First Deputy Managing Director John Lipsky said that “the region’s developing countries should be central participants and beneficiaries … by moving up the ladder.”

The IMF is committed to supporting these countries make the transformation into emerging markets. How best to do this will be a major topic discussed at a high-level conference co-hosted by the Government of Korea and the IMF in Daejeon, Korea on July 12–13.

Min Zhu, who will open the conference session on this topic, said, “This discussion will allow us to hear a wide range of views of how Asia’s low-income countries can improve their growth prospects. We can find lessons in the path taken by today’s emerging markets in the region, but how countries take advantage of new opportunities and manage risks will also be a crucial factor in determining tomorrow’s emerging markets.”

Rise of Asia’s emerging markets

Asia has had enormous success in transforming low-income countries into emerging markets, raising their level of development and average incomes. Sustained economic growth and expanding employment opportunities have been crucial.

A 2008 report by the Commission on Growth and Development, chaired by Michael Spence who is a keynote speaker at the Korea conference, identified only 13 economies worldwide that had grown on average by 7 percent or more per year, for 25 years or longer. Of those 13 economies, nine are in Asia: China, Hong Kong SAR, Indonesia, Japan, Korea, Malaysia, Singapore, Taiwan POC, and Thailand. India and Vietnam may soon join this list.

Experience in these dynamic emerging markets points to several common success factors.
An important part of their development strategies focused on building competitive manufacturing sectors to export goods to the rest of the world. They also managed to have high rates of saving and investment, and used foreign investment as an important source of financing and new technologies.

But, according to the Commission’s report “no economy can flourish in the midst of macroeconomic instability.” Macroeconomic policies that helped to reduce economic volatility and uncertainty, allowed these economies to attract investment and expand the private sector.

Many of these factors are behind Asia’s recent economic success.

IMF Managing Director Dominique Strauss-Kahn underscored this point in a recent interview with Yonhap news agency, citing Korea’s sound macroeconomic policies and reforms over the past decade. As a result,

“the Korean economy faced the latest global economic and financial crisis from a relatively strong position, which helped facilitate the economy’s impressive rebound from the downturn,” Strauss-Kahn said.

Analysts wonder if the performance of Asia’s emerging markets can be repeated by employing similar export-oriented growth strategies.

The next emerging markets

Anoop Singh, Director of the IMF’s Asia and Pacific Department, recently blogged about the “Flying Geese Paradigm”—first conceived by Japanese economist, Kaname Akamatsu—as a way of explaining “the successive waves of Asian countries achieving … emerging or developed market status”. He identified Cambodia, Laos, and Nepal as among the Asian economies preparing to take off. “These countries have huge potential,” said Singh.

For one, they still have lower labor costs than in the region’s emerging markets. But, compared to their predecessors, low-income countries today also face new challenges and new opportunities.
Stricter environmental standards and multilateral trade agreements today limit countries’ pursuit of policies that strategically manage industrialization. The more interconnected global economy means that countries are also more vulnerable to adverse developments in other countries and regions. During a recent visit to Singapore, IMF Deputy Managing Director Naoyuki Shinohara said that, in the wake of the global crisis, weaker demand could disrupt Asia’s export markets.

However, Asia’s low-income countries also have access to a broader pool of technologies that can help them exploit lower communication costs to export services, rather than relying mainly on exporting goods.

And, even if demand elsewhere in the world remains subdued, the expanding middle class within Asia will provide a new export market. “I believe we will see ... emerging Asia becoming a centerpiece of a whole new global trade pattern,” said IMF Special Advisor Min Zhu in an interview for the June 2010 issue of Finance and Development.

Discussing new ideas for growth

With this new economic environment, an open question is whether existing ideas or new ideas, or some combination of the two, can best nurture growth in low-income countries.

Sharing Anoop Singh’s views about the potential of low-income countries in the region, John Lipsky said that, “at a fundamental level, Asia’s developing countries are qualitatively different from their counterparts in other regions. Living standards are higher, populations are less marginalized, and the middle class is more prominent.”

“Of course possessing potential and realizing it is not the same thing. Countries need to make the most of their potential by being well prepared with sound macroeconomic policies and a robust financial sector,” Singh said.

The IMF’s latest Asia and Pacific Regional Economic Outlook said that low-income countries in the region “also need to make significant progress in a series of structural reforms needed to raise their competitiveness.” Priority areas include improving the business environment and ensuring a sound banking sector.

The IMF is committed to helping these countries reach the next level of development through policy advice and capacity building, but also by taking the policy dialogue to the region.

The challenge of achieving emerging market status was the focus of a conference earlier this year in Hanoi organized by the IMF. Speaking at the conference, John Lipsky emphasized that boosting long-term growth in low-income countries requires investment in infrastructure and stronger social safety nets. In this regard, the conference identified the need for increased investment in health and education, and the importance of achieving equitable growth—not just high growth—to reduce poverty.

The IMF will continue its dialogue with member countries in Asia and their development partners, with a session dedicated to this topic, at the high-level conference in Korea in July.


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RUSSIA: Russia and U.S. downplay spy case

Thu Jul 1, 2010 3:39pm EDT

Michele Kambas

(Reuters) - Police in Cyprus issued an arrest warrant on Thursday for a suspected Russian spy wanted by the United States who vanished shortly after being freed on bail on the Mediterranean island.

Christopher Robert Metsos, 55, who American authorities accuse of being the paymaster for a network of Russian agents in the United States, failed to report to a police station on Wednesday, violating terms of his bail granted a day earlier.

A police statement issued on Thursday said Metsos was wanted for "disobeying a court order" on June 30. "We have no indications of where he may be," Michalis Katsounotos, a police spokesman, said, adding that he had cleared out his apartment.

The spokesman declined to speculate about whether he had fled Cyprus. Police were searching for him on the island.

Police released a photograph of Metsos on Thursday. The suspect was of medium build, balding with grey hear, rimless spectacles and a neat mustache. It was taken in Cyprus on June 29, shortly before he was released on bail, police said.

Metsos is accused by U.S. authorities of having managed payments to a group of agents collecting information for Russian intelligence for at least a decade. Ten suspects were arrested in the United States on Sunday, causing a diplomatic stir.

A Canadian passport holder, Metsos was arrested as he attempted to fly out of Cyprus in the early hours of June 29 for Budapest. On the same day, a local court ordered he be freed on bail, rejecting a request from police he remain in custody until an extradition hearing scheduled for July 29.

Metsos had checked in with police on the first day of his bail, on June 29. On Wednesday, the day of his disappearance, he was expected to discuss terms of his case with his lawyer, but Metsos did not communicate with him, the lawyer told Reuters.

RISK OF FLIGHT

It is unusual for Cypriot courts to grant foreigners bail, since prosecutors cite the risk of flight from the island, particularly through a breakaway state in northern Cyprus.

Larnaca, a pretty seafront town where Metsos had been staying from June 17 is about 20 kilometres away from the ceasefire line which splits the island.

There are a number of designated checkpoints linking Cyprus's estranged Greek Cypriot community in the south, and the Turkish community in the north.

A spokesman for Turkish Cypriot police said they had no knowledge of Metsos being in the north.

After checking out of one hotel on Tuesday, Metsos checked in to another complex of modest holiday apartments off the Larnaca seafront promenade.

In the United States, Metsos and his 10 co-accused face charges of collecting information ranging from research programs on small-yield, high-penetration nuclear warheads to the global gold market, and seeking background on people who applied for jobs at the Central Intelligence Agency (CIA).

The 55-year-old had specifically been accused of receiving and making payments to the other members of the group.

U.S. Justice Department documents say he received payments during a brush-pass with aRussian government official who was affiliated with the Russian mission to the United Nations in New York, and of burying cash which was then retrieved by other suspects.

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JAPAN: NYT's Photo of the Week

Itsuo Inouye/Associated Press

A diver feeds fish at the Hakkeijima Sea Paradise, and aquarium in Yokohama, Japan.

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CHINA: Google tweaks China site in bid to keep license

(Reuters) - Google Inc is tweaking its China website in a last-ditch effort to save its search business in the world's largest Internet market after butting heads with Beijing over Web censorship.

The google.cn search site will stop automatically redirecting users to Google's uncensored search portal in Hong Kong -- instead, visitors will be required to click a link to access the Hong Kong site, Google said on Tuesday.

The move comes ahead of a Wednesday deadline for China to renew Google's operating license. Google said Beijing had made it clear it was unhappy with the company's three-month old system of re-routing Chinese Web surfers to google.com.hk.

"It's clear from conversations we have had with Chinese government officials that they find the redirect unacceptable, and that if we continue redirecting users, our Internet Content Provider license will not be renewed," Google Chief Legal Officer David Drummond wrote on the company's corporate blog.

"Without an ICP license, we can't operate a commercial website like Google.cn so Google would effectively go dark in China," he wrote.

There was no immediate comment from China. Google shares were down 3 percent by early afternoon trading, in line with the Nasdaq stock market's fall.

The website tweak is Google's latest attempt to strike a delicate balance between standing up to China's policy of Internet censorship while maintaining a presence in a market considered key to its future growth.

Google's shares have fallen roughly 23 percent since the company announced its intention in January to stop censoring search results in China.

"It seems like investors have already taken China out of the valuation of the company. I don't think there's much more incrementally negative for the stock," said UBS analyst Brian Pitz.

CHINA SILENT

Google, which battles Baidu for China's 380 million Internet users, said in January it might quit the country over censorship and after it was hit by a hacking attack that it said came from within China.

But after keeping its promise to end self-censorship by automatically rerouting users to its Hong Kong site, Google now seems reluctant to abandon the Chinese market entirely.

"China, with its business potential, is a hard market to give up," said Cao Jun Bo, analyst at Beijing-based technology research company iResearch.

It is unlikely Google would have moved without some blessing from Beijing, and there certainly would have been negotiations about the change, said Cao.

China's foreign ministry on Tuesday declined to comment on Google's decision to end automatic rerouting, but Drummond said he hoped it would be acceptable to the Chinese government.

A Google spokeswoman declined to comment further on the details of negotiations with Beijing.

Google's challenge to China's online policies has provided a new source of tension to Sino-US relations. The State Department has backed Google and demanded that China explain the alleged hacking attacks.

The new google.cn page has an image of the Google logo and a non-functioning search box. A short message says, "We have already moved to google.com.hk" and "Please save our new website." Clicking on much of the page redirects users.

If accessed from China, the Hong Kong search engine does not offer unfettered access to information the government wants blocked as domestic firewalls prevent connections to many websites that Beijing objects to.

The Google.hk.com site is also periodically unavailable from mainland China, and searches can be unstable.

LUCRATIVE MARKET

Analysts estimate Google's China business is a modest 1 percent to 2 percent of its $6.5 billion in annual net profit, but the country had been considered a major long-term growth opportunity.

Besides Web search, Google has other operations in China, such as the Android mobile operating system.

China Mobile has released smartphones into the China market using Android, and Credit Suisse analyst Wallace Cheung expects Android to one day become the most popular mobile operating system in China.

Google, which runs two research centers and has several hundred employees in China, may already have paid a price in lost talent for its spat with the Chinese government.

It has seen an exodus of executives from its China operations, as well as from partners under its advertising AdSense program.

"It seems clear they want to have some engagement or business in China. But they are at a point right now where an increasing number of partners and AdSense partners are leaving Google," said Mark Natkin, managing director of Marbridge Consulting.

Natkin said at least three other licenses for Google business units in China are due for renewal in June.

(Reporting by Melanie Lee and Emma Graham-Harrison; Additional reporting by Michael Wei in Beijing and Alexei Oreskovic in San Francisco; Editing by Anshuman Daga and Robert MacMillan.)

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RUSSIA: Putin says U.S. police "out of control" in spy case

(From L to R) Russian spy suspects, Anna Chapman, Vicky Pelaez, Richard Murphy, Cynthia Murphy and Juan Lazaro, are seen in this courtroom sketch during an appearance at the Manhattan Federal Court in New York June 28, 2010. The arrests -- days after a warm Washington summit between President Barack Obama and Russian President Dmitry Medvedev -- thrust a Cold War-style spy scandal into the midst of the U.S. leader's ''reset'' of long-strained ties with the Kremlin.  Credit: Reuters/Jane Rosenburg

(Reuters) - Moscow angrily rejected U.S. accusations on Tuesday that Washington had cracked an undercover Russian spy ring, and said the Cold War-style cloak and dagger saga seemed timed to wreck a recent thaw in relations.

Prime Minister Vladimir Putin said U.S. police had gone "out of control" after 10 suspected spies were arrested in the United States in the biggest espionage case for years.

"I hope that all the positive gains that have been achieved in our relationship will not be damaged by the recent event," he told visiting ex-U.S. President Bill Clinton.

An 11th suspect was arrested in Cyprus on Tuesday and was released on bail, police on the Mediterranean island said.

The suspects, some of whom lived quiet lives in American suburbia for years, were accused of gathering information ranging from data on high-penetration nuclear warhead research programs to background on CIA job applicants.

The arrests came days after a warm Washington summit between President Barack Obama and Russian President Dmitry Medvedev, part of what the U.S. leader describes as a "reset" of long-strained ties with the Kremlin.

"The choice of timing was particularly graceful," Russian Foreign Minister Sergei Lavrov told journalists sarcastically during a trip to Jerusalem.

Other Russian officials also suggested the timing was no coincidence.

"We do not understand what prompted the U.S. Justice Department to make a public statement in the spirit of Cold War espionage," the Foreign Ministry said, calling the accusations baseless.

It said lawyers and diplomats should be given access to the suspects.

"We deeply regret that all of this has happened against the background of the relations reset declared by the U.S. administration itself," the ministry said in a statement.

With buried banknotes, coded communications and other cinematic details, the accusations echoed spy scandals of the 20th century and the more recent chill in relations with a Kremlin which, under the 2000-2008 presidency of ex-KGB spy Putin, often accused the West of trying to weaken Russia.

Britain and Ireland both said they were checking reports suspects had traveled on false passports from their countries.

Moscow has repeatedly accused Western powers of maintaining spying operations against Russia despite the end of the Cold War. Western powers also complain of Russian activity, especially in the commercial and scientific areas.

BLOW TO OBAMA

Russian analysts said the timing suggested it was an attempt to undermine the "reset" which Obama's administration has hailed as a major foreign policy achievement, citing Moscow's support for sanctions against Iran and cooperation on Afghanistan.

"It's a slap in the face to Barack Obama," said Anatoly Tsyganok, a political analyst at Moscow's Institute of Political and Military Analysis.

He predicted Russia would follow Cold War etiquette and uncover an equal number of alleged U.S. spies.

Military analyst Alexander Golts said the scandal would be unlikely to deal a major setback to ties. Obama's administration would aim to "soft-pedal the situation" to avoid damage to improved relations it sees as a foreign policy success, he said.

Tatyana Stanovaya, political analyst at Moscow's Center for Political Technologies, said the accusations could widen a rift in Russia's elite between advocates and opponents of better U.S. ties, with the scale of the response hinting at who is ascendant.

Stanovaya said it could dent the authority of Medvedev, who is struggling to emerge from Putin's shadow and has made engagement with Washington a hallmark of his presidency.

The U.S. Justice Department accused the 11 people of operating as "illegals"; the term applied in the intelligence world to agents infiltrated under false identities, rather than officers who use diplomatic or other legitimate cover.

They were accused of collecting information ranging from research programs on small-yield, high-penetration nuclear warheads to the global gold market, and seeking background on people who applied for jobs at the Central Intelligence Agency (CIA), according to criminal complaints filed in a U.S. court.

Authorities said 10 were arrested on Sunday in Boston, New York, New Jersey and Virginia on charges including conspiracy to act as unlawful Russian agents and money laundering.

They sought to "become sufficiently 'Americanized' such that they could gather information about the United States for Russia and can successfully recruit sources who are in, or are able to infiltrate, United States policy-making circles," court papers said.

The U.S. Justice Department said they received extensive training in coded communications, how to evade detection and how to pass messages to other agents.

After the 2001 arrest of FBI agent Robert Hanssen, accused of selling secrets to Moscow over 15 years and sentenced to life in prison, Washington expelled four Russian diplomats and ordered 46 to leave the country. Russia responded in kind.

In 2006, Russia accused British diplomats of running a James Bond-style spy ring and communicating with agents via an electronic device disguised as a rock. The next year, British officials said Russian spying was "at Cold War levels."

(Additional reporting by Dmitry Zhdannikov and Amie Ferris-Rotman; Writing by Conor Humphries and Steve Gutterman; Editing by Peter Graff)

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TRAVEL: Inspectors find safety flaws where airline food is prepared

By Gary Stoller, USA TODAY

Six months ago, Food and Drug Administration inspectors say, they found live roaches and dead roach carcasses "too numerous to count" inside the Denver facility of the world's largest airline caterer, LSG Sky Chefs.

They also reported finding ants, flies and debris, and employees handling food with bare hands. Samples from a kitchen floor tested positive for Listeria, a bacteria that can cause serious and sometimes fatal infections in young children, the elderly and people with weakened immune systems. It's also dangerous to pregnant women.

LSG Sky Chefs, which annually provides 405 million meals worldwide for more than 300 airlines, says conditions at the Denver plant didn't meet company standards. It took immediate measures to remedy the problems, says spokeswoman Beth Van Duyne.

The Denver facility is one of many catering operations that provide food to airlines where FDA inspectors saw unsanitary and unsafe conditions in the last two years, according to inspection reports obtained through the Freedom of Information Act by USA TODAY.

The reports show "caterers for many of the nation's air carriers are contaminating foods in a number of ways," says Roy Costa, a consultant and public health sanitarian who voluntarily agreed to review the reports.

Frequent flier Arthur Debowy, an architect from Highland Mills, N.Y., says the findings are "sickening," and he'll be more careful on future flights if food doesn't smell or taste right.

USA TODAY requested inspection reports since January 2009 for the two biggest airline caterers, LSG Sky Chefs and Gate Gourmet, and a third large caterer, Flying Food Group. Combined, the three companies have 91 kitchens preparing in-flight food for many big U.S. and foreign airlines at U.S. airports.

As of Friday, the FDA's regional offices had sent reports for 46 facilities. At 27 of them, FDA inspectors noticed suspected food-preparation violations or objectionable practices. Among them:

•An FDA inspector spotted a mouse, rodent nesting materials and rodent feces under a pallet of food and in other areas at LSG Sky Chefs' Minneapolis facility during a May 2009 inspection.

•The Dulles, Va., facility of Gate Gourmet, the second-largest caterer in the USA, failed to keep shrimp, filet mignon, Chilean sea bass, chicken and vegetables, and pastrami and cheese sandwiches at the proper temperature during an inspection in August. When an inspector mentioned the unsafe practice to company personnel, the shrimp and the pastrami and cheese sandwiches were not thrown in the garbage.

Employees with "unclean hands" were handling food. A lab report found a "high coliform count" in rice.

•At Gate Gourmet's San Diego facility in November, the director of operations said the company would cook any food to an airline's specification without regard to food safety guidelines, an FDA inspector wrote. He also wrote that a Gate Gourmet official said the company doesn't verify if food is from approved sources or frozen for "parasite destruction." Raw meats aren't cooked to adequate temperatures — a repeat violation that was also cited in 2008.

•A Los Angeles facility of Flying Food Group had a corroded and taped ice-machine door that failed to "hold ingredients in bulk or in suitable containers to protect against contamination," an inspector wrote in an April report.

Making improvements

After the Los Angeles, San Diego, Dulles and Minneapolis inspections, Flying Food Group, Gate Gourmet and LSG Sky Chefs were issued a document called Form 483 by FDA inspectors. The form is only issued, the FDA says, when there are "significant" suspected violations of regulations or objectionable practices.

In the inspection reports, several LSG Sky Chefs and Gate Gourmet facilities received Form 483s on two or three consecutive inspections. Repeat violations were noted at some facilities.

When serious violations occur — such as those at LSG Sky Chef's roach-infested Denver facility — the FDA may issue a warning letter. A company has 15 days to address the problems.

Sky Chefs facilities have received 18 warning letters since 1996, according to a USA TODAY analysis of the agency's online database. Three were received after German airline Lufthansa acquired controlling interest in the company in June 2001, and the company has taken many steps since then to ensure food safety, spokeswoman Van Duyne says.

Besides the warning letter sent in December, the company's Denver facility received one in May 2001 for a number of deficiencies.

Two years ago, LSG Sky Chef's facility in East Granby, Conn., was issued a warning letter because tilapia filets and shrimp meals were "prepared, packed or held under insanitary conditions" that may be "injurious to health." There was concern about botulism, caused by toxins that are among the most poisonous to humans.

Sky Chefs implemented a global quality and safety system "harmonizing food safety at all its kitchens" in 2002, says Van Duyne. Since then, the company has served more than 3 billion meals, and "there has never been a report of a food-borne illness outbreak related to our facilities," she says.

Gate Gourmet's most recent warning letter was issued in April 2005 to its Honolulu facility. Among other violations, FDA inspectors found cockroaches and fruit flies, food stored at improper temperatures, mold in a refrigerator and "a pink, slimy substance" dripping onto a conveyor for a pot-washing machine.

Eight months earlier, 47 passengers became ill — and 116 other passengers probably became ill — after eating food on 12 flights from Hawaii catered by Gate Gourmet, according to the Hawaii State Department of Health. The likely cause was raw carrots, says agency spokeswoman Janice Okubo.

Gate Gourmet Vice President Norbert van den Berg says the company has an excellent system to ensure safe food, including temperature-controlled facilities and use of an independent auditor. His company's food-safety standards are superior to any restaurant, he says. "We can guarantee the safest product out there," van den Berg says.

Flying Food Group received a warning letter for 11 deficiencies — including inadequately protecting food from contamination — at a Jamaica, N.Y., facility in 2000. The company has since moved to a "state-of-the-art" facility at nearby JFK airport, says Glenn Caulkins, vice president of quality assurance.

Caulkins says Flying Food Group has invested a lot of money to ensure that its facilities prepare and process food safely. The company quickly addresses or corrects any concerns in FDA inspection reports, he says.

After the April inspection at the Los Angeles facility noted concerns about the ice machine, the company installed a new one, he says.

Fewer meals, fewer problems

FDA officials say the number of warning letters issued to airline caterers has declined in recent years.

Cost-cutting airlines are serving fewer fresh meals. Some have eliminated meals. And airline caterers have incorporated government food-safety guidelines into their own guidelines, says FDA spokesman Ira Allen.

"With less ready-to-eat fresh food offered in coach class and substitution with prepackaged, shelf-stable foods, the opportunity for poor preparation, storing foods at improper temperatures and food-handling violations is much lower," Allen says.

Mary Ann Dowd of the International Flight Services Association, which represents airlines and caterers, says the inspectors' findings are a concern because the trade group works hard to promote food safety. The group will soon distribute a new edition of food-safety guidelines for caterers and airlines.

Despite fewer warning letters, inspection reports show that caterers are ignoring the guidelines and FDA requirements on fresh food they're preparing, says Costa, the public health consultant.

"The airlines, which have the primary liability for the safety of their passengers, have a serious supplier control problem," he says.

Airlines say they require their caterers to provide government inspection reports, and they do their own unannounced inspections.


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CHINA: Growing Organic in China

6/23/2010 10:04:51 AM

In a country hit by food safety scandals, the interest in organic produce is growing fast. Video courtesy of AFP.

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CHINA: China's Currency Announcement and the U.S. Congress

June 22, 2010

With the G-20 Summit set to begin in Toronto on June 26, China announced over the weekend that it would increase the flexibility of its exchange rate and allow its currency to appreciate.  In this video, Kenneth Lieberthal discusses China’s exchange rate and how the U.S. Congress has responded to the issue.

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JAPAN: Big Election Victory for Japan's Ruling Party?

One of America's leading experts on Japanese politics, Columbia professor Gerald Curtis, handicaps the July 11 upper house elections, and discusses the implications for U.S.-Japan relations and tax policy.

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JAPAN: Japan pledges to beat deflation

New premier Naoto Kan wants to cut Japan's debt levels

Page last updated at 20:30 GMT, Friday, 18 June 2010 21:30 UK

Japan's new government has pledged to slash corporation tax and beat deflation to achieve stable economic growth of 2% a year.

It said it aims to defeat deflation by April 2011, but revealed few details on how it would achieve this.

The government also said it would cut corporate tax from 40% to nearer 25%.

Earlier this week, Japan's central bank announced plans for up to 3 trillion yen (£22bn; $33bn) in loans to spur economic growth.

The plans mark the first time Japan has set a time frame for tackling deflation, which has plagued the economy for much of the last two decades.

JAPAN IN FIGURES

• Government debt: 200% of GDP
• Government deficit: 8% of GDP
• External surplus: 2.5-3.5% of GDP
• GDP growth: 3%
• Inflation: -1.5%
• 30-year bond yield: 2%

Source: Daiwa

Persistent deflation has hampered economic growth, with consumers opting to hold off on making major purchases, expecting prices to fall even further.

However, the ambition of the new government was met with scepticism by some analysts.

"The growth targets don't sound like anything new to me, just wishful thinking," said Junko Nishioka at RBS Securities.

Japan's growth averaged just 1.3% a year before the recession brought on by the financial crisis.

Like many other developed economies, Japan is also suffering from high levels of sovereign debt.

Its plans for cutting borrowing levels are due to be announced next week.

New Prime Minister Kaoto Kan has made cutting the country's deficit his priority.

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RUSSIA: Let Russia Join the WTO

Epsilon/Getty Images

JUNE 18, 2010

BY ANDERS ÅSLUND, C. FRED BERGSTEN

Here's how the White House can earn an easy win next week.

On June 24, U.S. President Barack Obama will welcome his counterpart, Dmitry Medvedev, to the White House. If there's one thing that the two presidents must accomplish, on an issue that has fallen off most observers' radar screens amid all the nuclear diplomacy and talk of "resetting" relations between Washington and Moscow, it's Russia's accession to the World Trade Organization (WTO) -- a potential game changer for the country's economy and foreign policy.

After hitting a low with the Russia-Georgia war in August 2008, U.S.-Russia relations have rapidly improved. Two milestones are the strategic nuclear arms reduction treaty that was signed in April and the new U.N. Security Council resolution on stricter sanctions against Iran. The next step is to improve economic cooperation.

The WTO currently has 153 members, accounting for 96 percent of world trade. Russia, which accounts for 2 percent of global commerce, is the biggest country outside the organization. Having applied in 1993, it has waited for membership longer than any other country, though the United States has recognized Russia as a market economy since 2002 -- a status it does not accord to WTO member China.

It's true that Russia needs the WTO less than many other countries, since it largely exports commodities that enjoy free-market access in any case. Yet Russia's potential gains from WTO accession have been assessed at 3.3 percent of GDP a year, a major jump for the economy. The main benefits would arise from freer trade of services and foreign direct investment.

Russia has never been closer to WTO accession. The remaining hurdles are modest: sanitary rules for U.S. exports of chicken and pork, limits on future agricultural subsidies, rules for encryption, regulation of state-owned enterprises, and export tariffs for lumber. By and large, these issues can be settled bilaterally with the United States. If any query remains after the Obama-Medvedev summit, it can be concluded at the G8 and G20 summits in Toronto that follow on June 26-27. Russia is the only member of the G8 or G20 outside the WTO.

The real obstacle is the lack of mutual trust. Russian trade negotiators fear that the Americans will raise new concerns after they think they have settled all the outstanding issues. A year ago, American negotiators were thrown off balance by Prime Minister Vladimir Putin's assertion that Russia's customs union with Belarus and Kazakhstan had priority over its WTO accession, but Russia has now made clear that WTO entry comes first and should proceed on its own. Therefore, Russia's accession needs to be decided politically by the presidents, and the outstanding technicalities could then be sorted out in a few months.

Russia stands at a crossroads after the global financial crisis. The Kremlin is still shocked by Russia losing 8 percent of its GDP last year, more than any other G-20 nation, despite having the third-largest international currency reserves in the world. The economy is now recovering quickly, but Moscow faces the choice of opting for modernization and economic liberalization that would allow its well-educated labor force to thrive, or remaining a slow-growing and corrupt petrostate living on oil rents. (Russia's main gains from WTO accession will not be from enhanced market access, although Russian steel and chemicals exports will benefit. Instead, the greatest economic benefits are anticipated on the domestic market for services and greater attraction of foreign direct investment -- leading to improved competition at home.)

Medvedev speaks persistently about the need for modernization and control of corruption, which reached new heights when Putin was president. An invitation by Obama to integrate Russia fully into the world economy would be a noteworthy manifestation of improved relations. It would also mark the first significant trade policy achievement of the administration.

The United States still maintains the Jackson-Vanik Amendment, adopted in 1974 denying favorable trade status to Russia, citing its restrictions on the free emigration of Jews from the Soviet Union. The law, a relic of the Cold War, has no practical effect but is a serious irritant in relations between the two countries. And as a practical matter, if Jackson-Vanik remains in force, Russia would simply not apply WTO rules to the United States, perpetuating trade discrimination against American companies. Hence the amendment should be scrapped immediately after Russia joins.

Now is the right time for Obama and Medvedev to resolve the last obstacles on the way to Russian entry to the WTO. The resulting encouragement of Russia's modernization is very much in the interest of both countries. Russia urgently needs to modernize, and the United States, bogged down in Afghanistan and facing the prospect of a nuclear-armed Iran, needs Russian cooperation more than ever.

C. Fred Bergsten is director and Anders Åslund a senior fellow of the Peterson Institute of International Economics.

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THE KOREAS: Children's balloons 'spark South Korea military alert'

A resident thought the balloons were parachutes

Page last updated at 07:19 GMT, Friday, 18 June 2010 08:19 UK

Balloons released by schoolchildren sparked a major security alert in South Korea, reports say, amid heightened tensions with North Korea.

A resident of Ansan, near Seoul, reported seeing 40-50 objects resembling parachutes falling on a mountainside.

The military and police mobilised a special joint task force.

Upon investigation, the objects turned out to be helium balloons released by a local school.

Tensions between North and South Korea have been running high since the sinking of a South Korean warship earlier this year. Seoul said the ship was torpedoed by Northern forces.

In another incident earlier this month, an alert was raised after an explosion was heard on Yeonpyeong island, near the sea border with North Korea, and a diving suit was found on a shoreline, the JoongAng newspaper reported.

A joint military and police investigation found that the diving suit was abandoned by a fisherman and that the explosion had been caused by a South Korean mine, the paper said.

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HONG KONG: Polls Say Hong Kong Chief Loses Debate

June 18, 2010, 3:21 AM EDT

By Mark Lee and Frederik Balfour

June 18 (Bloomberg) -- Hong Kong Chief Executive Donald Tsang lost a televised debate with barrister and opposition leader Audrey Eu on plans to change the city’s electoral system, polls showed.

Tsang said the proposal to change the way Hong Kong elects lawmakers and the chief executive in 2012 would move the city along the path to full democracy, and accused Eu’s side of trying to stall the plan. “We’d rather stand still than take a step backward,” Eu replied.

Seventy-one percent of respondents in two university surveys said Eu won the debate, the South China Morning Post and Standard newspapers said. Forty-five percent of people polled by University of Hong Kong said they were “more opposed” to the government’s proposals after the debate, while 20 percent said they were more supportive, said the Post, which co-sponsored one survey. No margin of error was given.

Eu’s pro-democracy group argues the central government in Beijing’s package doesn’t go far enough to deliver democracy and is stacked in favor of business groups dominating the so-called functional constituencies that make up half the 60 seats in the Legislative Council. Tsang says opposition demands should be addressed after the plan goes through.

“It’s obvious Audrey was the better performer,” said Joseph Cheng, professor of political science at the City University of Hong Kong.

Still, the debate probably won’t make the government deliver changes to the proposal demanded by pro- democracy groups, he said.

Public Protest

“For a harmonious society you need a fair system,” Eu said during a speech at the Foreign Correspondents Club in Hong Kong today. “But functional constituencies are causing problems, they are the obstacle,” she said, describing them as an “anchor” weighing Hong Kong people down.

“The anchor is put there not by the Hong Kong people but by the central authorities with a string of broken promises as well as by people with vested interests.”

The debate is also unlikely to have won over any of the 23 legislators who vowed to block the proposals, and may have been aimed more at salvaging Tsang’s reputation with the central government in Beijing, Alan Leong, a lawmaker in Eu’s party said before the debate. The package needs a two-thirds majority to pass, unless China makes concessions.

LegCo is to vote June 23 on the proposal, which would see the number of lawmakers increased by 10. Five would be directly elected and five would represent functional constituencies. The number of Beijing appointees who elect the chief executive would be increased from 800 to 1,200.

Tung Chee-hwa

Tsang’s predecessor Tung Chee-hwa stepped down from his post in 2005, more than two years early, after a botched attempt to push through separate China-sponsored constitutional changes sparked street protests and a deadly virus harmed tourism.

Tsng’s own popularity has been slipping amid the wrangle over elections, polls show.

On June 4, about 113,000 people attended a candlelight vigil to mark the 21st anniversary of China’s crackdown on pro- democracy demonstrators in Tiananmen Square, the largest number since 1989 according to police estimates.

Several hundred people gathered in a park near yesterday’s debate, cheering for Eu and booing Tsang. Police had set up a visible security presence around nearby streets as a precaution.

Chinese President Hu Jintao in December told Tsang to “handle constitutional development issues properly to ensure social harmony.” Premier Wen Jiabao urged him to resolve “deep-rooted contradictions in Hong Kong.”

Two Systems

One of those contradictions is the “one country, two systems” formula struck when Britain handed the territory back to China in 1997. While Hong Kong has multiple political parties and more civil liberties than in mainland China, the timetable for greater democracy was set by the National People’s Congress Standing Committee in Beijing.

Eu is calling for universal suffrage in 2012, five years earlier than China’s plans for letting the public vote for the chief executive and eight years before planned direct elections of all LegCo members.

--With assistance from Marco Lui and Ben Richardson in Hong Kong. Editors: Ben Richardson, Dirk Beveridge

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SEOUL, S. KOREA: Asia in Photos

A laser light display of ghostly human forms by renowned French artist Laurent Francois was shown in fountains of the Cheonggyecheon River in Seoul on Monday.  Wally Santana/Associated Press

JAPAN: Asia in Photos

Japanese football fans celebrated in Tokyo

Yoshikazu Tsuno/Getty Images

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THE KOREAS: UN hears Korea warship testimony

The warship row has intensified tensions on the Korean peninsula

Page last updated at 01:25 GMT, Tuesday, 15 June 2010 02:25 UK

North and South Korea have presented their cases to the UN in a dispute over the sinking of a Southern warship.

Seoul asked the UN to take "timely and appropriate measures", blaming Pyongyang for March's sinking of the Cheonan, which killed 46 sailors.

But the North denied involvement and said it was the victim.

After hearing separate submissions from both sides, UN officials said they had "grave concern" over the issue and needed to debate it further.

"The Security Council makes a strong call to the parties to refrain from any act that could escalate tensions in the region," the council said in a statement.

The BBC's Barbara Plett, at the UN headquarters in New York, says the South Koreans presented evidence, including a Powerpoint presentation, which they said showed their warship was sunk by a North Korean torpedo.

"We hope that on the basis of this finding the Security Council will take timely and appropriate measures against North Korea," said South Korean delegate Yoon Duk-yong.

UN diplomats said the North Koreans demanded an opportunity to visit the site of the explosion, and once again rejected South Korea's allegations as forgery and fraud.

"We are just a victim, we would like to make our position clear here, we will inform our position, concerning that issue," said Pak Tok-hun, the North's deputy UN ambassador.

Our correspondent says there is still no agreement on what to do.

Security Council members China - North Korea's strongest ally - and Russia have not yet commented on the investigation.

The warship row has left inter-Korean relations highly tense. Seoul has suspended inter-Korean trade and Pyongyang responded by cutting all ties.

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JAPAN: Memo From Tokyo: After Parade of Prime Ministers, Japan Is Still Hoping for a Recovery

Left to right, top to bottom: Junichiro Koizumi in 2001; Shinzo Abe in 2006; Yasuo Fukuda in 2007; Taro Aso in 2008; Yukio Hatoyama in 2009; Naoto Kan in 2010; Chronological, Patrick Kovarik/Agence France-Presse—Getty Images; David Guttenfelder/AP; Franck Robichon/EPA; Haruyoshi Yamaguchi/Bloomberg; Pool Photo by Yoshikazu Tsuno; Issei Kato/Reuters

June 14, 2010

By MARTIN FACKLER

TOKYO — Just a week into office, Japan’s new prime minister, Naoto Kan, has already broken with politics as usual here by making unusually frank warnings about the nation’s growing social inequalities, unsustainable national debt and need for painful tax increases.

The question now is whether Mr. Kan, a plain-spoken former civic activist, can further defy precedent by lasting more than a year in office.

He seems off to a good start. Japan’s recession-weary voters have already embraced his tough talk, giving his governing Democratic Party a larger-than-expected bounce in the polls.

Political experts say a straight-talking prime minister is exactly what Japan wants, after years of ineffective leaders who seemed hopelessly out of touch with voters’ concerns and unable to restore a sense of direction to this rudderless nation.

What they want, many here say, is the next Junichiro Koizumi, who energized the public between 2001 and 2006 with his calls for Reagan-style economic deregulation and small government. His quirky charisma and willingness to defy entrenched interests made him the most popular prime minister in modern times, say experts, and changed Japan’s expectations for its leaders.

“Japan is starved for strong leadership,” said Satoshi Machidori, a politics professor at Kyoto University. “Voters understand they need someone to lead Japan out of its long stagnation.”

Yet despite Japan’s severe problems, its political system has given its people a string of short-lived, weak leaders. In the last four years, it has gone through four prime ministers in rapid succession, with Mr. Kan now the nation’s fifth new leader since 2006.

His immediate predecessor, Yukio Hatoyama, lasted just eight months. He was driven out by plunging approval ratings after breaking campaign promises and seeming to fritter away the Democrats’ historic election mandate.

Stretch the time frame back to 1990, the approximate beginning of Japan’s stubborn economic funk, and the ailing Asian economic giant has had 13 prime ministers come and go before Mr. Kan. Even Japanese political scientists feel hard pressed to name them all.

“We are competing with Italy to create forgettable leaders,” said Mayumi Itoh, the author of the book “The Hatoyama Dynasty: Japanese Political Leadership Through the Generations,” referring to the string of colorless leaders who preceded the current prime minister, Silvio Berlusconi.

Mr. Kan’s ability to fare better than his predecessors will largely depend on how well he grasps the reasons that drove them from office, Ms. Itoh and other experts say. And while experts cite a host of factors, from outmoded political parties to the emergence of an ingrown leadership class, most agree that the underlying problem seems to be a growing gap in expectations between the public and its political leaders.

What voters want, say political experts, is a leader who both understands their concerns and offers the vision and courage to point a way out. Too often, they have suffered instead with prime ministers who worry only about internal party politics, consensus-building and mollifying the nation’s many interest groups, experts say.

Most of Japan’s recent prime ministers have been second-, third- and even fourth-generation politicians who proved too far removed from average voters and were quick to quit when their approval ratings fell.

“Japan has gone through 20 years of economic stagnation, and there is a lot of pain out there, so voters are much more impatient for dramatic reform than politicians realize,” said Jeff Kingston, a professor of Japanese politics at Temple University’s campus in Tokyo.

Voters have responded to their tone-deaf leaders by rejecting each, often in striking style. Approval ratings for Mr. Hatoyama, who took office in September after the Democrats ended a half-century of virtual one-party rule, plummeted to the high teens from more than 70 percent, dragged down by his seemingly terminal indecisiveness.

Political experts say that Japanese voters might be more forgiving if Japan were somehow incapable of producing strong leaders, either for cultural reasons or because of the limited executive powers of the prime minister’s office, as some have argued. But in fact, the nation has produced numerous visionaries, going back to the samurai who put Meiji-period Japan on its march to industrialization in the late 19th century.

The most recent such leader was Mr. Koizumi. When members of his own party tried to block his plan to privatize the nation’s enormous postal savings system, he took his cause directly to the voters by calling a snap election, an act of political brinkmanship that few other Japanese prime ministers would dare. Mr. Koizumi and his supporters won that 2005 election by a landslide.

While Mr. Koizumi’s market-oriented agenda has fallen out of popularity, he has left a more enduring legacy: changing what voters expect of their leaders.

Japan can no longer go back to the colorless insiders who ruled by brokering backroom deals between party factions, experts say. After Mr. Koizumi, political leaders must be more television-friendly personalities capable of reaching out directly to the public, and particularly to undecided swing voters.

Mr. Koizumi also whetted Japan’s appetite for more decisive leaders unafraid to make tough choices. Experts say his successors failed because they lapsed into Japan’s consensus-driven politics, appeasing interest groups while seeming to ignore the nation’s enormous problems.

“After Koizumi, voters don’t want consensus-makers anymore,” said Jun Iio, a professor of government at the National Graduate Institute for Policy Studies in Tokyo. “Koizumi set a high bar for leadership that his successors have failed miserably to meet.”

The question now, Mr. Iio and others say, is whether Mr. Kan fully grasps this shift to a more populist style of politics.

Mr. Kan will face his first political test in the July 11 parliamentary elections. In the longer run, experts say, he will succeed only if he can show voters that he is working in their interests, something Mr. Hatoyama failed to do.

“Mr. Hatoyama is a classic example of a prime minister who needed to set a course for Japan, but couldn’t,” said Kyoto University’s Mr. Machidori. “Mr. Kan must show he has learned the Koizumi lesson.”

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JAPAN: Struggling Japan edge out Cameroon

Japan 1-0 Cameroon

By Marc Vesty

Japan edged out Cameroon in a dour encounter at Bloemfontein's Free State Stadium which produced little in the way of goalmouth action.

A far from capacity crowd witnessed two out-of-form teams struggle to find any inspiration in another tepid World Cup encounter.

After a dire opening half-hour the Japan took the lead against the run of play when Daisuke Matsui's cross looped over Stephane Mbia and was met by Keisuke Honda, who fired in coolly at the back post.

Japan almost doubled the lead when Makoto Hasebe crashed an effort towards goal but it was well saved by Souleymanou Hamidou before the offside Shinji Okazaki clattered the post as he followed up.

Cameroon finally found some urgency in the closing stages as Mbia rattled the crossbar from 25 yards but the well-drilled Japan side were able to hold on and go level with the Netherlands at the top of Group E.

The Blue Samurai, who had lost four straight games in their World Cup build-up before drawing 0-0 with Zimbabwe, set out so defensively it seemed they would be happy with a point from the opening whistle.

And although Cameroon showed more endeavour, the fact that star striker Samuel Eto'o was played wide on the right and was often found lurking very deep, they lacked any sort of cutting edge.

A 37th-minute shot from Eyong Enoh was the first goalmouth action of the game and, although it was comfortably collected by Japan goalkeeper Eiji Kawashima, it did finally suggest Cameroon may start to find gaps in the Japanese defence.

But the opposite was true as, despite their lack of attacking intent, Japan took a surprise lead one minute later.

Matsui's deep left-footed cross was completely missed by the Cameroon defenders and Honda had time to control the ball before passing into the net.

The Indomitable Lions are the most successful African side in World Cup history having qualified for the World Cup six times, but the pride and passion shown by previous incarnations was sadly lacking in this first tournament on their own continent.

Immediately after half time however, it suddenly seemed Cameroon had roused themselves from their slumber.

Three-time African Footballer of the Year Eto'o finally showed a glimpse of his ability when he picked the ball up on the right and beat two men on his way into the area before squaring to Maxim Choupo-Moting but the striker could not control his finish and blasted over the bar.

But that impetus was not to last and it was not until the 85th minute that Cameroon found two efforts which could have stolen them a point.

In a moment of inspiration totally out keeping with the rest of the game, Mbia hammered a stunning effort towards goal from 25 yards which crashed off the crossbar and following that Kawashima saved from Pierre Webo in injury time.

In fairness to Japan the Asian side's tactics worked almost perfectly as they defended solidly but on this evidence the Netherlands and Denmark will have little to worry about going into the tournament's second week.

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CHINA: Food-Inspection Group Banned From Working in China

By SCOTT KILMAN


The U.S. Department of Agriculture said Monday it is banning an organic-food inspection group from operating in China nearly two years after the department proposed the ban.

According to the USDA, which certifies private organizations to inspect organic farms, a nonprofit Lincoln, Neb., group called Organic Crop Improvement Association improperly used Chinese government employees to inspect Chinese farms that use state-owned land to grow crops for export to the U.S. bearing the USDA's organic seal.

Under the USDA's eight-year-old organic program, farm visits are supposed to be conducted by independent, third-party inspectors to avoid any conflict of interest.

Amanda Brewster, interim executive director of OCIA, which once was one of the largest organic-food inspection agencies in China, declined to comment in an email message. OCIA can continue to inspect food for compliance with U.S. organic standards in the U.S., Canada and Mexico, among other countries.

The USDA's ban isn't expected to disrupt the flow of organic products from China to U.S. supermarkets. The USDA's long spat with the Nebraska group had already prompted many Chinese farmers to arrange for periodic visits from other inspection groups accredited by the USDA.

According to the USDA, OCIA largely stopped its farm inspection work in China last year. The USDA didn't levy any fines against OCIA, which can apply for re-accreditation in China after one year.

The USDA began trying to revoke OCIA's authority to operate in China after a 2007 audit uncovered the use of Chinese government employees as farm inspectors. OCIA appealed the move.

The New York Times earlier reported the USDA's ban on OCIA on its website.

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S. KOREA: Korea summit backs biodiversity body

So far, nations have failed to halt the rate of biodiversity loss

Page last updated at 10:30 GMT, Monday, 14 June 2010 11:30 UK

By Mark Kinver
Science and environment reporter, BBC News

An international meeting has given the green light to the formation of a global "science policy" panel on biodiversity and ecosystem services.

Proponents say the new body will "bridge the gulf" between scientific research and urgent political action needed to halt biodiversity loss.

More than 230 delegates from 85 nations backed the proposals at a five-day UN meeting in Busan, South Korea.

The international panel is expected to be formally endorsed in 2011.

Among the main roles of the Intergovernmental Science Policy Platform on Biodiversity and Ecosystem Services (IPBES) will be to carry out peer reviews of scientific literature in order to provide governments with "gold standard" reports.

It is expected that the IPBES will be modelled on the Intergovernmental Panel on Climate Change (IPCC), which plays a major role in shaping global climate policy.

'Historic agreement'

"The dream of many scientists in both developed and developing countries has been made a reality," said Achim Steiner, executive director of the UN Environment Programme (Unep).

"Indeed, IPBES represents a major breakthrough in terms of organizing a global response to the loss of living organisms and forests, freshwaters, coral reefs and other ecosystems that generate multi-trillion dollar services that underpin all life - including economic life - on Earth."

The meeting's chairman Chan-Woo Kim, director-general of South Korea's environment ministry, said the "historic agreement" laid the foundations for a full scientific assessment of the challenges facing the world.

"The essence of this vision is to ensure environmental sustainability while pursuing development," he explained.

"For this to be realised, it is crucial to have a credible, legitimate and policy-relevant understanding of biodiversity and ecosystem services."

The "Busan Outcome" reached in Korea is the culmination of negotiations that began in Paris back in 2006.

The idea to establish the IPBES followed the publication of the UN's Millennium Ecosystem Assessment in 2005, which concluded that human activities threatened the Earth's ability to sustain future generations.

Professor Bob Watson, chief scientific adviser to the UK's environment department and one of the meeting's vice chairmen, said it was "absolutely critical" to address global biodiversity loss.

"There has been an urgent need to strengthen the legitimacy and credibility of scientific research in this field," he observed.

"IPBES has the potential to now raise global understanding of the threats we face... and empower governments to make policies to counter them, based on solid and integral scientific evidence."

Plans to set up the IPBES are set to be formally established by the 65th session of the UN General Assembly, which opens in September.

They will then be presented to environment ministers for endorsement at Unep's global ministerial meeting in February 2011.

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ASIA: Video of Kyrgyz Unrest on YouTube

June 14, 2010, 8:09 am

By ROBERT MACKEY

Video of the city of Osh, in southern Kyrgyzstan, posted on YouTube on Monday, showing security forces on the streets and some aid distribution.

As my colleague Michael Schwirtz reports from Kyrgyzstan, the southern city of Osh is mostly quiet on Monday morning, “after four days of violence left swaths of the country’s ethnically mixed south in ruins.”

Video showing the aftermath of deadly clashes between ethnic Kyrgyz and Uzbek citizens in and around Osh has been posted on YouTube and collected on the video-sharing service’s CitizenTube blog. Some of the images of dead or badly wounded people posted on the blog are very hard to watch.

This clip, posted within the past hour, seems to show security forces on the streets of the city on Monday:

The same YouTube channel also includes this video, apparently shot on Sunday, which has images of the city shot from the air during what looks like a helicopter patrol by the security forces:

The same user, jshekelman, had also uploaded another video on Saturday showing some of the damage done to buildings in the city:

This video, apparently shot on Saturday in Osh and uploaded to the Web by a user named Oshlik1206, shows a desperate scramble to get medical treatment for some of those wounded in the unrest:

Another YouTube channel, maintained by a user named IlhomDju, includes more images of the wounded, and this clip, apparently shot on a cellphone and uploaded on Saturday, shows burned-out buildings in the city:

ASIA: Uzbek refugees flee Kyrgyzstan violence

The UN refugee agency is coordinating a humanitarian response to the crisis

Page last updated at 21:54 GMT, Monday, 14 June 2010 22:54 UK

Thousands of ethnic Uzbeks have massed at the Uzbekistan border in an attempt to escape violence in Kyrgyzstan which has left at least 138 dead.

Reports suggest that Uzbekistan is considering closing its borders as the build-up continues, despite requests by the UN to keep it open.

The United States has called for a "co-ordinated international response" to the violence.

At least 1,761 people have been injured in four days of clashes.

The unrest - which broke out overnight Thursday between Kyrgyz and minority Uzbeks in the southern cities of Osh and Jalalabad - is the worst ethnic violence in Kyrgyzstan in 20 years.

The south of Kyrgyzstan, an ex-Soviet Central Asian state of 5.5 million people, is home to an ethnic Uzbek minority of almost one million.

It is unclear what has sparked the violence, which comes two months after ex-President Kurmanbek Bakiyev was ousted in a violent uprising.

Kyrgyzstan has appealed to Russia for military support, and the UN Security Council is also being briefed on the situation, according to officials.

British authorities have meanwhile arrested Mr Bakiyev's son, who is wanted by the Kyrgyz interim government for alleged corruption.

Refugee camps

The International Committee for the Red Cross (ICRC) earlier said that an estimated 80,000 Uzbeks have crossed into Uzbekistan from Kyrgyzstan, while about 15,000 are waiting on the border.

Camps have been set up in Uzbekistan to cope with the influx of refugees.

Most were women, children and the elderly, many of whom reportedly had gunshot wounds.

The UN refugee agency says it is providing aid to about 75,000 people.

Earlier on Monday, the Collective Security Treaty Organisation (CSTO), a regional grouping of former Soviet states, reached an outline agreement on measures to take as a response to the crisis.

I've overheard them say that they will burn the buildings and shoot us when we flee

Gulnara, Osh

No details have been released of the plans, but a Russian official has told the BBC that Moscow would not rule out sending peacekeeping troops.

Kyrgyzstan has asked Russia for troops, but it has so far refused. Correspondents say Moscow is reluctant to act unilaterally, although it has sent at least 150 paratroopers to protect its military facilities in the north of Kyrgyzstan.

Both the US and Russia have military bases in the north of Kyrgyzstan, and the country is also an important transit point for Nato troops en route to Afghanistan.

Mr Bakiyev, who was ousted in April, has called on the CSTO to send forces, claiming that Kyrgyzstan's interim government had been ineffective.

Separately, the ousted president's son, Maxim Bakiyev, has reportedly been arrested in the UK on an Interpol warrant, the AFP news agency cited Kyrgyz officials as saying.

Keneshbek Duyichebayev, the chief of Kyrgyzstan national security council, told local TV that Maxim Bakiyev was detained on his arrival at Farnborough airport.

The Home Office in London has declined to comment.

Deaths 'under-estimated'

In Kyrgyzstan, sporadic attacks continued on Monday in the southern cities of Osh and Jalalabad, amid further accusations that Kyrgyzstan troops in some areas had supported anti-Uzbek mobs over the weekend.

Several planes containing medical supplies from the World Health Organisation have begun to arrive at Osh's airport.

The BBC's Rayhan Demytrie in Osh says that many ethnic Uzbeks in the city are trapped in their homes - fearing attacks from mobs on the streets if they leave - and are in urgent need of food and supplies.

There were reports of bodies lying in the streets and in smouldering buildings, and of mass burials being carried out. Whole streets had been burned down.

Osh Police Chief Kursan Asanov said that 950 foreigners - mostly Russians, Pakistanis, Indians and Africans - had been evacuated, according to AP news agency.

UN Human Rights Commissioner Navi Pillay has called on the Kyrgyz authorities to end the fighting, adding that there was evidence of indiscriminate killings - including of children - and of rapes.

Uzbek refugees allege that, during the clashes, armoured vehicles in Osh drove through Uzbek streets shooting at civilians and clearing the way for gangs following behind.

Pascale Meige Wagner, from the International Committee for the Red Cross, said the death toll was an underestimate.

"We hear about bodies not being recovered in Osh and Jalalabad. We do believe that once the situation is bit quieter in those two towns we'll have a better idea of the dimension of this crisis," she said.

Mr Bakiyev, living in exile in Belarus, still has supporters in the south of the country, and there have been concerns that his overthrow might have exacerbated historical tensions between the ethnic groups.

Kubatbek Baibolov, commandant in Jalalabad, said the unrest was "nothing other than an attempt by Bakiyev's supporters and relatives to seize power".

Mr Bakiyev denies any involvement.

The interim government said a "well-known person" was arrested in Jalalabad on Monday on suspicion of being behind the unrest, Reuters reported. No further details on the alleged arrest were available.

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JAPAN: Japan producers 'more upbeat'

Japanese manufacturers have proved resilient

Page last updated at 10:35 GMT, Monday, 14 June 2010 11:35 UK

Optimism among big Japanese manufacturers has grown in the past three months, a study said.

The results suggested large manufacturers had shaken off fears of the euro debt crisis and the strengthening yen, according to analysts.

However the outlook for the Japanese economy remains uncertain.

Last week Japan's new prime minister said the country was at "risk of collapse" under its huge debts.

Naoto Kan, in his first major speech since taking over, said Japan needed a financial restructuring to avert a Greece-style crisis.

Later this week, Japan's central bank is expected to announce a new loan scheme aimed at redirecting money to industries with growth potential.

Asia demand

The business survey index (BSI) of sentiment at large producers rose to 10 in the April-to-June period, from 4.3 in the previous quarter, a joint survey by the Ministry of Finance and the Cabinet Office's Economic and Social Research Institute showed.

The index measures the percentage of firms that expect the business environment to improve from the previous quarter, minus the percentage that expect it to worsen.

Firms also raised their capital expenditure plans, which observers said was a sign that corporations were showing greater appetite to spend.

"Sentiment is gradually improving both for underlying conditions and the outlook," said Takeshi Minami, chief economist for the Norinchukin Research Institute.

"The euro's decline triggered by the Greek debt crisis doesn't seem to have had much impact, at least for now."

Strong demand from Asia has meant that, so far at least, demand for Japanese exports has recovered despite weakness in other markets such as Europe and the US.

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JAPAN: No damage reported from Japanese quake

No damage reported from Japanese quake

Sun Jun 13, 2010 1:29am EDT

TOKYO (Reuters) - An earthquake with a preliminary magnitude of 6.2 jolted northern Japan on Sunday, the Japan Meteorological agency said, though there were no reports of damage and nuclear facilities in the area were unaffected.

The quake, at 12:33 p.m. (0333 GMT), was also felt in Tokyo.

The focus of the tremor was 40 km (25 miles) below sea level off the east coast of Fukushima prefecture, on Japan's main island of Honshu, about 240 km (150 miles) northeast of Tokyo, the Japan Meteorological Agency said.

No tsunami warning was issued.

Kyodo news agency said there was no injuries reported in either Fukushima prefecture or Miyagi prefecture to the north.

Tokyo Electric Power Co's Fukushima No.1 and No.2 nuclear power plants were operating normally after the quake, a company spokesman said.

Tohoku Electric Power Co's Onagawa nuclear plant in Miyagi prefecture and Higashidori nuclear plant in Aomori also continued their normal operations, company officials said.

Nippon Oil Corp's Sendai refinery in Miyagi was continuing normal operations after the quake and there were no reports of damage, a refinery official said.

Japan Energy group refinery Kashima plant in Ibaraki prefecture, south of Fukushima, has been shut for scheduled maintenance and no damage was reported, a plant official said.

Sendai airport Miyagi prefecture halted flights briefly to check the runway before resuming operations, national broadcaster NHK said.

The bullet train that connects Tokyo and Aomori, northern Japan, temporarily suspended operations on part of the rail network after the quake, Kyodo said.

Earthquakes are common in Japan, one of the world's most seismically active areas. The country accounts for about 20 percent of the world's earthquakes of magnitude 6 or greater.

In October 2004, an earthquake with a magnitude of 6.8 struck the Niigata region in northern Japan, killing 65 people and injuring more than 3,000.

That was the deadliest quake since a magnitude 7.3 tremor hit the city of Kobe in 1995, killing more than 6,400.

(Reporting by Osamu Tsukimori, Hugh Lawson, Yoko Kubota and Kiyoshi Takenaka; Editing by Alex Richardson)

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