RUSSIA: Russia bearish on infrastructure spending

Going up: a ski lift in operation at Sochi, site of the 2014 Winter Olympics – an infrastructure project that has thus far escaped government spending cuts

Published: June 7 2010 17:55 | Last updated: June 7 2010 17:55

By Charles Clover

The global economic crisis has hit ambitious goals Russia laid down in 2007 to rebuild its infrastructure, part of its plan to become the fifth-largest economy in the world by 2020.

Much of the country’s road, airport, railroad and power-generating capacity is decayed, left over from the Soviet era. Amid the post-communist economic chaos, investment spending collapsed in the 1990s, and only three years ago recovered to world averages.

In 2007, German Gref, the economics minister at the time, announced plans to spend up to $1,000bn (£695bn, €820bn) over the following decade on roads, airports, electricity generation, housing and other much-needed infrastructure.

The proposals – a potential bonanza for international banks and construction and engineering firms – are now likely to take longer to materialise than many optimistic forecasts had expected.

Just three years later, the plans are in tatters – the money spent on alleviating the financial crisis instead.
A total of $8bn earmarked for infrastructure investment from Vnesheconombank, the state development bank, went instead to bail out Rusal, the aluminium conglomerate, and other private companies. Budget money has also been moved from investment to social spending to soothe the impact of the crisis on the population.

The only projects that have been exempt from cuts are the $14bn Olympic site in Sochi for the 2014 Winter Olympics and a $10bn development plan in the far eastern region ahead of the 2012 Asia-Pacific Economic Cooperation (Apec) summit in Vladivostok.

“They can’t change the date of the Olympics, or they would,” says Andrei Kuznetsov, a strategist at Troika Dialog, the Moscow investment bank.

Sochi is one of the Kremlin’s flagship projects, meant to symbolise the rebirth of post-communist Russia in the same way that the 2008 summer Olympics showcased the new China. Up to $5bn of the costs will be financed from the federal budget, and much of the rest provided by investments from Russia’s large state- or quasi-state-owned industrial behemoths such as Gazprom, the natural-gas monopoly, and Rusal.

Gazprom is funding the construction of a resort for cross-country skiing; Interros, a big industrial group, is building a ski centre; and Sberbank, the largest retail bank in Russia, is constructing a ski jump. Tourism infrastructure plans include building a number of hotels, laying fibre-optic cables and installing a satellite navigation system in the city’s buses.

In Vladivostok, plans are afoot to build two massive bridges, a gleaming new airport and a university that will host the Apec conference.

In other areas, spending has been slashed, though official projections have yet to be revised. Finding figures is difficult, as the government does not disclose them, say analysts.

“The government doesn’t announce it is cutting spending on infrastructure. It just delays it, which is the same as cutting,” says Mr Kuznetsov.

The scale of the infrastructural task alone is daunting. Despite Russia’s size, its railway network is half the length of that in the US and freight trains crawl along at an average 25mph. The paved road network is less than one-10th the size of the US’s, and barely 5 per cent of its roads are considered “good quality” – which in Russia means having at least two lanes and a decent surface.

Improving this will mean radically changing the structure of the Russian economy away from consumption, to which it is currently geared, towards investment.

Investment, as measured against GDP, is 30 per cent for a typical emerging market, but in the middle of the past decade this fell to 15 per cent. It has only slowly been creeping back up, achieving the average overall world level of 23 per cent in 2007.

Russia invests far less in infrastructure than China or other Asian high-growth countries. Infrastructure investment is roughly 4-5 per cent of Russia’s GDP, while in China it is 8 per cent, according to Troika Dialog.

One constant obstacle to greater infrastructure spending is the cost of building in Russia, which seems to be astronomical compared with other countries. Moscow residents joke that the cost of a kilometre of the MKAD, or Moscow ring road, is equivalent to a kilometre of the Large Hadron Collider built by Cern on the Franco-Swiss border.

A planned 415-mile highway linking Moscow and St Petersburg will be expensive. Stage one, or 27 miles of the roadway, is projected to cost $1.2bn, and that is likely to rise.

Another costly road project is the western high-speed highway in St Petersburg, an eight-lane road designed to alleviate traffic congestion in the city. It is scheduled to be built, together with a ring road around the city, by 2015. Since spring 2006, the construction cost of the 29-mile road has risen by 370 per cent, from 57bn roubles (£1.3bn, €1.5bn) to 212.7bn roubles.

The problem, according to Mr Kuznetsov, is that

“when the government increases spending, it doesn’t increase volumes, it increases prices”.

Overall, 80 per cent of the $1,000bn announced in 2007 is expected to come from private sources, which in practice means mostly loyal oligarchs and state companies. But unlike China, which spends nearly $500bn every year on infrastructure, largely from its own resources, even Russia’s oil wealth will not be enough to finance the entirety of its ambitious plans. Foreign investors may be needed.

The European Bank for Reconstruction and Development has taken the lead in financing several projects, and will make its largest loan to date, of $245m, for the St Petersburg flood-protection barrier. It is also lending towards the reconstruction of the city’s Pulkovo airport.

Foreign investors will be wooed to participate in public/private partnerships to build projects such as toll roads and electricity generation, although Russia’s record with such investors leaves much to be desired. There are several damaging precedents such as the Sakhalin-2 oil and gas project, control over which Royal Dutch Shell lost to Gazprom in 2006.

This might make foreign investors think twice about getting into a long-term infrastructure project in Russia. However, for the time being, with oil and gas revenues buoying the economy, foreign appetite to invest in Russia never seems to wane.

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CHINA: New Threads

Aly Song / Reuters

Monday, Jun. 07, 2010

An employee works on a threading machine at the Su Yin Denim Co. Ltd. in Jiangyin, Jiangsu province. The Chinese textile industry produces clothing for many of the popular brands throughout the U.S. and Europe.

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JAPAN: Lost WWII battleground, Japanese remains found in Papua New Guinea

The location of the largest World War II battle between Australian and Japanese forces in Papua New Guinea has been discovered after 68 years, former Australian Army Capt. Brian Freeman says. Known as the "Lost Battlefield," the site was hidden on a remote plateau, 1 kilometer west and 450 meters above the village of Eora Creek, in the Owen Stanley Ranges. Found along the Kokoda Track, the site has been touted as the most significant WWII discovery in the 21st century.

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SHANGHAI, CHINA: Yummy zongzi

Two tourists from France watch a woman prepare a zongzi in Yuyuan Garden yesterday as a 15-day Dragon Boat Festival fair began. One of the festival's traditions, which falls on June 16 this year, is eating zongzi, glutinous rice wrapped up in reed or bamboo leaves shaped like a pyramid.

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Blogger Labels: Dragon Boat Festival,SHANGHAI,CHINA,Yuyuan,Garden,tradition,tourists,zongzi

TRAVEL: How To Get Along With Your Travel Partner

How To Get Along With Your Travel Partner on Howcast

A vacation can be relaxing, exciting, and fun, unless you and your travel partner spend the entire time arguing about where to go and what to do.

You Will Need

• Agenda
• Budget
• Ability to compromise
• Breaks
• Sense of humor
• Overnight trip (optional)

Step 1: Understand differences

Understand that different people like to experience traveling in different ways. One person may prefer to have a meticulously detailed schedule while another may prefer to wing it.

Test the waters by going away for only one night on your first trip with a travel partner.

Step 2: Plan an agenda

Make an agenda, itemizing what each of you wants to see or do on the trip.

Be open to any situations that arise on the trip that may be more fun or interesting than what is outlined in the itinerary.

Step 3: Budget the trip

Set up a budget for the trip that clearly outlines how much the trip is going to cost. Specify every expense and determine how much each person is responsible for.

Step 4: Compromise

Be willing to compromise. Compromise means that sometimes both parties have to give up a little of something they want to make each other happy.

Step 5: Take a break

Take a break from each other. If you have travel plans that conflict, or one of you wants to stay in the hotel, split off and meet back together later.

Step 6: Work together

Work off each other’s strengths and weaknesses. If your partner is better at planning, and you are better at taking pictures, then do what you are good at.

Step 7: Laugh

Have a sense of humor. It is often easier to get along when you and your partner can share a laugh about your travel experiences.

According to the United Nations World Tourism Organization, in 2008, international tourism generated $944 billion.

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JAPAN: Tokyo: It's All About the Food

Jun 6, 2010, 10:58 AM

Bizarre Foods Blog Posted by: Andrew Zimmern

What a great and interesting trip this was. Notice the story selection here...Sumo, Akihabara, Japanese Nutty Professor, exotic alternative lifestyles like La Carmina and her posse or our day with the Cos-play girls...No food stories here! Well this show was originally shot as an episode of Bizarre World, and the week we returned from the shoot we found out that we were going to be going back to making only Bizarre Foods episodes so this show is kind of a rare breed. A hybrid episode that I think is a great show. I wish you could have seen the original program in all its glory. For example, the theme restaurant act was not originally about the restaurants, it was about the people that I dined with. Cross dressing, fetish party going, club crazy, hipster chic and phenomenally great company, La Carmina and her friends adore Tokyo because it's the world's trend setting capital, a city where you can be whatever you want. Despite, or in spite of, its rep for being straight laced and narrow minded, Tokyo is a city that makes everyone comfortable, and there is no kink too exotic, no lifestyle too extreme. Tokyo accepts' anyone and any way of life. Who knew? But that's one of the things I love most about Tokyo.

But of course it's all about the food for me...Nobu, Mizutani, Ishikawa, Quintessence, Hamadaya, Kanda, Koju, Sukiyabashi Jiro and about 100 tempura shops, yakitori bars, sukiayaki houses, shabu shabu dens and chankonabe taverns are what make the Tokyo food scene for me. BUT, and it's a big but, I come home every night from a busy 17 hour shoot day and I don't have the energy to do anything. Since I always stay at the same hotel in Shibuya I simply walk one block to Tokyo Food Show, a super sized food shop that lie beneath Shibuya Station. Many Japanese department stores offer an entire floor dedicated to food. Often located in basements, these markets are colloquially named depachika, taken from combining department store (depaato) and basement (chika). TFS is two city blocks in size, with plenty of treats for everyone in your family to choose from. TFS is the market I stop in every day when I am in Tokyo. I always stay in Shibuya, and TFS is in Shibuya Crossing, and unlike many markets in Asia, the Tokyo Food Show is laid out like the makeup floor at Saks Fifth Avenue in NYC; very easy to navigate. The place is filled with locals, all shopping on the way home or grabbing a bite for lunch or dinner. The staff is helpful and getting lost in TFS is the best advice I can give you. It's a blast. The Japanese work ethic is hardcore, and many businessmen and women slave away well into the evening. The market caters to men and women on the go, serving up bento boxes and takeaway noodle dishes of every type of Japanese cookery. And I mean everything. If it can be eaten in Japan, it can be found at TFS in both the raw and cooked formats. Typically, eating local fare is the best route taken at markets. However, the Tokyo Food Show also offers a wide variety of exotic gourmet foods from around the globe. Check out the Belgian beer stalls, Vietnamese spring roll stands, French fromageries, and even stellar Indian curry shops. As a culture, the Japanese earn a reputation for envelope-pushing, often times serving up wacky experimentation when it comes to food. Expect to see square melons priced at $200 and single, perfect mangoes from teeny farms halfway across the world selling for 50 bucks apiece. Looking for 80 types of seaweed salad to squeeze in between a cluster of sweet French wine grapes and a piece of miso glazed wild salmon from Hokkaido? This is the place. Last month I bought Okinawan sea salt, dried natural shiso leaves for crumbling over rice, a pound of mixed pickles for the hotel fridge, small baskets of smoked shishamo (a teeny fish), several bottles of aged shoyu, chili-spiked salted cod roe, teeny skewers of roasted eel, ripe honey-sweet persimmons and gobs of chu-toro sashimi for eating on the walk back to the hotel. You're shopping in a basement, but don't expect bargains. But they are there. Some rice cracker stands are for art lovers with baskets of their wares costing a small fortune, but there are 40 other rice cracker vendors selling at reasonable prices. For a deal, hit up the market around closing time when vendors sell off items at a deep discount (especially the oyster shuckers and other seafood purveyors) and be sure to cruise through the massive supermarket located at the West end of the market.

Looking for a taste of Tokyo...head to TFS. You will love it.

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CHINA & THE KOREAS: US call to China on N Korea

US Defence Secretary Robert Gates has challenged China to deal with North Korean provocation and the longer-term issue of whether Beijing's military can establish more durable links with the US.

Asian nations cannot stand by in the face of North Korea's alleged sinking of a South Korean warship, Mr Gates said yesterday during an international security summit that was dominated by questions about Pyongyang.

"To do nothing would set the wrong precedent," he said.

The latest crisis with North Korea has highlighted the limited options to deter from attacks or dismantle its nuclear weapons program. The US and China are part of a diplomatic effort to buy out the North's nuclear program.

Mr Gates said North Korea seemed immune to many of the levers of international pressure, such as ostracism.

"How do you gain purchase with a regime that doesn't seem to care what happens to it?" he said in an interview with the BBC.

"As long as the regime doesn't care what the outside world thinks of it, as long as it doesn't care about the wellbeing of its people, there's not a lot you can do about it, to be quite frank, unless you're willing at some point to use military force. And nobody wants to do that."

China, the North's closest ally, has yet to lay blame for the explosion that sank a South Korean warship in March, killing 46 sailors. China is the communist North's biggest patron, giving it economic and political pull over Pyongyang. Washington and Seoul want China to use its clout to rein in the North Koreans.

South Korea referred the sinking of its warship to the UN Security Council, which has the power to impose sanctions. China is one of five veto-holding members of the council.

At the summit, Mr Gates said: "The nations of this region share the task of addressing these dangerous provocations."

He asked China to resume the military co-operation with the US that Beijing suspended after the Obama administration went ahead with the sale of weapons to Taiwan worth more than $US6 billion ($7.2bn). The two powers cannot afford to misunderstand one another, Mr Gates told the Shangri-La Dialogue conference in Singapore.

Mr Gates joined South Korea in trying to raise world support for the conclusion that North Korea was to blame for the sinking of the South's warship, and should be held to account.

South Korean officials handed out pamphlets containing the results of an international investigation that found North Korea blew the warship Cheonan apart with a torpedo.

Mr Gates met South Korean officials several times over two days, including a three-way discussion with officials from South Korea and Japan. Washington is pledged to defend both nations as a legacy of US wars in the Pacific. Mr Gates said the three nations "have to have a united front to deter further provocation".

AP

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N. KOREA: Who To Watch (North Korea?!) In The World Cup

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N. KOREA: Media-shy North Koreans train in S African township

Sunday 06th June, 02:36 AM JST

TEMBISA, South Africa — The North Korean World Cup squad has held its fourth training session in South Africa but foreign reporters are yet to be allowed in.

The media-shy North Koreans, making just a second World Cup appearance and first since 1966, worked out Saturday at the Makhulong Stadium in the township of Tembisa, near Johannesburg.

Access was only granted to a North Korean TV crew and FIFA’s TV unit as Kim Jong Hun’s squad prepared for a friendly against Nigeria at the Makhulong on Sunday.

FIFA is thought to be taking a “softly softly” approach to North Korea and its media commitments but the team from the secretive communist country is required to allow journalists in five days before its first match—against Brazil on June 15.

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JAPAN: Obama greets new Japanese leader

 The Futenma base has angered Okinawans for years

US President Barack Obama has telephoned Japan's new leader Naoto Kan to congratulate him and to pledge co-operation, amid tensions over a US military base on the island of Okinawa.

Tokyo officials said Mr Kan had promised to make "strenuous efforts" to resolve the issue.

Japan's previous government resigned after failing to deliver an election pledge to move the US base off Okinawa.

Many residents on the island resent the military presence.

Incidents including the rape of a 12-year-old Japanese girl in 1995 by three US servicemen have inflamed public opinion.

Compromise plan?

The White House said in a statement that the two leaders had agreed to work closely together on a number of issues.

"They emphasised the importance they each place on the US-Japan alliance," the statement said.

 

Barack Obama and Naoko Kan spoke for about 15 minutes

Washington did not mention the Futenma military base, which has been in place since World War II ended and has become crucial to US efforts to maintain a balance of power in East Asia.

The administration of former Prime Minister Yukio Hatoyama - who resigned last week - had tried to organise moving the base away from Okinawa.

But he failed to find an agreeable site and so proposed a compromise - to relocate it elsewhere on Okinawa.

Japan's Kyodo news agency reported that Defence Minister Toshimi Kitazawa had confirmed that Tokyo wanted to press ahead with the compromise plan.

The agency said Mr Kitazawa had told US Defense Secretary Robert Gates about the new government's intentions during talks on the sidelines of a security conference in Singapore.

Tokyo has not commented on the report.

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NE ASIA: Today in History for 5th June 2010

Historical Events

• 1945 - USA, UK, USSR, France declare supreme authority over Germany
• 1969 - The International communist conference begins in Moscow.
• 1972 - Yugoslav president Tito visits USSR
• 1988 - Russian orthodox church celebrates 1,000th anniversary
• 1991 - Mikhail Gorbachev receives his 1990 Nobel Peace Prize

Famous Birthdays

• 1640 - Pu Songling, Chinese writer (d. 1715)
• 1882 - Igor F Stravinsky, Oranienbaum Russia, composer (Rite of Spring) [OS]
• 1901 - Anastasia N Romanova, great ruler of Russia/daughter of last tsar
• 1919 - Akeo Watanabe, Tokyo Japan, conductor (Nippon Phil Orch 1956-68)
• 1971 - Takaya Tsubobayashi, Japanese racing driver

Famous Deaths

• 1017 - Emperor Sanjō of Japan (b. 976)
• 1383 - Dmitry Konstantinovich, Russian prince (b. 1324)
• 1990 - Vasily V Kuznetsov, pres of USSR supreme soviet (1982-83, 85), dies
• 2009 - Boris Pokrovsky, Russian operatic stage director (b. 1912)

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THE KOREAS: S. Korea seeks U.N. measures against N. Korea in warship sinking

President of the Republic of Korea, Lee Myung-Bak, gestures as he delivers the keynote address at the Shangri-La Dialogue's Asia Security Summit in Singapore, Friday, June 4, 2010. (AP Photo/Carolyn Kaster, Pool) (Carolyn Kaster - AP)

Friday, June 4, 2010; 11:45 AM

By Craig Whitlock
Washington Post staff writer

SINGAPORE -- South Korea said Friday that it has asked the U.N. Security Council to take measures against North Korea for allegedly torpedoing a warship, prompting the United States to hold off a fresh display of military force in the region.

 President of the Republic of Korea, Lee Myung-Bak, delivers the keynote address at the Shangri-La Dialogue's Asia Security Summit in Singapore, Friday, June 4, 2010. (AP Photo/Carolyn Kaster, Pool) (Carolyn Kaster - AP)

South Korean President Lee Myung-bak said his government had formally referred the matter to the Security Council but did not specify if it was seeking new sanctions against North Korea, or lesser measures.

 U.S. Secretary of Defense Robert M. Gates, right, shakes hands with Indonesia's Defense Minister Purnomo Yusgiantoro, left, as Malaysia's Defense Minister Zahid Hamidi, center, looks on, during the 9th Asia Security Summit on Friday, June 4, 2010 in Singapore.(AP Photo/Wong Maye-E ) (Wong Maye-e - AP)

"If we think that after a while North Korea's action will be condoned and that stability on the Korean peninsula will somehow be maintained, then we would be fooling ourselves because North Korea would once again resort back to attacking others," Lee told a gathering of Asian leaders at a security conference here.

Defense Secretary Robert Gates, right, Korea's Minister of National Defense Kim Tae Young, shake hands before their bilateral meeting during the Shangri-La Dialogue's Asia Security Summit in Singapore, Friday, June 4, 2010. (AP Photo/Carolyn Kaster, Pool) (Carolyn Kaster - AP)

The United States has been considering new joint military exercises with South Korea as a show of force in response to the March 26 sinking of the Cheonan, in which 46 sailors were killed. Seoul has accused Pyongyang of torpedoing the vessel, causing one of the worst security crises in the region since the Korean War.

Russian Deputy Prime Minister Sergei Ivanov, right, speaks to Singapore's Defense Minister Teo Chee Hean at the 9th Asia Security Summit on Friday, June 4, 2010 in Singapore. (AP Photo/Wong Maye-E ) (Wong Maye-e - AP)

But Defense Secretary Robert M. Gates said Friday that U.S. and South Korean officials had decided to give diplomacy a chance first.

"There's a desire to see what can be accomplished first at the U.N.," he told reporters after meeting in Singapore with South Korean Defense Minister Kim Tae Young. "What we do in terms of further exercises is still under consideration."

Defense Secretary Robert Gates, right, bows his head as he delivers his condolences to Korea as he sits across from Korea's Minister of National Defense, Kim Tae Young, as they participate in a bilateral meeting during the Shangri-La Dialogue's Asia Security Summit in Singapore, Friday, June 4, 2010. (AP Photo/Carolyn Kaster, Pool) (Carolyn Kaster - AP)

U.S. defense officials in Washington had said Wednesday that they were considering deploying an aircraft carrier, the George Washington, to the Yellow Sea as a warning to North Korea. In addition, Pentagon officials had previously said they were planning two major joint military exercises with South Korea to demonstrate solidarity against threats from Pyongyang.

South Korean President Lee Myung-bak waits to deliver his keynote address during the opening of the 9th Asia Security Summit on Friday, June 4, 2010 in Singapore. Lee said his country has referred North Korea to the U.N. Security Council over the sinking of a warship. (AP Photo/Wong Maye-E ) (Wong Maye-e - AP)

En route to Singapore on Thursday, Gates told reporters that

"some additional exercises are being discussed," but added that he was "not aware of a plan to send a carrier to the waters off of South Korea."

After meeting with his South Korean counterpart Friday, Gates said it was unclear exactly what course of action Seoul would ask the Security Council to take.

"Whatever they choose to do with the U.N., they will have the full support of the United States," he said.

South Korean President Lee Myung-bak delivers his keynote address during the opening of the 9th Asia Security Summit on Friday, June 4, 2010 in Singapore. Lee said his country has referred North Korea to the U.N. Security Council over the sinking of a warship. (AP Photo/Wong Maye-E ) (Wong Maye-e - AP)

South Korea's options in the Security Council are limited without the backing of China, North Korea's strongest ally. Beijing is considered unlikely to agree to new sanctions against Pyongyang, and has already disappointed Seoul by declining to accept the results of an international investigation that held North Korea responsible for the sinking of the Cheonan.

The investigation -- led by South Korea and assisted by the United States, Australia, Sweden and Britain -- concluded two weeks ago that a North Korean mini-submarine fired a North Korean-made torpedo that sank the Cheonan. Evidence clearly showed, the investigation said, that the North Korean military plotted to attack the ship.

Defense Secretary Robert Gates, right, looks to Korea's Minister of National Defense Kim Tae Young, as they participate in a bilateral meeting during the Shangri-La Dialogue's Asia Security Summit in Singapore, Friday, June 4, 2010. (AP Photo/Carolyn Kaster, Pool) (Carolyn Kaster - AP)

North Korea has denied responsibility and in turn accused Seoul and Washington of manufacturing the incident.

"Such outlandish assertions are laughable," Lee said in his speech in Singapore. "North Korea must admit its wrongdoing. It must pledge to never again engage in such reprehensible action."

President of the Republic of Korea, Lee Myung-Bak delivers the keynote address at the Shangri-La Dialogue's Asia Security Summit in Singapore, Friday, June 4, 2010. (AP Photo/Carolyn Kaster, Pool) (Carolyn Kaster - AP)

North Korea as warned that "all-out war" could result if South Korea seeks to punish it for the torpedoing of the Cheonan. But Adm. Robert Willard, head of U.S. forces in the Pacific, told reporters in Singapore on Friday that there were no signs that North Korea was moving troops or preparing for hostilities.

"Right now we're not seeing indications that North Korea is intending the next provocation," Willard said. "But I think everyone in the region is watching North Korea very closely given their unpredictability."

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JAPAN: Imperial Household Agency demands publisher apologize

Jun 4 11:24 AM US/Eastern

(AP) - TOKYO, June 5 (Kyodo)—The Imperial Household Agency has asked publisher Shinchosha for an apology and correction after a weekly magazine article alleged that the agency had suggested to Princess Aiko's school that it add medication to the school meals of unruly boys to calm them down, which the agency described as a "baseless and malicious" accusation, a senior official of the agency said Friday.

Issei Nomura, grand master of the crown prince's household at the agency, told a regular press conference that the protest was lodged Thursday over an article carried in "Shukan Shincho" weekly magazine, which hit store shelves the same day.

The article claimed that the board of the crown prince's household allegedly recommended that Gakushuin Primary School mix medication for children with attention deficit hyperactivity disorder into the school meals of unruly boys, as the princess, a third grader, had become reluctant to go to school after encountering the rough behavior of the boys.

"The article alleges officials of the agency suggested (the school) take action in violation of laws relating to medical practitioners and pharmaceutical affairs. It is simply not possible," Nomura said.

Meanwhile, the publisher said, "We have confidence in the credibility of the article as it was written on a solid basis."

Princess Aiko, 8, the only child of Crown Prince Naruhito and Crown Princess Masako, has been attending only a limited number of classes with her mother since March, according to the agency. In March, Nomura told a regular news conference that the princess had missed school due to strong anxiety and stomachaches after being treated harshly by boys but the school quickly denied that the princess had been directly subjected to rowdy behavior. Motomasa Higashisono, a senior director of the Gakushuin School Corporation, explained shortly after Nomura's news conference that the princess was startled when a boy dashed out of a classroom and it must have reminded her of past rowdy behavior by boys.

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JAPAN: Naoto Kan to be New Prime Minister of Japan

Naoto Kan has been elected head of the Democratic Party of Japan (DPJ).

He is now in line to become Japan's ninety-fourth prime minister later in the day.

(He received 291 votes compared to Tarutoko Shinji's 129 votes.)

JAPAN: The Wrath of Kan: Can this man clean up Japan's mess?

Kiyoshi Ota/Getty Images

JUNE 3, 2010

BY ABRAHAM M. DENMARK, DANIEL M. KLIMAN |

Should Finance Minister Naoto Kan become Japan's next prime minister on Friday, as most observers predict, it won't be the first time he will have shouldered the responsibility for cleaning up after Yukio Hatoyama. Kan succeeded him as party chairman back in 2002, when Hatoyama resigned over talks he had held with the rival party. Now, Kan seems to be swooping in again in the wake of Hatoyama's sudden resignation, hoping to limit the damage from the outgoing prime minister's disastrous nine months in power. Then as now, Kan boasts more experience in government than his predecessor and a style that could hardly be more different. His hot temper and self-made expertise might be just what Japan needs if it hopes to keep a prime minister for a period of longer than a few months.

Japan urgently needs a strong leader. Less than a year after Hatoyama and his Democratic Party of Japan (DPJ) swept away half a century of nearly unbroken rule by the Liberal Democratic Party (LDP) in September, their coalition today looks frayed and tired. Hatoyama got bogged down in a disagreement with the United States over where to relocate Futenma, a strategically important U.S. Marine air base on Okinawa. In late May, after months of painful public dithering, he finally signed on to a 2006 agreement hammered out by the previous LDP government -- which provoked a revolt in his governing coalition and deep shock among an unprepared public. With his party in disarray and an approval rating headed for the single digits, Hatoyama resigned Wednesday, along with the DPJ's powerful party secretary, Ichiro Ozawa.

Enter Kan. He is a figure already well known to investors and analysts as the fiscal conservative who has spent the last six months trying to relieve Japan's stifling debt burden (roughly 200 percent of GDP) and reinvigorate a stagnant economy. While he has actively called for Japan to follow the path of fiscal responsibility, and pointed ominously to Greece as a direction Japan might follow if his reforms are not implemented, his short time as finance minister has not seen considerable progress in this direction.

Kan is also known as a pacifist in line with Japan's old left tradition. While serving in the Japanese legislature, he advocated a greater role for the Japanese military under the banner of the United Nations and opposed sending the country's troops to Iraq, as the United States has hoped Japan would. After meeting with Japan's then-Prime Minister Junichiro Koizumi in 2003, he commented, "The decision to send troops to Iraq is based on a fundamental miscalculation." Still, unlike Hatoyama, Kan is unlikely to fumble matters of foreign policy and relations with the country's most important ally, having watched and learned from the Futenma debacle.

Kan's upbringing could be a key asset. Hatoyama's entry into politics was lubricated by family connections (his father was also prime minister). Kan, on the other hand, is a rarity for Japanese politicians -- a self-made man. His path to power was neither direct nor easy. An aspiring scientist in his youth, Kan majored in physics at the Tokyo Institute of Technology and opened his own patent office in 1974. He made his political debut shortly thereafter as a civic activist and entered the Japanese parliament in 1980 as a member of the lower house. It was after exposing a massive scandal, however, that Kan truly burst onto the national scene in the 1990s, as health minister in the LDP government. HIV-tainted blood was entering the country's blood supply, and the government had been covering it up. Kan exposed the details to public acclaim.

But Kan soon faced his own series of scandals. In 1998, he resigned his post after his affair with a television newscaster went public and he simultaneously admitted that he had failed to pay into the national pension fund. Just five years later, Kan was forced to resign from his leadership of the DPJ over another failure to pay. This time, Kan made formal penance: He shaved his head, put on a Buddhist monk's robes, and traveled to the traditional pilgrimage destination of Shikoku island and its 88 temples. It worked. Japan's comeback kid, he remained a senior figure inside the DPJ and served as deputy prime minister and finance minister in the Hatoyama cabinet.

Behind the scenes in Tokyo, he is known as "Ira-Kan" or "Irritable Kan" for his quick temper (cue the Wrath of Khan jokes). He has also cultivated a reputation as a serious policymaker with a popular touch and has built good relationships with politicians both within the DPJ and across a broad ideological and geographical spectrum.

How did Kan manage to survive? Even amid the scandals, he projected an image of probity and sincerity. As China's People's Daily put it,

"In an era of bureaucrats and back room dealings, Kan's transparent politics were completely unprecedented and his honesty was enthusiastically praised by the public and the media."

That jives well with the sentiment that brought the DPJ to power in the first place -- a vow to take power back from unelected bureaucrats and shake up Japan's stultified politics.

Hatoyama made little headway on this reform agenda. But a Prime Minister Kan would require less on-the-job training, allowing him to avoid his predecessor's rookie mistakes and take on entrenched interests within the bureaucracy, while navigating the divides within his own party.

He'll need all the political savvy and strength he can muster. With the loss of its two most prominent leaders, Hatoyama and Ozawa (the real force behind the party's successful rise to power), the DPJ is in turmoil. The party's junior lawmakers -- who were largely sidelined for the past nine months -- are hungry to wield more authority in the next administration. Kan is no acolyte of Ozawa's, but he is one of the party's founders and is still a member of the old guard. The other probable contenders for prime minister -- which include Foreign Minister Katsuya Okada, Transport Minister Seiji Maehara, and chairman of the lower house's environment committee Shinji Tarutoko -- carry the banner of an eager, younger DPJ generation that is dissatisfied with the old guard's penchant for backroom negotiations. Kan is likely to prevail in the short term, but he will be harried by the next generation of lawmakers after a July upper-house election that is looking disastrous for the DPJ, and certainly at the party's September conclave.

Ozawa's fall will also pose a more direct challenge to Kan's leadership. In resigning, Ozawa has freed the DPJ of its biggest public relations albatross -- he has been accused of accepting questionable campaign donations. But his departure is also a huge loss, as Ozawa's almost mythic power within the party served as a unifying force. Since taking control of the DPJ, Ozawa has relentlessly pursued the destruction of the LDP (his former party) and would use his clout and his political genius to cultivate and aid loyal candidates. Many saw Ozawa as the only man who could lead the DPJ out of the wilderness to power, and his success in 2009 only solidified this reputation. It would be naive to think that Ozawa's exit is complete, given that his loyal lieutenants will continue to wield significant power. Still, without his commanding presence, today's DPJ looks like an uneasy amalgam of aging former socialists, young pragmatists, and refugees from the LDP.

Then there is the job of actually running Japan. As prime minister, Kan will likely move to trim government spending -- no easy task, as he has surely learned in the finance ministry. With Japan's population aging rapidly, social outlays for health care and pensions are set to increase, and Kan might be tempted to make his cuts from Japan's defense budget. But that looks harder to justify after North Korea's sinking of the South Korean corvette Cheonan and the growing military assertiveness of China, which conducted a provocative naval exercise near Japan this spring.

And then there's Futenma, the U.S. base issue that unseated Hatoyama. Although the U.S.-Japan joint statement issued on May 27 defused bilateral tensions for the short term, the game is far from over in Japan. After the July election, the DPJ will have to persuade the Social Democratic Party -- which bolted from the ruling coalition after Hatoyama signed the base agreement with the Americans -- to rejoin the government. Okinawans will likely seek to foil any attempt by Tokyo to actually implement the Futenma deal, and the United States exhibits no willingness to reopen negotiations. Hatoyama's hasty exit has vividly demonstrated that the Japanese still judge their leaders in part on their ability to successfully manage the alliance.

Tough as the coming months may be, Hatoyama's and Ozawa's departures herald the end of the beginning in Japan's political transformation. In fact, these resignations are a sign that the change heralded by the DPJ's rise to power is continuing. It was the failure to live up to the DPJ's promises that caused Hatoyama to resign -- not the DPJ's reform agenda itself.

Still, don't bet on political stability in Tokyo. Of Japan's 13 prime ministers since 1991, only three have lasted more than two years. Kan might be of a different breed, but the hostile environment he faces is essentially unchanged. So unless something unexpected happens, get used to more resignations and more new prime ministers.

Abraham M. Denmark is a fellow and Daniel M. Kliman is a visiting fellow at the Center for a New American Security, which is hosting a major conference on the U.S.-Japan alliance on June 17 and 18 in Washington, D.C.

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CHINA: World's top 10 military spenders

Chinese militia take part in a military drill in Taiyuan, China, in July 2009. Reuters/FILE

CHINA - $100 billion: Beijing regards its military expenditures as a state secret, but SIPRI estimates that China spent $100 billion on its military in 2009. While this is less than one-sixth of what the US spends on its military, it is still a 217 percent increase from a decade earlier.

A Japanese Maritime Self-Defense Force officer monitors screens at the Pacific Missile Range Facility on Kauai, Hawaii, during a Japanese missile defense test in the waters off the island in December 2007.   Japan Maritime Self-Defense Force/AP/FILE

JAPAN - $51 billion: The world’s second-largest economy is focusing revenues away from military, decreasing such spending by 1.3 percent over the past decade. That’s less than 1 percent of total GDP, whereas the US spends 4.3 percent of GDP on its military, and Saudi Arabia spends 8.3 percent.

Russian army fighter jets fly over Moscow's Kremlin during rehearsals ahead of the upcoming Victory Day Parade on May 6.  Ivan Sekretarev/AP 

RUSSIA - $53.3 billion: The Russian bear’s military spending saw a 105 percent increase from 2000. Strong oil revenues over the past decade helped Russia beef up its military, though the rate of increase has slowed in the past year because of falling gas prices.

Marines and sailors line the deck of the US Navy amphibious assault ship USS Iwo Jima as it passes the Statue of Liberty in New York on May 26, as part of Fleet Week.   (Peter Morgan/AP)

Despite a global recession, worldwide military spending increased in 2009 by its fastest pace since 2003, according to a new report by the Stockholm International Peace Research Institute. Chad boosted spending by 663 percent. The US still has the biggest defense budget.

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posted June 3, 2010 at 1:55 pm EDT

By Stephen Kurczy, Correspondent

Worldwide military spending jumped 5.9 percent in 2009 to $1.5 trillion, according to a new report that underscores the long-term decision of many countries to prioritize defense. This is despite a recession that shrunk the global economy 2.2 percent.

The US remains by far the biggest military spender, followed by China, the Stockholm International Peace Research Institute (SIPRI) said in its annual report on worldwide military expenditures, released June 2. Last year saw the steepest jump in worldwide military spending since the start of the Iraq War in 2003.

See the full list: IN PICTURES: World's Top 10 Military Spenders

But, as the world’s military spending increased nearly 50 percent over the past decade, the biggest military budget increases were seen in small, oil-rich countries flooded with new wealth.

From 2000 to 2009, Chad increased its military budget 663 percent, Azerbaijan increased 471 percent, and Kazakhstan increased 360 percent.

“It creates potential dangers,” Sam Perlo-Freeman, one of the report’s authors and the head of SIPRI’s military expenditure project, said in a telephone interview from Stokholm Thursday.

“Although there is nothing inevitable about arms races leading to war, it can potentially be a warning sign.”

Turning oil into arms

Oil discovery often increases military spending, Mr. Perlo-Freeman says, because – unlike taxes – the revenues carry little political cost, the oil and gas infrastructure justifies increased protection, and the development of natural resources tends to exacerbate tension and conflict.

In Nigeria, for example, SIPRI found that “the massive environmental damage caused by oil extraction and the lack of benefit to oil-producing regions has generated grievances.” Chad, as well, has increased military spending in an attempt to quell domestic conflict. Chad’s oil infrastructure was built up with cheap loans from the World Bank. The global lending agency pulled out of the project when it became clear that the government was spending oil revenues on defense instead of development, says Perlo-Freeman.

In Central Asia, Azerbaijan has used oil revenues to beef up forces along its border with Armenia, which has traditionally had a stronger army and enjoys strategic terrain advantages. The International Crisis Group said in a report last year that Azerbaijan's stronger military could put the fragile truce with Armenia under threat.

“Azerbaijan has been playing catch-up with Armenia,” says Perlo-Freeman, noting their conflict over the disputed Karabakh region.

US and China top spenders

In absolute terms, the US and China increased military spending the most over the past decade.

China, which regards its military budget as a state secret, spent an estimated $100 billion on it in 2009, a 217 percent increase from 2000, according to SIPRI. The only other Asian country in the top 15 was India, which spent $36.3 billion on its military in 2009.

The US spent $661 billion on its military in 2009, a 75.8 percent increase from 2000. While current US military spending is still a carryover from the years of George W. Bush, President Barack Obama shows no signs of cutting spending. The Nobel Peace Prize winner excluded security-related expenditure from a planned three-year squeeze in discretionary expenditure. At a recent hearing before Congress, Secretary of Defense Robert Gates talked about efforts to trim the fat but the proposed Defense Department baseline budget for fiscal 2011 is $708 billion.

Engaged in two wars, the US led the decade of increases, but it was joined by 16 additional nations in the G20.

In 2009, Timor-Leste led the world with the biggest increase in military spending, upping its budget 54 percent. Uruguay, Cyprus, and Lebanon were also big spenders, with each country upping their military budget more than 20 percent this past year.

Biggest drops seen in Iraq, Georgia

While oil-rich countries saw big budget increases over the decade, 2009 saw a decrease in gas prices and therefore reduced military budgets in oil-dependent economies. The fall in oil prices in 2009 severely affected the military spending of oil producers Iraq (down 28 percent), Venezuela (down 25 percent), and Oman (down 16 percent), according to SIPRI.

The downturn in oil and commodity prices in 2009 somewhat slowed the rising trend in military spending in some countries with a high level of resource dependence. Some countries, such as Iraq and Venezuela, reduced their spending in 2009 as a result of lower revenues; others, such as Nigeria and Russia, increased spending, but at a much slower rate than in recent years. But the long-term trend of oil and other natural resource revenues driving increased military spending in many developing countries seems set to continue.

But the largest relative real decrease in 2009 was in Georgia, whose military spending fell 39 percent from exceptionally high levels in 2008 due to the conflict with Russia in South Ossetia. Until then, Georgia had one of the most rapid increases of military spending.

“Their rapid expansion was building up to a conflict,” says Perlo-Freeman. “Essentially having failed in the war, they would appear to have decided that the military option isn’t going to work anymore.”

RELATED:

• Defense Secretary: Pentagon must trim the fat in war on waste
• China's military spending slows, on paper
• Military spending: up and away

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TRAVEL: Delta drops last-minute booking fee for frequent-flier award tickets, but raises another

 A passenger walks past a Delta Airlines 747 aircraft in McNamara Terminal at Detroit Metropolitan Wayne County Airport.  By Paul Sancya, AP

By Ben Mutzabaugh, USA TODAY

Delta Air Lines is doing away with its redemption fees for SkyMiles award tickets booked at the last minute.

In an e-mail sent out to SkyMiles frequent-flier members today, Delta says

"this means you will no longer pay a redemption fee of up to $150 when you book an Award Ticket within 20 days of departure. Award Tickets booked 21 days or more prior to departure will continue to have no Award redemption fee."

"We are actively listening to customers' concerns about the SkyMiles program and are responding," Jeff Robertson, Delta's vice president – SkyMiles, says in a press release announcing the change.

It's not all good news, though. The Atlanta Journal-Constitution writes

"Delta is increasing another fee: Its redepositing and reissuing fee for customers who change frequent flier award flights is going up to $150 from $100." But, the newspapers notes, Delta "will still waive the fee for its elite diamond and platinum level frequent fliers.

As for the end of last-minute award fee, Delta's move matches a similar one made by United in 2009. This past July, United announced it would no longer charge fees for frequent-flier award tickets booked on short notice. United had charged $100 tickets for award tickets booked within six days of travel and $75 for tickets booked within seven and 20 days of travel.

RELATED LINKS: Study: US Airways, Delta stingiest with frequent-flier tickets | Your frequent flier mileage may vary (Minneapolis Star Tribune)

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