Finance Blog number 1

Lawmakers grilled Toyota’s president, Akio Toyoda, in a hearing Wednesday aimed at discovering, among other things, why the automaker was slow to respond to safety issues related to sudden acceleration.

Mr. Toyoda acknowledged that the company had made mistakes and repeatedly apologized for the recent lapses in quality control. But he did not provide specific answers to questions about what the company knew about certain defects and when they were discovered.

Members of the House Committee on Oversight and Government Reform repeatedly asked Mr. Toyoda if his company had provided U.S. safety regulators with all the information they requested.

"According to my understanding, we fully shared the information we have with the authorities," Mr. Toyoda said, speaking through a translator.

Mr. Toyoda, who is the grandson of the company’s founder, read his opening remarks in English, but relied on a translator for the majority of his testimony. Yoshimi Inaba, the president of Toyota’s North America division, testified before the committee in English.

Committee members also peppered the executives with questions about why Toyota didn’t respond faster to customer complaints about sudden unintended acceleration.

In response, Mr. Toyoda acknowledged that the company’s efforts failed to live up to its core values and pointed to the company’s plans to set up a global commission to address complaints more quickly and efforts to increase transparency on safety issues.

However, some lawmakers did not find Mr. Toyoda’s answers sufficient.

Marcy Kaptur, D-OH, said she was "disappointed" with Mr. Toyoda’s testimony, adding that she did not feel he had shown sufficient remorse or taken enough note of the amount of complaints over the last decade.

The executives also came under fire for a 2009 memo in which Toyota staffers boasted of the company saving $100 million by negotiating a limited recall for certain cars.

Mr. Inaba, whose name appeared on the document, said the it was "inconsistent with the guiding principle of Toyota." He added that the report was made shortly after he rejoined the company and that he was not involved in writing it.

Toyota has been criticized for not responding quickly enough to customer complaints about sudden acceleration, which have been blamed for several accidents resulting in injuries or death. The automaker has recalled over eight million vehicles worldwide for this problem.

Mr. Toyoda attributed instances of unintended acceleration to certain factors, including the way the car is used or misused, and other "structural aspects." But he said he was "absolutely confident" that there are no defects with the design of Toyota’s electronic throttle control system.

After the nearly three hour hearing was over, Mr cash advance to savings account. Toyoda told reporters that he plans to make "sweeping changes" at the automaker.

"Going forward I intend to make every effort to achieve the transformation and rebirth of the company by making safety and ‘customer first’ the top priority," he said.

In response to the human toll of the company’s safety problems, Mr. Toyoda extended his condolences to members of the Salyor family, who lost four members in a crash involving a recalled Toyota vehicle in San Diego.

"I would like to send my prayers again," Mr. Toyoda said. "And I will do everything in my power to ensure that such a tragedy never happens again."

However, when asked if Toyota would pay for the medical or funeral expenses for drivers killed or injured in crashes involving defective Toyota cars, the executives hedged.

Mr. Inaba said the question will be resolved by the company’s legal team.

In his prepared remarks, Mr. Toyoda said the automaker’s rapid growth over the last few years contributed to the recent lapses in safety and outlined new steps the company will take to ensure quality control.

Toyota will devise a system to convey customer complaints from around the world to the company’s management in a timely manner, he said. It will also implement a system in which each region will be able to make recall decisions as necessary.

In addition, Toyota form a "quality advisory group" that Mr. Toyoda said will be "composed of respected outside experts from North America and around the world to ensure that we do not make a misguided decision."

Mr. Toyoda, who became the company’s president in June, said the automaker will "invest heavily" in quality in the U.S. and will establish an Automotive Center of Quality Excellence and will introduce the new position of Product Safety Executive.

Toyota has grown its sales in recent years, outpacing General Motors (GM, Fortune 500) as the world’s top-selling automaker. But its recent troubles have stained its reputation as a bright light in Japan’s otherwise stagnant economy.

Prior to Mr. Toyoda’s testimony, Department of Transportation secretary Ray LaHood testified before the House Oversight and Government Reform Committee. He defended himself against criticism for not having taken enough action concerning the faulty vehicles.

"We haven’t been sitting around on our hands," said LaHood. "When there needs to be a recall, we do it."

Aaron Smith, CNNMoney.com staff writer contributed to this report 

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French business confidence unexpectedly climbed in December to its highest level since March 2008 as Europe’s third-largest economy extended its recovery from the recession.

The Bank of France’s Business Sentiment Indicator for manufacturing advanced to 101 from 99 in November, according to an e-mailed statement today. Economists had expected the measure to remain unchanged, according to the median of five forecasts gathered by Bloomberg News.

The Paris-based central bank said the data suggest economic expansion of 0.5 percent in the fourth quarter, a decrease of 0.1 percentage point from its previous estimate. Declines in gauges for capacity utilization, total orders and production countered an improvement in order books, the central bank said.

“Businesses still remain skeptical and want to see what happens in the economy,” said Laurence Boone, chief French economist at Barclays Capital in Paris.

Finance Minister Christine Lagarde said last week that the government hopes to raise its growth forecast to at least 1 percent for 2010 from 0.75 percent as the recovery gains pace.

Industrial production grew more than twice what economists expected in November, gaining 1.1 percent from the previous month, statistics agency Insee said yesterday.

French businesses are benefiting from the economy’s return to growth in the second quarter of 2009 as well as government stimulus programs, even as increases in the euro and unemployment threaten the expansion.

On Jan. 6, Sodexo, the world’s second-biggest catering company, reported a smaller first-quarter revenue decline than some analysts expected and confirmed its annual profit target.

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Romania’s central bank unexpectedly cut its main interest rate to the lowest since January 2008 after the appointment of a government ended months-old political turmoil and signs that lenders may resume payments of a bailout loan.

The Banca Nationala a Romaniei trimmed the monetary policy rate to 7.5 percent from 8 percent at its first meeting since last month’s presidential elections, the Bucharest-based bank said in an e-mail today. The decision was expected by only two of 11 economists in a Bloomberg survey. Seven predicted no change and two predicted a smaller cut.

“This is a small surprise in timing, but not in direction,” Raffaella Tenconi, the chief economist at Wood & Co. in Prague, said in an interview today. “With the new government already going forward to meet the IMF requirements, a loosening doesn’t change our view of a stable leu in the near term.”

Traian Basescu was re-elected president last month and re- appointed Prime Minister Emil Boc, ending a political stalemate that had left the country without a government since October. The International Monetary Fund, which is leading a $30 billion bailout loan to Romania, has said it may resume loan payments.

Recovering Economies

Economies throughout east Europe are recovering from recession or contractions are slowing as demand picks up from their main trading partners in western Europe. Romania aims for economic growth of as much as 1.5 percent this year after an estimated contraction of 7.5 percent in 2009.

“It is worth noting the continued slowdown in real terms of the annual dynamics of credit to the private sector, especially of the leu-denominated component, amid weak demand for loans against the background of the recession,” the bank said in a statement after today’s decision business cards.

The Romanian leu held its gains against the euro after the announcement and traded 0.2 percent stronger at 4.2071 per euro as of 12:50 p.m. in Bucharest, while the Bucharest Stock Exchange’s main benchmark BET index rose 2.5 percent to 4867.35.

The IMF and the European Union froze the bailout payments to Romania last October after Boc’s previous administration collapsed and the ruling coalition of parties disintegrated in feuding. The lenders said they would visit Romania again in January to discuss the new government’s economic program and 2010 budget plan.

The IMF has said it would only consider unfreezing the payments after Romania installed a new government and passed a 2010 budget plan. The new government was approved in Parliament on Dec. 23 and Parliament is scheduled to vote on the budget plan by Jan. 15.

Romania’s inflation rate rose in November for the first time in 10 months, the National Statistics Institute said on Dec. 11. The rate rose to 4.7 percent from 4.3 percent in October, mainly because of an increase in taxes on tobacco.

The central bank said that increases in tobacco prices last year contributed 1.8 percentage points to the annual inflation rate. Tobacco accounts for 4.6 percent of the basket of products the central bank uses in its consumer price index.

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Goldman Sachs’ banking titans and top congressional Democrats don’t often see eye to eye — executive pay caps, anyone? But here’s something the megabank and Capitol Hill agree on: One of the best ways to get financing to worthy small businesses is through a little-known community lending vehicle called a CDFI.

Taken together, Goldman Sachs and the federal government have earmarked more than $300 million to invest in these local financiers in 2010. Compared to Wall Street’s bailout billions, that’s pennies on the dollar, but for CDFIs it’s a jackpot. Next year’s funding pool is almost three times bigger than any they’ve ever had before.

A CDFI is a Community Development Financial Institution, a certification conferred by the Treasury Department. The program gives low-interest government loans, grants and tax credits to organizations that specialize in economically developing low-income and otherwise underserved markets.

CDFIs were a hot topic at the small business lending forum Treasury Secretary Timothy Geithner convened last month to brainstorm solutions to the ongoing credit crunch small companies face. Wary of lending to firms struggling through the recession, banks slashed their small business credit this year.

That left CDFIs, which specialize in riskier loans, scrambling to pick up the slack. Funding requests surged. For the 2010 fiscal year, the CDFI Fund received applications totaling $467 million, a 97% jump from 2009.

Entrepreneur William Ortiz-Cartagena turned to the Opportunity Fund, a California CDFI, for the $10,000 loan that launched his San Francisco parking logistics company. Gentle Parking now has a staff of 12.

"It was very hard to start this company, because traditional lending institutions were just ‘no, no,’ just not even see me in the door," Ortiz-Cartagena told attendees at the lending forum. "I couldn’t even get an appointment with a traditional institution."

Opportunity Fund got Ortiz-Cartagena the money he needed and walked him through the steps of starting a business. "They really sit down with you and make sure that first your business plan is viable — that it can be successful — and then help you throughout the process," he said.

The success CDFIs have had getting money out into communities through the downtown is now being rewarded. For fiscal year 2010, Congress appropriated $247 million for the Treasury’s CDFI Fund, a funding level President Obama signed into law last week. That’s a giant jump from the $107 million the fund got in 2009.

Goldman Sachs (GS, Fortune 500) added more financial fuel with the "10,000 Small Businesses" initiative it launched last month. Over the next five years, Goldman Sachs will dole out $300 million to CDFIs across the U.S. A bank spokesman said $50 million of that money will be distributed through grants, with loans making up the other $250 million.

Community development financiers routinely depend on bank loans and philanthropic donations to fill their coffers, but Goldman’s cash wad is of record size. It’s the largest single-source CDFI funding pool specifically dedicated to small business financing, according to Mark Pinsky, CEO of the Opportunity Finance Network, an industry trade group.

Goldman Sachs said it chose to work through CDFIs because of their track records and community expertise 500 fast cash payday loan.

"They have deep knowledge of local markets and relationships with the borrowers and businesses that are the least-served by the traditional banking system," said Alicia Glen, managing director of Goldman Sachs’ Urban Investment Group.

First at bat

The first CDFI to get an infusion of Goldman capital is Seedco Financial in New York City. The organization landed a $20 million loan, which it will in turn begin lending out early next year.

Part of the money will go to create a new financing program aimed at more mature small companies. Seedco will target businesses that have been around for at least three years, generate annual revenue of $300,000, and have five or more employees.

"We believe that in the $50,000 to $250,000 — and even up to $750,000 — loan amount range, we will be able to have a more material positive impact," said Lesia Bates Moss, president of Seedco Financial.

Targeting small but established companies serves a key goal of both Seedco and Goldman Sachs: Financing job creation.

For one small engineering firm in New York City, a recent Seedco loan is translating directly into financial salvation and two new jobs.

Founded in 2003, IAQ Systems grew steadily until the end of 2008, when the recession hit home.

"We have been hammered on the payment part," IAQ founder and President Sai Barade said. "We were not getting paid on time, and the demand was such that we had to deliver. The ends were not meeting; there was a big gap."

Late last year IAQ landed a contract with the New York City school system that will yield $8 million over three years. But to get that work moving, IAQ needed a loan to make payroll and cover overhead costs.

The company previously tapped bank lines of credit, but "at the end of 2008, all the banks were shrinking away from giving us any lines or loans," Barade said.

Seedco Financial turned around a $200,000 loan within two weeks. "Seedco was very responsive," Barade said. "They understood where we were." The company has 10 employees now and plans to soon add two more.

It doesn’t take even $200,000 to create jobs, though. Opportunity Fund, the San Jose, Calif., lender that financed William Ortiz-Cartagena’s parking business, has an average loan size of $7,000. Its target borrower has one to five employees.

"There is this credit crunch for small businesses, and there is this reality that we need more loans to flow to small business if we are going to have a robust job creating recovery," said Eric Weaver, Opportunity Fund’s CEO and founder.

Opportunity Fund has developed a niche lending to day care and health care providers who work out of their homes. Its interest rates typically run from 6% to 8%.

"For a very small amount of capital, you can start or expand that business," Weaver said. "It is hard work, but it is very important work and it is real income to a family." 

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General Motors is killing off another well-known brand — Saab, a quirky line of cars known for angular roof lines and ignition keyholes between the front seats — after talks with a Dutch would-be buyer collapsed.

GM, Dutch automaker Spyker Cars and the government of Sweden, where Saabs are made, were in discussions as late as Friday morning. Spyker said the sale was too complicated to complete quickly. GM declined to elaborate on why the deal failed.

GM plans to begin liquidating the brand early next month. However, the Detroit automaker will continue to honor warranties and provide service and spare parts to current Saab owners once the Saab dealerships close, Automotive News reported Friday. The auto trade publication also reported that the brand has 218 U.S. dealers.

Enthusiasts appreciated touches like placing the ignition lock between the front seats rather than on the steering column. Saabs were also known for unusual design, with flatter front windshields and sloping rear windshields that gave the cars an almost backward silhouette.

Saab was also a pioneer in turbocharged engines, beginning with the release of the Saab 99 in the 1970s, and the first carmaker to offer heated seating, in 1971.

GM bought a 50 percent stake and management control of Saab for $600 million after it split from Swedish truck maker Scania in 1989. It bought full ownership in 2000 for $125 million more.

Even after the GM takeover, Saab remained closely associated with Sweden and its history of making safe, reliable cars personal loan for poor credit. But GM never made money on the acquisition. Industry analysts complained Saab lost its distinctiveness in the crowded market for luxury cars under GM, which stripped it of its angular design.

"More and more frequently, they were using GM platforms and sheet metals, moving away from that uniqueness based on styling," said Tom Libby, an independent Detroit-area auto analyst.

It’s the third time this year GM has failed to sell an unwanted brand. In September, auto industry magnate Roger Penske scrapped plans to buy Saturn after he was unable to find someone to make them when GM stops making them in 2011. GM is phasing out Saturn.

And last month, GM halted a deal to sell the European Opel brand to a group led by Canadian auto parts maker Magna International Inc. GM will keep Opel, which, unlike Saab, it considers critical to its international plans.

GM did successfully sell Hummer, which will go to Chinese heavy equipment maker Sichuan Tengzhong Heavy Industrial Machinery Corp.

Saab employs about 3,400 people worldwide, most of them at its main plant in Trollhattan, Sweden. It also has a parts distribution center and a design center in separate locations in Sweden and an engine plant in Finland.

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ST. LOUIS — Holly Cunningham is expanding her business. Angela Watson is rebuilding her life.

Both are happening here, on the fourth floor of the St. Patrick Center, where holiday orders for goodies such as Lemon Heaven cookies and Holly Dolly dessert bars pour in.

It’s the busiest time of the year for Cunningham’s Hollyberry Baking Co., and she has turned to the region’s biggest provider of homeless services to help meet the demand.

St. Patrick is the only homeless services agency in the country to operate an in-house business incubator. In October, the agency opened a licensed commercial kitchen at the incubator and has since doubled its number of tenants, including the popular treat baker.

Cunningham, a Webster Groves mom, admits that it seemed an unlikely fit for her suburban business. Before taking the plunge, she said she gave her biggest sales pitch ever to employees, certain they would have trepidation about working downtown in a building that caters to transients.

She even ran the idea past some of her customers, making sure she wasn’t going completely off track. Support was overwhelming from both employees and customers, she said.

Watson is one of the four St. Patrick Center clients Cunningham has hired. Living in a women’s shelter and enrolled in a recovery program for drug addiction, Watson says the work experience and paycheck will help her get back on her feet and have job skills to get her permanent employment.

"I take life a day at a time," Watson said, as she packed fresh-baked dessert bars into clear plastic bags. "I’m a go-getter."

For Cunningham, the new kitchen at St. Patrick Center serves a dual purpose for her 11-year-old business. She can expand without the expense of adding on to her current business in case the uptick is only temporary. And she can tap into a ready-made work force that has been trained through various programs the center offers.

In turn, the social service agency has a new partner to hire those who many employers shun. In a climate of high unemployment, being homeless — often with a drug addiction or criminal record — makes finding work that much more challenging.

Cunningham and her employees train and supervise the St. Patrick clients working in the center’s kitchen.

"Having an established company here gives us a better grasp of food manufacturing and food distribution," said St. Patrick Center CEO Dan Buck.

St. Patrick Center received a $3.5 million federal grant to renovate two floors of its building at 800 North Tucker Boulevard, including space for a business incubator, which opened last year and now has 15 companies renting space. The businesses share a reception area and conference rooms, with access to office equipment such as a copy machine and postage meter. They pay for office space based on square footage.

The National Business Incubation Association says St. Patrick stands alone nationally as the only known center specifically catering to the homeless that has started an in-house business incubator.

"People are going to pay attention to this, especially given the current economic climate," said Corinne Colbert, spokeswoman for the association, which estimates there are 1,100 incubators in the country.

The U.S. Commerce Department’s Economic Development Administration, pleased with St. Patrick Center’s success, last month awarded the agency an additional $250,000 grant. It will be used to help buy more equipment for the culinary suite, which replaced a seldom used wood shop no fax cash advance. With the additional equipment, seven companies will be able to share the space, including two catering companies, a barbecue-sauce manufacturer, gourmet-popcorn maker and a company that specializes in whole-grain products including frozen waffles. In addition to startups, St. Patrick Center continues to look for established businesses such as Hollyberry to expand into the incubator.

"We’re encouraging companies to expand with a social conscience," Buck said.

The kitchen is a more practical work area than the wood shop, Buck said. Construction jobs are down, but there is always a need for food service and food production, he said.

"It’s an economic sector that is actually hiring," said Buck.

Outside the culinary suite, other businesses are using the St. Patrick incubator to grow their futures. Heaven Sent is one of them.

While in prison for dealing drugs, Lamond Allen repaired the dining hall’s stoves and refrigerators. That tinkering came in handy when his 7 1/2 year sentence ended two years ago.

With the help of St. Patrick Center, Allen got into a program that certified him in HVAC work. With that training, he started Heaven Sent, a building maintenance business.

He currently has a contract with the U.S. Department of Housing and Urban Development to clean up and make safe foreclosed homes, including checking for gas leaks.

Allen has two employees, one an ex-con who went through the same training program as Allen, and another living in transitional housing.

"My whole focus is giving someone a chance," Allen said. Moving his business from his home into St. Patrick Center has helped him navigate the various trappings of a new business including legal, financial and insurance needs. If there is any question on how to run a business, the staff at the incubator, headed by Jan DeYoung, is there to lend a hand.

"They’re my lifeline," Allen said. And through the incubator, he has begun building relationships with other businesses. For example, he hired A.U. Innovative Land Management for a hauling job.

Cathey Allen and Ren

Options traders are growing less bullish on the yen after efforts by Japanese officials to boost the world’s second-biggest economy and a U.S. jobs report led to the currency’s biggest weekly decline in a decade.

Japan’s currency plunged 2.5 percent against the dollar and 1.3 percent versus the euro on Dec. 4 after the U.S. Labor Department said employers cut the fewest jobs since the recession began. The yen sank 4.5 percent versus the greenback for the week, the most since February 1999 and retreating from a 14-year high. Traders sold yen and bought dollars on speculation interest rates in the U.S. will increase before June.

“The improving U.S. jobs market suggests the Federal Reserve won’t stand pat on interest rates longer than the Bank of Japan,” said Kazutoshi Yasuda, general manager of the markets department in Tokyo at FX Prime Corp., a unit of Itochu Corp. Increased U.S. borrowing costs would lead traders to favor using yen to finance higher-yielding investments, leading to more losses for the Japanese currency, he said.

Options showed declining bets the yen will rise. The odds for a gain to 84.5 yen per dollar by the end of March from 90.56 last week fell to 38 percent from 80 percent on Nov. 30, data compiled by Bloomberg show. Chances of a decline to 92 versus the dollar by Dec. 31 reached 63 percent. Options grant buyers the right to purchase or sell an asset at a predetermined price.

Weekly Tumble

The yen tumbled 3.6 percent versus the euro last week, the sharpest slide since the five days to April 3. The yen also fell 4.5 percent against the dollar, the most since the week ended Feb. 19, 1999, when it slumped 5.9 percent. The yen’s biggest drop during the week came after the U.S. Labor Department said payrolls dropped by 11,000 last month, the smallest decrease since the recession began.

The yen traded at 89.90 per dollar as of 11:53 a.m. in Tokyo from 90.56 last week, and was at 133.87 versus the euro from 134.54.

“What the job numbers do is firm up expectations that the Fed interest-rate hike is coming,” said Camilla Sutton, a strategist in Toronto at Bank of Nova Scotia, the nation’s third-largest lender. “That should be a strong-dollar story.”

Federal-funds futures contracts on the Chicago Board of Trade show a 43.3 percent probability the U.S. central bank will raise its target rate for overnight bank borrowing to 0.5 percent by June from the current range of zero to 0.25 percent, up from 12.6 percent odds a month ago.

‘Finally Turning’

UBS AG expects the Fed to set its key rate at the top end of its 0.25 percent range in April and follow with a quarter- point increase in June. The jobs report and last week’s gains “suggest the greenback is finally turning,” Mansoor Mohi-uddin, the Zurich-based bank’s global head of currency strategy, wrote in a note to clients.

The yen was the best performer against the dollar among the 16 most-traded currencies the past four years, Bloomberg data show. It surged to 84.83 on Nov. 27, the strongest since July 1995, from 124.13 in June 2007. The yen tends to advance amid financial turmoil because Japan’s trade surplus reduces reliance on foreign capital.

Record low U.S. interest rates have kept the dollar under pressure at the expense of the yen, making the greenback the favorite for so-called carry trades, where investors raise funds in countries with low borrowing costs and use the proceeds to invest in countries with higher returns.

Benchmark rates of as low as zero in the U.S. and 0.1 percent in Japan compare with 3.75 in Australia and 2.5 percent in New Zealand.

Libor

The London interbank offered rate, or Libor, for three- month loans in the U.S. currency has been below the equivalent yen rate since Aug. 24. In the decade before then, the dollar rate averaged 2.94 percentage points more than the yen rate.

Contracts betting the yen would climb against the dollar rose to 51,710 on Nov. 27, the most since May 2008, according to the Commodities Futures Trading Commission in Washington based on contracts at the Chicago Mercantile Exchange. As recently as June, there more contracts betting on a decline than a gain.

Such “extreme” positioning may suggest that the decline in the yen represents traders unwinding “long” positions rather than an outright bet on the currency’s depreciation, Marc Chandler, the global head of currency strategy at Brown Brothers Harriman & Co. in New York, said in a note to clients on Dec. 4.

The median estimate of more than 30 strategists surveyed by Bloomberg is for the yen to end March at 92 to the dollar and 136 to the euro.

‘Urgent Steps’

Fujio Mitarai, head of Japan’s largest business lobby, called on the government to take “urgent steps” on Nov. 27 to curb gains in the yen, which make Japanese exports less competitive and threaten corporate profits. The same day, Finance Minister Hirohisa Fujii said in Tokyo the nation will “do what is necessary” and he may contact U.S. and European officials to act.

Exports make up about 12 percent of Japan’s economy, compared with 6 percent in the U.S. The nation’s gross domestic product is forecast to shrink 5.7 percent this year, according to the median estimate of economists surveyed by Bloomberg. That compares with a contraction of 2.4 percent in the U.S.

The Bank of Japan announced an emergency 10 trillion yen ($113 billion) credit program on Dec. 1 to combat falling prices and the stronger yen. The spread between dollar- and yen-based Libor narrowed to 2.72 basis points on Dec. 4 from as much as 7.25 basis points on Sept. 8.

Stimulus Plan

“The BOJ’s action worked,” said Masato Mori, senior manager of the business and marketing department at NTT SmartTrade Inc. a unit of Nippon Telegraph & Telephone Corp. “Stopping the yen’s advance will require additional spending from the government.”

A stimulus plan worth as much as 4 trillion yen may be agreed upon today, Chief Cabinet Secretary Hirofumi Hirano said last week. The government planned to announce the measures on Dec. 4 before disagreements between Prime Minister Yukio Hatoyama’s ruling Democratic Party of Japan and coalition partners, who want a larger package, caused a delay.

Bonds to be issued in the fiscal year starting April 1 may reach 146.2 trillion yen compared with a revised 132.3 trillion yen this year, according to Citigroup Global Markets Japan Inc.

“There is probably enough in the policy action in Japan by the government and the BOJ to argue for further upside on cross- yen currencies near term,” said Greg Gibbs, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in Sydney.

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The euro rose against the dollar Thursday after the European Central Bank hinted it would slowly start withdrawing emergency liquidity while the yen fell amid fears Japan may move to weaken its currency.

Though the ECB at a meeting left interest rates at record lows, its president, Jean-Claude Trichet, said the next 12-month refinancing operation for banks would be the last. The bank also lifted its economic growth forecast for 2010.

The euro neared a 16-month high around $1.5140 and rose against the yen but it gave up some gains when Trichet said plans to wind down some emergency programs were not a signal that interest rates may be about to change.

"He hinted that they’ll do something about an exit policy, so the first knee-jerk reaction was euro positive, but he’s not ready to endorse a full exit quite yet, so it’s really neither overly supportive of, nor detrimental to, the euro," said Boris Schlossberg, head of research at GFT Forex in New York.

Ultra-loose monetary policy tends to undermine a currency’s value because it increases money supply and risks inflation.

The euro rose 0.3% to $1.5085 and 1.1% to ¥132.94.

The euro got a modest boost when Bank of America (BAC, Fortune 500) said it would repay bailout funds to the U.S. government. That increased risk appetite and suggested banking sector improvement.

The yen was under pressure for the second straight day after the Bank of Japan said this week it would provide new three-month funding to banks to combat deflation and after top officials warned that the currency had grown too strong.

The dollar was up 0.8% at ¥88.15, off a 14-year low of of ¥84 no fax pay day loan.82 plumbed last week.

BOJ Governor Masaaki Shirakawa said the central bank does not target foreign exchange for monetary policy but "if the bank’s easy stance becomes widely known in markets, it will have certain effects on the currency market in the long run."

Sterling fell 0.3% to $1.6575 while the dollar fell 0.3% to 0.9989 Swiss francs.

Trichet, Bernanke speak

Analysts said Trichet had to walk a fine line as any hint of a rate rise would prompt traders to bid up the euro, especially as the U.S. Federal Reserve has said it would keep its own rates low for an extended time.

"He’s saying the outlook for economic growth is still uncertain, which means he’s not overly confident, and it seems that is capping the euro gains," said Hidetoshi Yanagihara, senior FX trader at Mizuho Corporate Bank in New York.

In Washington, Fed Chairman Ben Bernanke made his case for a second term in testimony before Congress, telling lawmakers the Fed’s forceful actions have prevented a devastating crisis from turning into something even worse.

Bernanke also pledged to maintain price stability and said fiscal deficits eventually have to come down. Some analysts have worried that rising U.S. debt and deficits will undermine the dollar further and eventually provoke higher inflation.

In separate remarks, U.S. Treasury Secretary Timothy Geithner reiterated the importance of a strong dollar and said the United States must persuade the world it will be more fiscally responsible. 

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Opportunities for Nordic bank mergers will emerge as new capital rules expose weaker players in a post-crisis world, but big-scale tie-ups are doubtful in 2010 as lenders focus on loan losses and curbing risk.

Analysts say that the one possible big deal — between Nordea and Swedbank — is unlikely in the near term due to uncertainty over bad loans, adding that Swedbank’s shares do not fully discount the lender’s exposure to the troubled Baltics.

Consolidation in Nordic banking would make sense: markets are mature, growth opportunities limited and players too small to compete on a pan-European scale. The banks are good targets for foreign players because they are efficient and have been — at least until recently — highly profitable.

Add the new capital requirements that add to costs and eat into profits, and the need for scale is more acute than ever.

But the crisis has made banks shy of risk-taking and left the developments in the regulatory environment uncertain.

“Never say never, but I think all the Nordic players, or financial institutions, are quite busy running their own shops at the moment,” Nils-Fredrik Nyblaeus, senior advisor to SEB chief executive Annika Falkengren, told Reuters.

“The main owners of each of the banks have to be convinced that the synergies are by far outweighing the risk with it, and that’s obviously not the case at this moment.”

Predictions that Europe could see a wave of consolidation as a result of the crisis have so far not come true as most of the bigger players tread carefully.

But there have been rumblings.

The top executive of Nordea, which, with a $46 billion market capitalization, is on par in size with Deutsche Bank, recently said Swedish rival Swedbank made a good fit for his group.

Christian Clausen said the financial crisis had spurred the long-term need for strategic tie-ups, although he added that he expected little would happen in the near future.

SWEDBANK-NORDEA A HOT TIE-UP?

While the recent crisis has not led to any major bank failures or nationalizations in the region, lenders are still smarting from the worst downturn in decades.

Heavy exposure to the Baltics and Ukraine — economies among the worst hit by the recent downturn — and Ireland has left several Nordic players facing very painful loan losses.

The tough climate has made Swedbank — the biggest lender in the Baltics — the hottest tip for a tie-up, with Nordea seen as the main candidate. Some have put potential synergies at 400 million euros ($600 million) a year. 

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Retail gasoline prices headed downward in most places to begin one of the country’s busiest travel weeks, with more than 33 million people expected to hit the road for the Thanksgiving holiday.

Americans are remaining closer to home because of anxiety about the economy, and demand for gasoline is weaker now than it was last year at this time.

That is telling because a gallon of gasoline then cost only $1.93 as the economic crisis unfolded in 2008.

Unlike last year, however, gas is not falling sharply and though prices fell overnight, it still cost about $2.64 per gallon on average, according to Department of Energy data and also auto club AAA, Wright Express and Oil Price Information Service.

"I think we will see some increases in the spring like we always do," said Fred Rozell, retail pricing director at OPIS. "But at this point I think we’re going to kind of see a status quo for a while."

Gasoline prices were either flat or falling in most places, but rose nearly 4 cents across the Midwest, according to a report Monday from the Energy Information Administration.

Crude prices have remained relatively strong, which has helped keep gas prices well above $2.50. A survey by AAA last weekend found that the number of Americans traveling away from home for Thanksgiving will be up just 2.1 percent this year from 2008.

Crude prices have dragged retail gasoline prices higher throughout the year and rose by 9 cents per barrel on Monday. Benchmark crude for December delivery settled at $77.56 a barrel on the New York Mercantile Exchange.

Crude in storage is above normal levels for this time of year and refiners that turn oil into gasoline, jet fuel and diesel are cutting back because demand is so weak.

Valero Energy became the latest to shut down a refinery Friday, the largest U.S. facility shut down so far this year.

That follows other refiners, including Sunoco and Western Refining, who have shut down plants in recent months and laid off almost 1,000 workers.

Refiners say they can’t raise the price of gasoline and jet fuel because people aren’t traveling as much, but they must pay higher prices for crude because of the weak dollar.

Air travel is projected to decline 6.7 percent, or 2.3 million travelers this year compared to 2.5 million in 2008.

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