Finance & Business World

Finance ministers from Europe’s largest economies said they are ready to hand the International Monetary Fund more money than they previously pledged to assist poorer countries through the global financial crisis.

Four days before a meeting in London of the Group of 20 nations, the governments of Germany, the U.K. and France said the 27 European Union nations should provide about $75 billion more on top of the $100 billion they’ve already committed. The G-20 said in April it would triple the Washington-based lender’s resources to $750 billion.

“Europe should set an example and do more to meet the target,” U.K. Chancellor of the Exchequer Alistair Darling said today in a column published in the Guardian. The IMF needs cash “to support those emerging markets and low-income countries most affected by the crisis,” he said.

The 186-member IMF has sought extra backing from its shareholders after the banking crisis and subsequent global recession forced it to mount financial rescues from Hungary to Pakistan. European finance officials meet in Brussels on Sept. 2 to discuss their agenda for the subsequent conference of G-20 finance ministers and central bankers.

The U.K., which already promised $15 billion, is ready to provide up to $11 billion more, he said. Germany is ready to contribute 25.03 billion euros ($35.7 billion) and France is willing to give 18.45 billion euros, according to a letter to EU counterparts from Germany’s Peer Steinbrueck and France’s Christine Lagarde.

Below Quota

The letter urged emerging markets such as India and Saudi Arabia to say how much they will provide. “Europe should not wait for these pledges and should announce rapidly the amount of its own contributions,” the two finance ministers said. “We call on our EU partners to join us.”

Europe’s current commitment is “quite a bit under” its so-called allocation of “quotas,” which determine a country’s voting rights, John Lipsky, the IMF’s No. 2 official, told Bloomberg Radio today. ‘If the EU wished to participate in a manner consistent with their current quotas, it would imply a need to increase that commitment.”

The European call for added aid follows the lender’s Aug. 28 announcement that it had pumped about $250 billion into foreign-exchange reserves worldwide, acting on another effort by the G-20 to boost global liquidity. Lipsky said today that economic data are “turning positive” and that the fund expects the world economy to expand next year.

‘First Signs’

The G-20 finance officials will meet before a summit of leaders in Pittsburgh on Sept. 24-25 amid the “first signs” that their economies are emerging from recessions, Darling said. Its governments “will step up their efforts to secure the economic recovery and repair the world’s financial system.”

The group is concerned that credit supply may tighten further, a German official told reporters on condition of anonymity. Steinbrueck wants to use this week’s talks to discuss how governments will roll back their budget deficits and improve the regulation of global finance, his aide said.

Darling said G-20 governments should not allow “any letup in the reform of the financial sector,” pressing each country to return their banks to a sound-footing, restore confidence in the financial industry and go further to ensure pay and bonuses are restrained. He demanded nations cooperate in ensuring new financial rules are evenly applied.

“Neither the economy nor the banking system can flourish efficiently without international cooperation,” Darling said. “In this global world our markets are interdependent, and without strong international financial regulation one country’s financial system can be played off against another.”

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Despite its name, the Airport Currency Exchange, a bare-bones operation across Interstate 70 from Lambert International Airport, doesn’t trade in euros, pesos or British pounds.

Instead, you can pay your electric, gas and phone bills there. And if you’re short on funds, the exchange can give you a short-term, high-interest loan. Missouri’s Public Counsel wants that to end.

The state’s consumer advocate for utility issues is hoping to prevent payday loan stores from doubling as utility payment centers.

In a recent filing with utility regulators, the Public Counsel asked for sweeping changes in billing and payment practices that include eliminating various payment fees. The proposal also would require utilities to open company-run payment centers and end the relationship between utilities and payday lenders.

Deputy General Counsel Mike Dandino said customers who most often used payday loan services were poor, elderly or living paycheck to paycheck. Many of the same customers either face threats of disconnection or have fallen behind on bills, making them easy targets for high-interest loans.

"It is not in the interest of consumers to have utility companies steer customers to these predatory lenders," Dandino said in the filing.

The Public Service Commission has yet to act on the petition. If the five-member commission decides to go ahead with a formal rule-making process, it would takes months and involve taking public comments and a hearing.

The recommendations are sure to draw stiff opposition from AmerenUE, Laclede and AT&T. They say that opening and operating payment centers across the area would be too expensive and that eliminating other payment sites would mean a loss of convenience for customers who may have to travel farther to pay their bills.

Richard J. Mark, senior vice president of energy delivery at AmerenUE, said the utility tried to provide customers as many options as possible, including payment centers spread across its 25,000-square-mile service area.

Eliminating even some of those options could especially hurt customers in rural areas and those who need to pay bills immediately to avoid disconnection, he said.

"By eliminating options, you really create hardships for customers," Mark said in an interview.

Nationally and in Missouri, payday loan stores have drawn increased scrutiny from regulators and consumer groups in recent years.

In 2007, the National Consumer Law Center, a nonprofit consumer advocacy group, urged regulators to end the relationship. The group said the added convenience of having more locations to pay bills was outweighed by steering vulnerable customers into the hands of those pitching high-interest loans.

Payday loans are generally defined as short-term cash advances usually secured by a post-dated personal check. In Missouri, the maximum loan is $500 and interest charges can’t total more than 75 percent of the principal.

Still, the average interest rate on a payday loan in Missouri last year was 431 percent, or $47.95 on the average two-week loan of $231 — a reason the state has been criticized for its lax regulation of payday lenders, at least compared with neighboring states.

"Regulated monopolies and the state PSC should not be a in a position where they’re encouraging the use of these services," said John Coffman, a lawyer and former Missouri Public Counsel who has in the past worked for consumer groups including AARP and Consumer Council of Missouri car loans for people with bad credit.

The Public Counsel’s proposal doesn’t include evidence that utility customers are taking out high-interest loans to pay their bills; it only suggests that the relationship between utilities and payday lenders makes doing so more convenient.

In fact, prohibiting utility payments at payday loan stores also doesn’t guarantee that a cash-strapped customer won’t take out a high-interest loan and use the proceeds to pay their bill at a supermarket or bank.

About half of AmerenUE and Laclede customers still pay their bills by mail, and only about 10 percent pay in person through a third-party agent. And most of those do so at grocery stores or banks, not payday loan stores, spokesmen said.

Neither utility has a direct relationships with payday lenders. Both companies contract with FirsTech Inc. to recruit and run a network of agents and transmit payments.

Transaction fees at payment centers are capped at $1, and utilities get no part of the money. In fact, AmerenUE and Laclede subsidize the fees received by businesses that serve as payment agents.

The utilities also get no part of convenience fees charged for credit and debit card payments made electronically.

AmerenUE customers who want to pay online or by phone with a credit or debit card are assessed a $3.50 "convenience fee" by Speedpay, the vendor. Laclede similarly offers customers the ability to pay with a credit or debit card through ChoicePay for a $2.95 fee.

Justin Gioia, a Laclede spokesman, said that of the 40 percent of customers who pay their bills electronically, less than 2 percent use the convenience fee option. Only 4 percent of AmerenUE customers pay by credit or debit.

Both utilities offer customers free options for paying bills electronically via check or direct debit.

Regardless, the Public Counsel sees the convenience fees as unnecessary and wants regulators to require utilities to operate company payment centers.

AmerenUE’s Mark said the cost of renting and staffing offices across much of the state for the benefit of a relative few customers who would use them would be expensive and an unfair burden on the rest of the utility’s customers.

Eliminating credit and debit card convenience fees, a piece of which goes to the credit card companies such as Mastercard and Visa, would also mean higher rates for all customers, not just those who use the service, he said.

Meanwhile, AT&T is challenging the accuracy of the Public Counsel’s rule-making petition, which claims the telephone company is charging customers $2.49 if they want to receive a paper copy of their local phone bill.

"AT&T Missouri does not charge customers to receive a paper copy of their AT&T local telephone bill," company spokesman Kerry Hibbs said in an e-mail.

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Ford Motor Co. said Thursday that it would add a third shift to production plants in Michigan and Missouri to meet increased demand for its F-150 trucks and Escape crossover vehicles.

The moves offer specifics about Ford’s plan to increase production in the fourth quarter by 33 percent over 2008 levels to a total of 570,000 vehicles.

Ford is gaining market share in the U.S., and two of its vehicles — the Focus and Escape — were among the top-sellers under the Cash for Clunkers program in July and August.

The automaker said earlier this month that it would increase production to replenish inventories depleted during the Clunkers program, although it expects September sales to fall below July and August levels.

Ford said it would not hire new hourly workers to handle the shifts, but would move workers from the truck production line at its Kansas City Assembly Plant to the line that makes Ford Escapes and Mercury Mariners, 5-passenger crossover utility vehicles.

The change takes place at the Claycomo, Mo., plant in October. Ford employs 3,956 hourly workers there, who previously agreed to work two days during a planned shutdown week this month to meet third-quarter production demands.

The company said third-quarter production levels would be 18 percent higher than a year ago.

Ford’s Dearborn Truck Plant will resume maximum operation of three shifts in late September. While there are currently three separate crews at the plant, they work on a rotating basis. Each works for four weeks and is then on "layoff" for two, said Ford spokeswoman Marcey Evans.

The moves will result in the additional production of 10,000 F-150 pickup trucks this year and 2,400 Escapes and Mariners by the end of October, Ford said.

The company had a 21-day supply of Escapes in early August. At the end of July, Ford had nearly 300,000 vehicles in stock, a 48-day supply, the industry average, according to Ward’s AutoInfoBank. Ford typically maintained a 70-day supply earlier this year.

Ford is expected to report a year-over-year increase in August U.S. sales next week.

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The U.S. economy probably contracted at a faster pace in the second quarter than previously estimated as companies made even bigger cuts in inventories, economists said before a government report today.

Gross domestic product shrank at a 1.5 percent annual rate from April to June compared with the 1 percent drop reported last month, according to the median forecast of 75 economists surveyed by Bloomberg News. Another report may show claims for unemployment benefits fell for the first time in three weeks.

Companies from Wal-Mart Stores Inc. to Macy’s Inc. cut costs and stockpiles to bolster profits as job losses caused consumers to curb spending. Leaner stocks and government programs to revive demand, including “cash-for-clunkers” and first-time homebuyer credits, are boosting manufacturing and housing, helping the economy emerge from the recession.

“The inventory adjustment is further along than thought, setting the stage for increased production in coming months,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.

The Commerce Department’s GDP report is due at 8:30 a.m. in Washington. Survey estimates ranged from declines of 1.8 percent to 0.8 percent. The world’s largest economy shrank at a 6.4 percent pace in the first three months of the year.

A drop would be the fourth in a row, the longest contraction since quarterly records began in 1947. The world’s largest economy has shrunk 3.9 percent since last year’s second quarter, making this the deepest recession since the 1930s.

Fewer Claims

A report from the Labor Department may show applications for first-time jobless benefits last week fell to 565,000 from 576,000, according to the survey median.

Today’s GDP report, the second of three estimates, will include figures on corporate profits not available in the advance figures issued in July.

Consumer spending, which accounts for 70 percent of the economy, probably fell last quarter at a 1.3 percent annual pace, a bigger drop than first estimated, the survey showed.

Reports so far this month have shown government efforts to thaw credit markets and boost spending may be taking hold. Combined sales of new and exiting homes in July reached a 5.67 million annual pace, the highest level since November 2007, the month before the recession began.

Auto Sales

Industry data showed sales of cars and light trucks rose to an 11.2 million annual unit rate in July, the highest since September. General Motors Co. and Chrysler Group LLC, both out of bankruptcy, are among firms set to ramp up production as government efforts lift demand.

The “cash for clunkers” program, which offered buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles, produced almost 700,000 automobile sales before ending on Aug. 24, the Transportation Department said yesterday.

A drop in other purchases last month signals a lack of spending may temper the recovery. Retail sales excluding auto dealers unexpectedly fell in July as Americans cut back on furniture, electronics, building materials, groceries and sporting goods, figures from the Commerce Department showed.

Target Corp., the second-largest U.S. discount retailer, is among companies trimming costs to make up for slower sales. The Minneapolis-based company reported second-quarter profit that fell less than analysts estimated as the company avoided markdowns.

‘Challenging’ Environment

“We continue to conservatively manage our inventories to help us navigate the challenging sales environment,” Kathryn Tesija, Target’s vice president for merchandising, said in an Aug. 18 conference call.

Business investment is another area that may be improving. Orders for goods meant to last several years jumped in July by the most in two years, the Commerce Department said yesterday. The report also showed a measure of shipments used in calculating GDP climbed for a second month.

The economy will expand 2 percent or more in four straight quarters through June, the first such streak in more than four years, according to the median estimate of 53 forecasts in a Bloomberg News survey earlier this month. Economists at Morgan Stanley were among those lifting growth estimates for this quarter after yesterday’s report on durable goods.

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Thailand’s central bank kept its benchmark interest rate unchanged at a third straight meeting after a government report showed the economy is past the worst of its recession.

The Bank of Thailand maintained the one-day bond repurchase rate at 1.25 percent, it said in a statement today. That’s the lowest level since July 2004. All 13 economists surveyed by Bloomberg News expected the decision.

“The benchmark will stay at this level for a long time,” said Sukkawat Prasurtying, acting chief executive officer at Bangkok-based Manulife Asset Management Co., which oversees about 5 billion baht ($147 million) of assets. “There is no need for a further interest-rate cut as the economy is on the path of recovery.”

Governor Tarisa Watanagase joins policy makers from Europe to Asia who have stopped reducing borrowing costs as about $2 trillion in pledged government stimulus helps the world recover from its slump. Thailand’s recession eased last quarter, helped by public spending and improving export orders, an Aug. 24 report showed.

“The current level of the policy interest rate is appropriate and supportive of the economic recovery without generating any inflationary pressure,” Assistant Governor Paiboon Kittisrikangwan said in Bangkok today. “There is no reason to change the rate now, but we are ready to” ease or tighten depending on the economic condition, he said.

‘Bottomed Out’

Thailand’s benchmark SET Index gained 0.1 percent to 655.87 at 3.26 p.m. in Bangkok. The baht was unchanged at 34.02 against the dollar.

The Bank of Thailand lowered its benchmark interest rate by a total of 2.5 percentage points in the four meetings from December to April to revive growth, its most aggressive cuts since it adopted inflation targeting in 2000. Consumer prices have fallen for seven months.

The threat that the economy won’t recover has receded, Paiboon said. The continuity of government spending and sustainability of the global recovery are the main risks for Thailand, he said.

“We do think that the Bank of Thailand will keep rates at this level till the middle of next year so as to take further insurance against growth,” said Prakriti Sofat, an economist at HSBC Holdings Plc in Singapore. An increase in borrowing costs “will materialize only in the second half of 2010, once the global recovery is well entrenched.”

‘V-Shaped Recovery’

The nation’s gross domestic product fell 4.9 percent in the second quarter from a year earlier after contracting 7.1 percent in the previous three months. Southeast Asia’s second- largest economy grew 2.3 percent from the first quarter.

“The economy has bottomed out” and is experiencing a “V-shaped recovery,” Chakramon Phasukavanich, a member of the central bank’s monetary policy board, said in Bangkok earlier today. “All indicators showed improvement in the third quarter. Exports have picked up in most of the sectors. Companies started to hire more staff. People have more confidence.”

Thailand’s GDP contraction will ease in the third quarter and the economy will resume growth in the last three months of the year, the government said this week. Companies including Hana Microelectronics Pcl and a local unit of Western Digital Corp. have started to hire workers to meet rising orders as their customers replenish stocks.

Thai Politics

Thai consumer confidence has improved since May as Prime Minister Abhisit Vejjajiva withstands protests against his rule, enabling the Cabinet on Aug. 18 to approve a revised 1.06 trillion-baht ($31 billion), three-year investment program to help lift the economy out of its recession. The plan is in addition to a 116.7 billion-baht stimulus package implemented in the first half of 2009.

The Bank of Thailand “should be fairly positive” about the economy as “the fiscal stimulus will still contribute positively to growth in 2010,” said Rahul Bajoria, an economist at Barclays Capital in Singapore.

Power in Thailand has shifted between parties allied to former Prime Minister Thaksin Shinawatra and his opponents since the 2006 coup that ousted him. Protesters against Abhisit say the prime minister’s rule is illegitimate because he came to office after a court dissolved the previous ruling party.

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On-the-job fatalities dropped in 2008 in part because the recession kept millions of workers at home, according to a government report released Thursday.

Fatal work injuries totaled 5,071 in 2008, a 10% drop from 5,657 deaths the prior year.

"It’s pretty clear to us that the economy has at least some part to play in the lower numbers of fatal work injuries in 2008," said Scott Richardson, a program manager at the Bureau of Labor Statistics. "But it’s not yet clear as to what proportion that was, or to what proportion other factors may have played a part."

The steepest declines were in the construction industry, in which fatalities declined 20% to 969 from 1,204 in 2007. In the sub-category of residential building construction, fatalities dropped even further, by 28%, to 93 deaths.

Construction was still the deadliest industry, with 969 fatalities last year, at a rate of 9.6 per 100,000, the report said. But the highest death rate — 29.4 per 100,000 — was in agriculture, forestry, fishing and hunting, with 651 fatalities in all.

Overall, the rate per 100,000 workers declined to 3.6 from 4.

For Paul Roldan, a business agent who represents the Laborers Local 325 in Jersey City, N.J., the reason for the decline is obvious: Fewer people are on the job as the recession grinds on.

"The work has slowed down drastically and dramatically," said Roldan. "If people aren’t working, then there’s less of a reason to get hurt."

Some 6.7 million jobs were lost in the United States from the beginning of 2008 until July 2009. The unemployment rate in July was 9.4%.

The disparity between workplace suicides and homicides is among the most puzzling details to emerge in the report, according to Richardson, the labor agency analyst.

Workplace suicides rose 28% to 251 deaths in 2008, the biggest increase since the bureau began tracking this information in 1992. But workplace homicides dropped 18% in that same time period, the report said.

"We were surprised at the lower homicide total, simply because a lot of research has showed a lot of correlation between higher unemployment and higher homicide numbers," said Richardson. He added that the suicide figures do not take into account work-related suicides that occur outside of the workplace.

Part of the study focused on racial demographics, showing an 8% decline in fatalities for white workers, but much greater declines for non-whites. Fatalities dropped 16% among black workers and 17% among Hispanic workers, the report said. The decline was especially dramatic among Hispanics born outside the U.S., dropping 24% to 480 deaths in 2008, compared to a 3% drop among U.S.-born Hispanics.

Richardson would not comment on the racial disparity statistics. But Roldan, the labor union business agent, theorized that layoffs hit the private sector the hardest, which tend to hire non-union members, and many of them are immigrants.

"It’s appealing to contractors to hire them more, because it’s more money for them to put in their pockets," said Roldan. 

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European Central Bank Governing Council member Axel Weber said he doubts whether providing liquidity to markets will solve all the problems in the world’s economy and financial markets.

“I’m not sure whether at this stage the liquidity policy that we can do as central banks has all the potential of solving all our other problems,” Weber, who is also the president of the Bundesbank, said in Jackson Hole, Wyoming, at a symposium sponsored by the Federal Reserve Bank of Kansas City free credit report instantly.

Weber noted that banks are still building up “huge amounts” of deposits at the ECB rather than lending the money.

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The Philippine central bank will probably end its longest series of interest-rate cuts since at least 2002 as the global economy recovers.

Bangko Sentral ng Pilipinas will hold its benchmark interest rate at a record low of 4 percent today, according to 13 of 15 economists surveyed by Bloomberg News. Two expect a quarter-point cut.

A nascent recovery from the worldwide recession has increased prospects of a revival in inflation, prompting countries from Thailand to South Korea to pause after slashing borrowing costs to revive growth. The Philippines will aim for a “controlled shift in the direction of our policy stance,” Governor Amando Tetangco said Aug. 11.

“Inflation has bottomed out already and will start to go up,” said Luz Lorenzo, an economist at ATR-Kim Eng Securities Inc. in Manila. “Commodity prices are the bigger risk as economies recover.”

Easing inflation allowed the Philippine central bank to cut its key interest rate by 2 percentage points from mid-December to July to bolster growth as exports collapsed. Consumer-price gains slowed to a 22-year low of 0.2 percent in July.

“Disinflationary forces” will dissipate as the year progresses, Tetangco said July 29. The price of oil, which in the Philippines is almost all imported, has risen about 50 percent this year.

Growth Outlook

The Philippines’ $167 billion economy expanded 0.4 percent in the first quarter, the weakest pace in a decade. The government, which will report second-quarter gross domestic product data on Aug. 27, has said it expects growth to improve in the coming quarters.

“I wouldn’t encourage them to do more rate cuts,” Economic Planning Director Dennis Arroyo told reporters in Manila today, even as he said the economy may have contracted 0 car insurance quotes.1 percent last quarter. Government spending should “kick in” and third-quarter data indicate an “upswing,” he said.

The Philippine Stock Exchange Index fell 1.5 percent to 2,720.18 at the close of trading at noon, contributing to a 4.6 percent decline for the week, the biggest drop in nine weeks. Tomorrow is a holiday in the Philippines.

Asian nations from Taiwan to Malaysia have reported smaller declines in exports as the world recovers from its worst slump since the Great Depression. China’s economy grew 7.9 percent last quarter from a year ago, while Singapore’s expanded an annualized 20.7 percent from the previous three months.

Completed Easing

The Bank of Korea kept its benchmark interest rate unchanged at 2 percent for a sixth month last week after its economy expanded at the fastest pace since 2003 in the second quarter. Australia’s central bank this month kept borrowing costs unchanged for a fourth time.

“Like other central banks across the region, Bangko Sentral has likely completed its easing cycle,” said David Cohen, an economist with Action Economics in Singapore. “With inflation subdued, they should remain patient, maintaining interest rates steady into next year, before likely raising rates around mid-2010.”

Bangko Sentral will likely keep borrowing costs at 4 percent for six months to a year, ATR-Kim Eng’s Lorenzo said.

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Lehman Brothers Holdings Inc.’s collapse in 2008 surprised former Bank of England Deputy Governor John Gieve because the rescue of Bear Stearns Cos. led him to assume U.S. officials would save investment banks.

“I remember being alarmed and surprised,” Gieve, the central bank’s financial stability chief at the time, told BBC Radio 4 in an interview broadcast today. The U.S. government’s actions on Bear had “established a strong presumption that it would do what was necessary to prevent a collapse of an investment bank as well as a commercial bank.”

U.S. officials didn’t share much information with the Bank of England as they struggled to save Lehman, Gieve said. The investment bank announced on Sept. 15 it had filed for bankruptcy after negotiations at the New York Federal Reserve to engineer a rescue by its peers failed.

“This was the weekend so I think I was patched in on various calls through that evening to the U.S. to get the latest news,” Gieve said. “I must say that we didn’t get a lot of news, we were told hour after hour that they would have some news shortly.”

U.S. officials were unable to broker a rescue of Lehman after talks including Treasury Secretary Henry Paulson and the heads of as many as 14 financial institutions. The U.K.’s Financial Services Authority blocked a rescue by Barclays Plc.

‘Fear’

“It took a week or two before it became clear that Lehman’s failure had triggered not just another round of bank problems but it caused a major loss of confidence worldwide,” Gieve said. “That wasn’t clear on day one. It was a fear.”

The turmoil jeopardized funding for banks around the world. Gieve said his main concern then was the focus that would follow on some U.K. financial institutions.

“I knew one thing that it would do was lead the markets to focus on who’s next,” Gieve said. In the U.K., “the people in the firing line were Bradford & Bingley which had been struggling through the summer, and HBOS online payday loans. Beyond that, of course was RBS, Barclays. The only question was: well how far will this wave go?”

Officials at the Bank of England began working “pretty much straight away” on a rescue plan that involved recapitalizing the banks, Gieve said.

Turning Point

“Over the next two to three weeks a lot of work went into producing what in the end turned out to be the capital package that we produced in early October,” he said. “I was pretty confident the capitalization plan would work if it was done on a big enough basis internationally. Over that week we did see some of the measures taken by the Americans in particular, and that more or less was the turning point.”

Questioned about the contribution of Britain in causing the financial crisis, Gieve said that the most serious errors were made in the U.S.

“We’re the tail, not the dog here,” Gieve said. “This whole crisis was born in the U.S. and the biggest mistakes that led up to it were made in the U.S. We made some of the same ones but we’re not big enough to shape the world.”

Gieve, asked about his time on the bank’s rate-setting panel, said Governor Mervyn King never tried to “browbeat” the Monetary Policy Committee.

“As chairman of the MPC, he acted entirely properly,” Gieve said. “He gave his views. They were influential — of course they were influential. Outside the MPC, the bank is more of a monarchy,” he said, citing the money-markets division as an example.

King doesn’t deserve to bear most of the blame for any mistakes made in the crisis, Gieve said.

“Looking back on this, the arrangements we set in place for economic and financial policy didn’t work as well as we wanted,” Gieve said. “I don’t think you can blame this on an individual being over-mighty.”

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Japan’s demand for services rose unexpectedly in June as government stimulus measures spurred consumer spending, another sign that the economy is emerging from a recession.

The tertiary index, which captures 63 percent of the economy, climbed 0.1 percent from May, when it slid a revised 0.3 percent, the Trade Ministry said today in Tokyo. The median estimate of surveyed was for a 0.3 percent drop.

Prime Minister Taro Aso’s 25 trillion yen ($262 billion) stimulus has helped counter Japan’s deepest postwar recession by providing people with cash handouts and incentives to buy energy-efficient cars and electronics. Worsening job prospects and falling wages make it unlikely consumers will lead a recovery once the government spending runs out.

“The improvement in consumer spending was largely bolstered by the government’s stimulus measures,” said Yoshiki Shinke, a senior economist at Dai-ichi Life Research Institute in Tokyo. “It’s unclear whether consumers will continue spending after the measures are withdrawn.”

A separate report today showed Bank of Japan policy makers are cautious about the outlook. Some members said last month emergency credit programs may need to be extended into 2010, according to minutes from a July 14-15 meeting published today. The central bank extended measures to buy corporate debt from lenders for three months until Dec. 31 at the gathering.

Nikkei Climbs

The Nikkei 225 Stock Average rose 0.9 percent to 10,612.92 at 10:42 a.m. in Tokyo. The gauge has climbed 49 percent since touching a 26-year low on March 10.

Business at service providers is growing no fax payday loans. Fast Retailing Co. reported sales at its Uniqlo stores rose 6.4 percent in June. Softbank Corp., Japan’s third-largest mobile-phone company, said profit rose 41 percent last quarter amid subscriber growth.

The stimulus package and a rebound in stock prices drove consumer confidence to a 20-month high in July, the Cabinet Office said this week. An increase in stock transactions and higher demand for engineering services related to public-works projects led the gains in the tertiary index, the report showed.

A rebound in exports and production probably helped the economy expand for the first time in a year last quarter. Gross domestic product rose at a 3.9 percent annual pace in the three months ended June after contracting a record 14.2 percent in the first quarter, analysts expect a report will show Aug. 17.

Remains Sluggish

The Bank of Japan said this week that while shipments abroad and factory output are improving, domestic demand remains sluggish and the outlook for a recovery is uncertain.

Wages fell at a record pace of 7.1 percent in June, and the jobless rate reached a six-year high of 5.4 percent. Economists expect the jobless rate to climb to an unprecedented 5.9 percent by next year, according to a Bloomberg News survey.

“For a strong recovery, we need to see improvements in the jobless rate and wages,” Shinke said. “We probably won’t see that until the end of 2010.”

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