17/12/2012 World Business Report

Those are the latest headlines. Now for the latest financial news

with Sally Bundock and World Hello and welcome to World Business

Report. I'm Sally Bundock. A sweeping return to power for

Japan' Liberal Democratic party but can a new government solve old

economy? Hello from Singapore. The country's

benchmark index soared to a eight 1/2 monk hired rover hopes of

better economic highs. -- 8.5 months high.

Swiss bank UBS is reported to be facing a $1 billion fine for its

role in rigging the London There is a change at the top in

Japan. Ex-premier Shinzo Abe gets a second chance to lead Japan after a

landslide victory for his Liberal Democratic Party in Sunday's

parliamentary election. Many are hoping this new government will

help the world's third largest economy break out of its 20-year

economic slump. Markets have reacted well to the news. The main

market, the Nikkei, in Tokyo is up over 1.5% today and the yen down at

a 20-month low against the US dollar. But finding a solution to

the country's many problems is not going to be easy. Japan's public

debt is more than twice its economic output and climbing

figures out last month show the country has slipped back into

recession for the fifth time in 15 years. The chronically strong yen

continues to hurt the country's foreign sales for growth. New Prime

Minister Shinzo Abe has promised a revival plan which seems

seductively simple. Print money and spend it. Lots of it. But will it

do the trick? We are joined by Rico Hizon in the

BBC's Singapore office. How are the market's reacting?

At this point, investors believe that Shinzo Abe and the LDP may

have the answers, may have the solutions, to fix the country's

economy. Many pundits are calling the next prime minister's economic

initiatives ergonomics. He set an inflation target of 2%, plus a big

spending on public works to kick- start the economy. The Nikkei has

risen more than 14%. That rally has taken the gains to 17%. That is

outpacing the European and US markets. That has led the yen to

hit a 20-month low. It has boosted the appeal of exporter shares. The

weaker yen helps boost Japanese exports' it overseas earnings and

increases their competitiveness. Exporters today are therefore

continuing to benefit. Many companies are also searching in

reaction to the LDP victory, noting the party opposes a nuclear free

policy. Thank you. UBS is reportedly on the

verge of paying more than $1 of manipulating the London

interbank lending rate. This would be more than double that levied by

regulators in America and Britain against Barclays for the same type

of offences and it does not bode well for Royal Bank of Scotland,

tipped to be the third bank to face Libor-rigging fines in the next few

weeks. Where does this latest scandal leave the banking industry?

I'm joined by Chris Skinner, Chairman of the Financial Services

Club. Nice to see you. UBS is the next one to be dealt a very big

fine. More than double Barclays? What is your reaction? I think it

is the shakedown of the whole issue in the market over the last few

years, of manipulation of the market. Collusion between some of

the banks and fixing interest rates. There have been several other

issues, insider trading. We have seen HSBC has been issuing a fine

for money-laundering. They have to go back to being effective and

working honestly, which they have not been for a few years. We have

been reading about UBS. Some report it would admit 36 traders were

involved in the manipulation of interest rates. Four UBS and others

that followed, the fine is larger because they did not come forward

initially. Barclays initiated the whole investigation, given the?

Barclays were the first to inform the authorities. -- didn't it.

Potentially there were issues of collusion between the banks. UBS is

the first now to be fined and they have admitted criminal wrongdoing

in Japan, which is quite significant, if confirmed. This is

a fine actor will be between the US, the Swiss and UK authorities.

Perhaps up to $1.6 billion, which is three times the amount of

Barclays. It shows there is a real move to get the bounty system back

to where it should be. Where does this leave UBS? They have had

terrible story after a terrible story. They were spectacularly

failed out because they were hit by the economic crisis. They lost

quite a bit of money recently. And they had to settle with the US in

terms of tax evasion charges. It is one thing after another. Yes but

they have a new management team that is redirecting the banking. A

completely new way and a new vision. The bank has been one of the last

investment banks in the world. It will no longer be an investment bag.

It will be a private bank and is laying off about 10,000 staff.

Major cuts. About 16% of the workforce. They are going back to

being a normal Swiss bank. Funny how things change. Thank you.

As soon as we hear about the news regarding UBS, we will make sure we

keep you up-to-date. Returning to our top story. The

change of leadership in Japan. Seijiro Takeshita, Director or

Mizuho International, joins me from Tokyo. Thank you for joining us.

What is your reaction? Obviously, the market reaction initially is

very strong to the positive side. Does that mean this is a good

change for Japan or is that just the initial reaction? Well, I

certainly think it will solve quite a lot of problem. A lot of people

expect there will be another election, which we will have in

July next year. But basically the Upper House can now veto all run

over the decision-making process. All opposition it was decided by

the upper house. At least the decision-making process will be

smoother. Secondly, there will be a lot more proactive issues. For

example, the Budget that will be formed next month. They will beat

we patching a lot of relationships that were lost, especially foreign

relationships, that were lost through a very sloppy management of

foreign policies. -- there will be re-patching. Looking at some of the

promises Shinzo Abe has made, he says they will keep flooding money

into the Japanese economy until inflation is at 2%. Deflation has

been one of the clouds hanging over Japan for many years. Do you feel

that will work? Japan has been doing this for a long time and yet

the economy is still lacklustre. The biggest worry is this diabetes

that we have, which is called deflation, which is putting so much

pressure on other parts of Japan. It is not easy. His policy that

came out in fighting deflation is rather fragile. I think we have to

wait and see if he can come up with some concrete measures. At least he

is being more proactive in making these policies. We have to wait and

see until the policy comes out towards the end of this month.

long do you think this government can remain in power? This has been

something that has hampered the economy, the fact that there has

not been that political stability to see through the significant

structural changes that Japan really needs to see. Absolutely.

They have to go for more of a painful policy. The transition of

the Japanese economy is what people are waiting for. Not these

patchwork economies, putting a band aid over a deep wound. They have to

go for a painful solution. Unfortunately that has not been the

case by the Japanese politicians. You can see the patience of the

Japanese public is running low. As you saw with this landslide victory.

But also, there is a 10% decline in the number of turnouts. That means

any Japanese are losing expectation and hope for the Japanese politics

overall. I really think this is their last chance to basically make