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TOKYO – Japan’s central bank is escalating the fight against deflation by offering more cheap loans to banks.

In a split decision, the Bank of Japan’s policy board decided Wednesday to double the amount available under its short-term lending program to 20 trillion yen ($221 billion) from 10 trillion yen.

Introduced in December, the three-month loans at a fixed rate of 0.1 percent are intended to nourish credit flows and reduce longer-term interest rates.

The seven-member board voted unanimously to keep its key interest rate at a super lean 0.1 percent. In a statement, it pledged to maintain an “extremely accommodative financial environment” for the time being. The central bank has not changed the overnight call rate target since December 2008, when the policy board lowered it from 0.3 percent.

The central bank’s expected move came amid growing political pressure to take stronger action to combat falling prices, which threaten to undermine Japan’s patchy economic recovery.

“The Bank recognizes that it is a critical challenge for Japan’s economy to overcome deflation and return to a sustainable growth path with price stability,” the central bank said. “To this end, the Bank will continue to consistently make contributions as a central bank.”

The world’s second biggest economy grew at an annualized pace of 3.8 percent in the fourth quarter thanks to robust exports, but that has done little to bolster demand or wages at home. Japan’s key consumer price index, which fell for the 11th straight month in January, is expected to keep declining for the next two years.

The troubling outlook separates Japan from growing economies elsewhere in Asia, where central banks are winding down stimulus measures and tightening monetary policy low interest personal loan. Interests rates are rising in Australia and Malaysia, while central banks in China and India are reducing liquidity to control inflation.

Meanwhile, Japan struggles with a familiar foe. The country has battled periods of deflation since the “Lost Decade” in the 1990s. Lower prices may seem like a good thing, but it hamstrings economic growth by shrinking company profits, sparking wage cuts and causing consumers to postpone purchases. It also magnifies debt burdens.

The government’s ability to counter deflation with increased spending is constrained because of Japan’s ballooning debt, the highest among industrialized countries and rising. Prime Minister Yukio Hatoyama has proposed a record $1 trillion budget for the next fiscal year starting April, which will require the government to issue some 44.3 trillion yen ($492 billion) in bonds.

With limited room to maneuver on the fiscal policy front, Finance Minister Naoto Kan has repeatedly called on the central bank to do more. He wants deflation gone by the end of the year and has suggested establishing an inflation target.

The latest move may appease the government for now. But it falls short of a meaningful fight against deflation, economists say.

Richard Jerram, chief economist at Macquarie Securities in Japan, described a temporary increase in liquidity or even a modest interest rate cut as “irrelevant.” Japan needs aggressive, government-led changes to shock prices higher, he writes in a recent report.

“Japan is in such a deep deflationary hole that marginal policy changes are likely to be ineffective,” he said.

Bank of Japan expands lending to fight deflation

It is the Wall Street equivalent of a coroner’s report — a 2,200-page document that lays out, in new and startling detail, how Lehman Brothers used accounting sleight of hand to conceal the bad investments that led to its undoing.

The report, compiled by an examiner for the bank, now bankrupt, hit Wall Street with a thud late Thursday. The 158-year-old company, it concluded, died from multiple causes. Among them were bad mortgage holdings and, less directly, demands by rivals like JPMorgan Chase and Citigroup, that the foundering bank post collateral against loans it desperately needed.

But the examiner, Anton R. Valukas, also for the first time, laid out what the report characterized as “materially misleading” accounting gimmicks that Lehman used to mask the perilous state of its finances. The bank’s bankruptcy, the largest in American history, shook the financial world. Fears that other banks might topple in a cascade of failures eventually led Washington to arrange a sweeping rescue for the nation’s financial system.

According to the report, Lehman used what amounted to financial engineering to temporarily shuffle $50 billion of troubled assets off its books in the months before its collapse in September 2008 to conceal its dependence on leverage, or borrowed money. Senior Lehman executives, as well as the bank’s accountants at Ernst & Young, were aware of the moves, according to Mr. Valukas, the chairman of the law firm Jenner & Block and a former federal prosecutor, who filed the report in connection with Lehman’s bankruptcy case.

Richard S. Fuld Jr., Lehman’s former chief executive, certified the misleading accounts, the report said.

“Unbeknownst to the investing public, rating agencies, government regulators, and Lehman’s board of directors, Lehman reverse engineered the firm’s net leverage ratio for public consumption,” Mr. Valukas wrote.

Mr. Fuld was “at least grossly negligent,” the report states, adding that Henry M. Paulson Jr., who was then the Treasury secretary, warned Mr. Fuld that Lehman might fail unless it stabilized its finances or found a buyer.

Lehman executives engaged in what the report characterized as “actionable balance sheet manipulation,” and “nonculpable errors of business judgment.”

The report draws no conclusions as to whether Lehman executives violated securities laws. But it does suggest that enough evidence exists for potential civil claims. Lehman executives are already defendants in civil suits, but have not been charged with any criminal wrongdoing.

A large portion of the nine-volume report centers on the accounting maneuvers, known inside Lehman as “Repo 105.”

First used in 2001, long before the crisis struck, Repo 105 involved transactions that secretly moved billions of dollars off Lehman’s books at a time when the bank was under heavy scrutiny.

According to Mr. Valukas, Mr. Fuld ordered Lehman executives to reduce the bank’s debt levels, and senior officials sought repeatedly to apply Repo 105 to dress up the firm’s results. Other executives named in the examiner’s report in connection with the use of the accounting tool include three former Lehman chief financial officers: Christopher O’Meara, Erin Callan and Ian Lowitt.

Patricia Hynes, a lawyer for Mr. Fuld, said in an e-mailed statement that Mr. Fuld “did not know what those transactions were — he didn’t structure or negotiate them, nor was he aware of their accounting treatment.”

Charles Perkins, a spokesman for Ernst & Young, said in an e-mailed statement: “Our last audit of the company was for the fiscal year ending Nov. 30, 2007. Our opinion indicated that Lehman’s financial statements for that year were fairly presented in accordance with Generally Accepted Accounting Principles (GAAP), and we remain of that view payday loans for self employed.”

Bryan Marsal, Lehman’s current chief executive, who is unwinding the firm, said in a statement that he was evaluating the report to assess how it might help in efforts to advance creditor interests.

Repos, short for repurchase agreements, are a standard practice on Wall Street, representing short-term loans that provide sometimes crucial financing. In them, firms essentially lend assets to other firms in exchange for money for short periods of time, sometimes overnight.

But Lehman used aggressive accounting in its Repo 105 transactions: it appears to have structured transactions such that they sold securities at the end of the quarter, but planned to buy them back again days later. These assets were mostly illiquid real estate holdings, meaning that they were hard to sell in normal transactions.

The effect of the accounting was to artificially and temporarily lower the firm’s debt levels to hit certain targets, making the firm look healthier than it really was.

In a series of e-mail messages cited by the examiner, one Lehman executive writes of Repo 105: “It’s basically window-dressing.” Another responds: “I see … so it’s legally do-able but doesn’t look good when we actually do it? Does the rest of the street do it? Also is that why we have so much BS [balance sheet] to Rates Europe?” The first executive replies: “Yes, No and yes. :)”

Mr. Valukas was appointed by the United States Trustee in the case in January 2009 to investigate the causes of the Lehman bankruptcy, as well as to find out if any fraud or misconduct took place.

Mr. Valukas writes in the report that “colorable claims” could be made against some former Lehman executives and Ernst & Young, meaning that enough evidence existed that could lead to the awarding of damages in a trial. He added that Lehman’s directors were not aware of the accounting engineering.

By his reckoning, Lehman managed to “shed” about $39 billion from its balance sheet at the end of the fourth quarter of 2007, $49 billion in the first quarter of 2008 and $50 billion in the second quarter. At that time, Lehman sought to reassure the public that its finances were fine — despite pressure from short-sellers like the hedge fund manager David Einhorn.

Executives, including Herbert McDade, who was known internally as the firm’s “balance sheet czar,” seemed aware that repeatedly using Repo 105 was disguising the true health of the investment bank. “I am very aware … it is another drug we r on,” he wrote in an April 2008 e-mail cited by the examiner’s report. At other times, he is described as calling for a limit to the number of Repo 105 transactions.

By May and June of 2008, a Lehman senior vice president, Matthew Lee, wrote to senior management and the firm’s auditors at Ernst & Young flagging “accounting improprieties.” Neither Lehman executives nor Ernst & Young alerted the firm’s board about Mr. Lee’s allegations, according to the report.

Mr. Fuld is described in the examiner’s report as denying having knowledge of the Repo 105 transactions, and there is no evidence that he directed subordinates to make use of that aggressive accounting. (He did recall issuing several directives to reduce the firm’s debt levels.) But Mr. McDade is reported as telling Mr. Fuld about using Repo 105 to achieve that goal.

Lehman Brothers Hid Borrowing, Examiner Says

NEW YORK – A hotel has opened on the edge of ground zero, and executives say the view it offers on the World Trade Center site rebuilding is a selling point.

The World Center Hotel is still under construction on some floors but began taking reservations last month. Its Web site features photographs of a memorial and the construction.

The hotel offers some rooms with floor-to-ceiling windows that open directly onto the work site. Guests and members will have access to the restaurant patio with views of giant cranes, jackhammers and metal scaffolding auto loan rates.

Australian tourist Josh Rowlands says he would like to stay at a hotel with a view of the rebuilding, especially because it’s so hard to see into the pit from the street.

But German tourist Michael Meindorfer says he thinks staying there would be too sad.

Ground zero hotel wants to attract WTC tourists

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ALAMEDA, Calif. – Celera Corp., a laboratory testing products and disease management services company, reported a fourth-quarter profit on lower costs and a tax benefit.

The company said it earned $7.8 million, or 9 cents per share, compared with a loss of $6.1 million, or 8 cents per share, during the same period a year prior. Revenue fell 15 percent to $40 million from $47.3 million.

Analysts polled by Thomson Reuters expected a loss of 3 cents per share on revenue of $39.6 million.

Celera was part of Applera Corp. until July 2008, but was separated from Applera after that company’s other component, Applied Biosystems, was sold to Invitrogen Corp. Those two companies combined into Life Technologies Corp.

Lab services revenue fell 25 percent to $22 million, while products revenue increased 1 percent to $11.3 million. Corporate revenue fell 3 percent to $6.7 million.

Meanwhile, selling and general expenses fell 17 percent to $22.4 million. The company had a tax benefit of $9 payday loans guaranteed no fax.1 million.

For the full year, the company lost $32.7 million, or 40 cents per share, compared with a loss of $124.6 million, or $1.56 per share, in 2008. Revenue fell to $167.1 million from $175.2 million.

Looking ahead, the company expects a loss between 11 cents and 13 cents per share on revenue between $30 million and $32million in the first quarter. It expects a loss between 15 cents and 21 cents per share on revenue between $145 million and $155 million in 2010.

Analysts expect a loss of 1 cent per share on revenue of $40.5 million in the first quarter and profit of 4 cents per share on revenue of $173.5 million in 2010.

Shares of Celera rose 1 cent to $6.15 in after-hours trading after falling 1 cent to close at $6.14 during the regular trading session.

Celera sees 4Q profit on tax benefit, lower costs

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LONDON – The British subsidiary of Reader’s Digest filed for administration, a form of bankruptcy protection, in a move intended to help its parent company complete restructuring under bankruptcy protection in the U.S.

The parent, the Reader’s Digest Association Inc., said the action to isolate the British unit would allow it “to emerge from Chapter 11 promptly.”

The British subsidiary’s filing follows its failure to gain regulatory approval for a plan for funding a pension deficit, the company said Wednesday. Without approval for its plan to deal with the British pension issue, the company said the U.K. unit was unable to meet its debts and sustain its operations, the company said.

Reader’s Digest had hoped to emerge from Chapter 11 protection — under which a company in financial trouble is allowed to shed debts and restructure — by the end of the January but was delayed by the pension problem in Britain.

The pension proposal had been accepted by the company, pension trustees and the U saving account pay day loan.K. Pension Protection Fund, but was rejected by the U.K. Pensions Regulator.

“The agreement, which contemplated a lump sum payment by parent company RDA plus an equity stake in RDA UK, was authorized by the U.S. bankruptcy judge overseeing RDA’s U.S. Chapter 11 proceedings, and would have relieved RDA UK of significant financial obligations associated with its underfunded UK pension plan,” the company said in a statement from its headquarters in Pleasantville, N.Y.

“Absent an agreement, RDA UK is financially unable to meet those obligations and sustain its operations.”

The British pension issue does not affect any other part of the company, Reader’s Digest said.

A U.S. judge has already approved the company’s Chapter 11 plan, which cuts its debt load to $555 million from $2.2 billion.

Reader’s Digest UK unit files for administration

BRUSSELS – European Union leaders on Thursday offered Greece moral support but no money to help it weather a debt crisis — vague assurances that didn’t calm the market fear that has shaken the entire EU and undermined the shared euro currency.

The 16 countries that use the euro said only that they “will take determined and coordinated action, if needed, to safeguard financial stability in the euro as a whole.”

But no money or loan guarantees were put on the table in the statement from a summit meeting in Brussels.

Markets appeared disappointed at not seeing a concrete backstop to ward off a potential default by Greece, which needs to borrow euro54 billion this year to cover its outsized budget deficit.

The Greek crisis is the leading edge of the debt troubles that have hit governments in the developed world during the world’s three years of economic turbulence, as they run up deficits bailing out banks and stimulating their economies.

A default would be a serious blow to Europe’s monetary union, and fears that Athens might not be able to pay its debts have already led markets demanding higher borrowing costs for Greece.

There are also concerns that the contagion could spread to other financially wobbly countries, such as Portugal and Spain, and that other governments will have to pay more to borrow.

The leaders said Greece had not requested financial support and called on Athens to push through “in a rigorous and determined manner” its budget cuts that have already triggered protests and strikes — and to prepare bigger cuts if needed.

Neil Mackinnon, global macro strategist at VTB Capital said, “it just looks like a pledge of solidarity, but no actual details of a program which is why the euro is still in the doldrums.”

“They have to stop this right now…they are firefighting at the moment but they need to put out this fire right now,” said Neil Mellor, currency strategist at Bank of New York Mellon. “It won’t appease those looking for a bona fide rescue plan.”

The euro hit a new nine-month low of $1.3635, having been as high as $1.38 earlier in the day on hopes of more substantive Greek bailout news. It was $1.51 in December. German and French stocks were down, while shares in Britain, which doesn’t use the euro, rose.

Markets see Greece at risk of defaulting on its massive borrowings because it faces several years of sluggish growth and mounting debt that current austerity plans may not be able to stem payday loans guaranteed no fax.

Those fiscal problems have also exposed the vulnerability of Europe’s monetary union in times of crisis. Euro members countries agree to limit their budget deficits to 3 percent of gross domestic output because overspending can undermine their shared currency. But those deficit rules have been broken repeatedly and have not been prevented Greece and other countries from trouble.

The leaders may make more comments on Greece later in the day.

Luxembourg government spokesman Guy Schuller said no firm bailout figures are on the table at this point, but many options are under discussion. “Paris and Berlin are at the head” of efforts that would be shared by all 16 eurozone nations, he said.

Among possibilities for Greece that have been floated in recent days are EU member countries guaranteeing Greece’s debt, a special credit line for the Greek government, and bilateral loans.

But German Chancellor Angela Merkel talked down a full financial bailout, but said other European governments would not leave Greece in the lurch.

“We won’t let Greece be alone but there are rules and they have to be respected and based on that we’ll issue a statement and an explanation,” she said.

Greece needs to borrow euro54 billion (nearly $75 billion) from bond markets this year to plug its budget gap. So far it has been able to borrow from markets but is facing increasing interest costs as markets price in higher risk of a possible default.

Greek Prime Minister George Papandreou has promised to reduce Greece’s deficit to 8.7 percent of gross domestic product this year, from 12.7 percent last year, the highest in the EU and four times above an EU limit.

But markets doubt Greece’s credibility after it admitted falsifying statistics for years to make the deficit look smaller. They also worry that Greece can’t carry out any cuts because it risks social unrest.

Greek workers shut down schools, grounded flights and walked out of hospitals Wednesday to protest austerity measures, and a much broader strike is planned for Feb. 24.

___

Associated Press writers Pan Pylas, Angela Charlton and Leslie Patton in Brussels contributed to this report.

EU leaders offer Greece support, but no money

OSLO – Norwegian telecommunications group Telenor ASA on Wednesday reported a 25 percent jump in fourth-quarter profits, primarily thanks to growth in Asia, but said it may have to cut costs this year to strengthen its finances.

Net profit rose to 2.5 billion kroner ($425 million) in the October-December period, from just under 2 billion kroner a year earlier. Revenues slipped to 24.2 billion kroner during that time, from 25.9 billion kroner in the fourth quarter of 2008. That excludes pro forma figures from Telenor’s troubled Ukrainian holding Kyivstar that were also provided for comparative reasons.

Telenor shares dropped 3 percent, to 75.85 kroner ($12.84), in morning trading in Oslo.

A strong quarter for Telenor in the Pakistani, Thai and Bangladeshi markets, as well as in the company’s consistently strong Scandinavian operations, contributed to a sustained revenue stream.

New subscriptions in these markets offset slumping revenues from Telenor’s operations in Eastern Europe, where the global financial crunch has depressed the telecoms market. Telenor subscriptions grew by 2 million in the fourth quarter.

Carnegie analyst Espen Torgersen said the result was “substantially over market expectation free credit scores.” He attributed the negative market reaction to Telenor’s lower-than-expected outlook for 2010.

Telenor CEO Jon Fredrik Baksaas warned of potential cost-cutting measures in 2010 to cope with hits to the group’s finances in the wake of the financial crisis.

Telenor “will strive to secure our market positions, while capturing organic growth opportunities. We will continue to implement necessary efficiency measures and provide innovative and viable solutions to our customers,” Baksaas said.

Among its priorities in 2010 are the expansion of its Indian subsidiary, which launched on Dec. 22, and the end of a long and expensive legal battle with Russian conglomerate Alfa Group over joint operations in Russia and Ukraine.

Telenor employs more than 40,000 people in 14 countries and claims 174 million subscribers worldwide.

___

On the Net:

http://www.telenor.com

Norway’s Telenor posts 25 pct rise in Q4 profits

NEW YORK (MarketWatch) — The dollar advanced Thursday, while the euro fell to a seven-month low and the Japanese yen attracted some buyers, amid renewed fears about fiscal problems facing a handful of European countries and as a U.S. report showed an unexpected increased in jobless claims last week.

The dollar index , which tracks the greenback against a trade-weighted basket of six major currencies, rose to 79.950 from 79.369 late Wednesday.

ECB’s Trichet Sees Major Challenges Ahead

European Central Bank President Jean-Claude Trichet told reporters Thursday the euro zone still faces major challenges but is heading in the right direction. He was speaking shortly after the ECB kept interest rates steady.

For its part, the euro tumbled on renewed fears over debt problems in the 16-nation euro zone, and as the European Central Bank kept a key benchmark rate steady.

The single currency declined 1% to $1.3736, down from $1.3906 in North American trading late Wednesday.

The British pound also fell after the Bank of England kept rates steady, down 0.3% to $1.5851.

But the dollar lost ground to trade at 88.65 Japanese yen, down from 91.01 yen late Wednesday. The yen’s a frequent beneficiary of movements out of riskier assets to a more stable one.

The euro enjoyed a short-lived respite from pressure Wednesday after the European Commission cautiously endorsed Greece’s plans to slash its budget deficit over the next three years. But the selling pressure resurfaced as the focus turned to Portugal and Spain.

‘We’re short-term bearish on the euro.’

Ray Farris, Credit Suisse

The spread between government bonds issued by Greece and Portugal widened versus comparable German bunds, highlighting worries about the fiscal outlook for nations on the so-called periphery of the euro zone. Concerns over those countries also pushed the cost of insurance for sovereign debt above the cost for U.S. companies for the first time payday advance. Read about the euro zone’s persistent credit worries.

“Over the next several months, we’ll probably have a succession of negative news associated the fiscal stress coming, first with Greece but increasingly into other sovereigns,” said Ray Farris, head of foreign-exchange strategy at Credit Suisse. “We’re short-term bearish on the euro.”

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Those concerns also weighed down U.S. stocks, with the Standard & Poor’s 500 index dropping nearly 2.5%. While less consistent in recent months, since the beginning of the credit crisis the dollar has tended to benefit when stocks fall, which traders take as a flight from risky assets to the relative safety of the U.S. currency.

That dynamic was overshadowing weak employment data in the U.S. during the session — one day before the government’s pivotal report on nonfarm payrolls for January, due out Friday.

The Labor Department said first-time claims for state unemployment benefits rose to the highest level since mid-December, up 8,000 to 480,000. The consensus forecast of Wall Street economists had been for claims to drop to 455,000. See more on U.S. jobless claims.

Also affecting trading in the British pound, Bank of England policy makers called a halt to its 200 billion pound ($319 billion) program of asset purchases but left the door open to resume purchases if it’s deemed necessary.

Currencies: Dollar up to 7-month high as risks seen in Europe

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BERLIN/ZURICH (Reuters) – German politicians were divided at the weekend over whether to buy the bank data of up to 1,500 possible tax evaders with accounts in Switzerland that media say an informant has offered to sell authorities.

The respected Frankfurter Allgemeine Zeitung reported that the whistleblower is asking for 2.5 million euros for the confidential data, which tax investigators believe could rake in 100 million euros for German state coffers.

The case risks prompting a fresh row over bank secrecy between Germany and Switzerland. Top Swiss politicians, including President Doris Leuthard, and bankers warned Germany against acquiring the data.

Without citing sources, Financial Times Deutschland reported in its online edition that the data belonged to German clients of HSBC (HSBA.L) and was among the information stolen from its private banking arm in Geneva by ex-employee Herve Falciani.

France already acquired some of that information last year by raiding the computer specialist's house, and used it to track down fraudsters, infuriating Switzerland.

A spokesman for the German Finance Ministry declined to comment on the report but said it would be the responsibility of individual German states to deal with such data.

A senior ally of Chancellor Angela Merkel, Defense Minister Karl-Theodor zu Guttenberg, said Germany would have to carefully check its legal right to purchase the alleged data cash advance.

"I have a problem with handing over money for something that has come into someone's possession in a legally questionable fashion," Guttenberg told Swiss daily Neue Zuercher Zeitung.

Members of the opposition Greens and Social Democrats (SPD) however encouraged the government to buy the data on behalf of "honest taxpayers."

Nicolette Kressl, SPD finance expert, told Die Welt am Sonntag the government should proceed as it did in 2008, when it purchased data on tax evaders from an informant about clients of a Liechtenstein bank.

The case snared former Deutsche Post chief Klaus Zumwinkel, who was given a suspended jail term for evading nearly a million euros in taxes using a Liechtenstein trust.

Former Finance Minister Peer Steinbrueck repeatedly accused Germany's neighbors Switzerland, Liechtenstein and Luxembourg of serving as havens for German tax evaders, but the three countries have taken steps in the last year to improve transparency on taxes amid a global crackdown on tax havens.

(Reporting by Sarah Marsh and Hans-Edzard Busemann in Berlin and Catherine Bosley in Zurich; writing by Sarah Marsh; editing by Andrew Roche)

Germany divided over buying secret Swiss bank data

TOKYO – Japan’s trade minister is urging Toyota Motor Corp. to secure the confidence of car buyers in the wake of massive global recalls.

“The scale of the recalls is huge. The situation is serious. It points to the possible dangers a global economy can bring,” Trade Minister Masayuki Naoshima told reporters Friday.

“I would like Toyota to respond properly to secure consumer confidence.”

Toyota — the world’s largest automaker — has recalled 7 payday loans.65 million vehicles in the U.S. over problems with gas pedals and floor mats. It recalled 75,500 vehicles in China for the same acceleration pedal problem.

The auto giant also said it would recall vehicles in Europe due to the accelerator problem, but said the number of recalled vehicles has yet to be determined.

Japan urges Toyota to secure consumer confidence