Japan's Abe set for second term, to tap allies for cabinet

 Shinzo Abe will be voted in as prime minister by parliament's lower house on Wednesday, giving the hawkish lawmaker a second chance at Japan's top job as the country battles deflation and confronts a rising China.
Abe, 58, has promised aggressive monetary easing by the Bank of Japan and big fiscal spending by the debt-laden government to slay deflation and weaken the yen to make Japanese exports more competitive.
The grandson of a former prime minister, Abe has staged a stunning comeback five years after abruptly resigning as premier in the wake of a one-year term troubled partly by scandals in his cabinet and public outrage over lost pension records.
His Liberal Democratic Party (LDP) surged back to power in this month's election.
"I want to learn from the experience of my previous administration, including the setbacks, and aim for a stable government," Abe told reporters as he entered parliament, where he will be voted in later in the day as Japan's seventh prime minister in six years.
Abe looks set to pick a slate of close allies leavened by some LDP rivals to fend off the criticism of cronyism that dogged his first administration.
Japanese media have said Abe will name former prime minister Taro Aso, 72, as finance minister, ex-trade and industry minister Akira Amari as minister in charge of a new economic revival headquarters and policy veteran Toshimitsu Motegi as trade minister. Motegi will also be tasked with formulating energy policy in the aftermath of the Fukushima nuclear disaster last year.
Loyal Abe backer Yoshihide Suga is expected to become chief cabinet secretary, a key post combining the job of top government spokesman with responsibility for coordinating among ministries.
Others who share Abe's agenda to revise the pacifist constitution and rewrite Japan's wartime history with a less apologetic tone have also been floated for posts.
"These are really LDP right-wingers and close friends of Abe," said Sophia University professor Koichi Nakano. "It really doesn't look very fresh at all."
CHINA TIES, JULY ELECTION
The yen has weakened about 9.8 percent against the dollar since Abe was elected LDP leader in September. On Wednesday, it hit a 20-month low of 85.38 yen against the greenback on expectations of aggressive monetary policy easing.
Abe has threatened to revise a law guaranteeing the Bank of Japan's (BOJ) independence if it refuses to set a 2 percent inflation target.
BOJ minutes released on Wednesday showed the central bank was already pondering policy options in November, concerned about looming risks to the economy. The BOJ stood pat at its November rate review meeting but eased this month in response to intensifying pressure from Abe.
Abe also promised during the election campaign to take a tough stance in territorial rows with China and South Korea over separate chains of tiny islands, while placing priority on strengthening Japan's alliance with the United States.
Japanese media said Abe would appoint two low-profile officials to the foreign and defense portfolios.
Itsunori Onodera, 52, who was senior vice foreign minister in Abe's first cabinet, will become defense minister while Fumio Kishida, 55, a former state minister for issues related to Okinawa island - host to the bulk of U.S. forces in Japan - will be appointed to the top diplomatic post, the reports said.
Abe, who hails from a wealthy political family, made his first overseas visit to China to repair chilly ties when he took office in 2006, but has said his first trip this time will be to the United States.
He may, however, put contentious issues that could upset key trade partner China and fellow-U.S. ally South Korea on the backburner to concentrate on boosting the economy, now in its fourth recession since 2000, ahead of an election for parliament's upper house in July.
The LDP and its small ally, the New Komeito party, won a two-thirds majority in the 480-seat lower house in the December 16 election. That allows the lower house to enact bills rejected by the upper house, where the LDP-led block lacks a majority.
But the process is cumbersome, so the LDP is keen to win a majority in the upper house to end the parliamentary deadlock that has plagued successive governments since 2007.
"It's the economy, the economy, the economy," an LDP source close to Abe told Reuters. The new government plans to submit an extra budget for the fiscal year to March 31 in late January.
Financial markets expect a budget worth about 10 trillion yen ($117.93 billion), but the source said no more than half of that would be spent on public works projects, a traditional staple of LDP economic stimulus packages.

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U.S. moves to sell advanced spy drones to South Korea

 The Obama administration formally proposed a controversial sale of advanced spy drones to help South Korea bear more of its defense from any attack by the heavily armed North.
Seoul has requested a possible $1.2 billion sale of four Northrop Grumman Corp RQ-4 "Global Hawk" remotely piloted aircraft with enhanced surveillance capabilities, the Pentagon's Defense Security Cooperation Agency said in a statement dated on Monday and distributed on Tuesday.
South Korea needs such systems to assume top responsibility for intelligence-gathering from the U.S.-led Combined Forces Command as scheduled in 2015, the security agency said in releasing a notice to U.S. lawmakers.
"The proposed sale of the RQ-4 will maintain adequate intelligence, surveillance, and reconnaissance capabilities and will ensure the alliance is able to monitor and deter regional threats in 2015 and beyond," the notice said.
The United States has agreed with Seoul to turn over the wartime command of Korean troops later this decade. Current arrangements grew from the U.S. role in the 1950-1953 Korean War that repelled a North Korean takeover of the South.
Seoul has shown interest in the high-altitude, long-endurance Global Hawk platform for at least four years. The system, akin to Lockheed Martin Corp's U-2 spy plane, may be optimized to scan large areas for stationary and moving targets by day or night and despite cloud cover.
It transmits imagery and other data from 60,000 feet at near real-time speed, using electro-optical, infrared and radar-imaging sensors built by Raytheon Co.
The possible sale has been held up by discussions involving price, aircraft configuration and a go-slow on release of such technology subject to a voluntary 34-nation arms control pact.
The Defense Department began informally consulting Congress on the possible Global Hawk sale in the summer of 2011, only to withdraw it pending further work on the make-up of the proposed export to Seoul amid lawmakers' arms-control concerns.
The formal notification to Congress came less than two weeks after a North Korean space launch of a satellite atop a multi-stage rocket, a first for the reclusive state, widely seen as advancing its ballistic missile program.
A White House statement denounced the December 12 launch as a "highly provocative act" that would bear consequences for violations of United Nations resolutions. The North is banned from testing missile or nuclear technology under international sanctions imposed after its 2006 and 2009 nuclear weapons tests.
In October 2008, then-U.S. Defense Secretary Robert Gates told reporters that the United States was "very sympathetic" to South Korea's interest in Global Hawk. But he cited issues that had to be overcome because of the so-called Missile Technology Control Regime, or MTCR.
The pact, established in 1987, has been credited with slowing the spread of ballistic missiles and other unmanned delivery systems that potentially could be used for chemical, biological and nuclear attacks.
Pact members, including the United States, agree to curb their exports of systems capable of carrying a 500-kilogram (1,102-pound) payload at least 300 kilometers (186 miles). The Global Hawk falls under a strong presumption against export under MTCR guidelines.
The notification to Congress did not mention that a U.S. government waiver for such an export would be required.
Arms-control advocates fear that this could fuel instability and stir regional arms-race dynamics as well as provide diplomatic cover for an expansion of such exports by Russia, China and others.
The Obama administration agreed earlier this year to let South Korea, a treaty ally, stretch the range of its ballistic missile systems to cover all of North Korea, going beyond the voluntary pact's 300 km (186 miles).
The congressional notification is required by U.S. law and does not mean that a deal has been concluded.
If a sale takes place, it would be for the third generation of Global Hawk drones known as Block 30, the security agency's notice to Congress said.
The Pentagon, in its fiscal 2013 budget request, proposed mothballing its own Block 30 Global Hawks and ending plans to buy more of that generation. Doing so would have no effect on the administration's plans to acquire other versions of the long-range drone.
South Korea's possible Global Hawk purchase would mark the system's first sale in the Asia-Pacific region. It has already been sold to the North Atlantic Treaty Organization (NATO).
Australia, Japan and Singapore each have shown interest in buying Global Hawk systems, Northrop Grumman officials have said. Company representatives had no comment on the Christmas holiday on the proposed sale to Seoul.

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Pope's Christmas message focuses on Mideast, China

 In his Christmas message to the world Tuesday, Pope Benedict XVI called for an end to the slaughter in Syria and for more meaningful negotiations between Israelis and Palestinians, while encouraging more religious freedom under China's new leaders.
Delivering the traditional speech from the central balcony of St. Peter's Basilica, Benedict also encouraged Arab spring nations, especially Egypt, to build just and respectful societies.
The pope prayed that China's new leadership may "esteem the contribution of the religions, in respect for each other" to help build a "fraternal society for the benefit of that noble people."
It was a clear reference to the Chinese government's often harsh treatment of Catholics loyal to the pontiff instead of to the state-sanctioned church. Earlier this month, the Vatican refused to accept the decision by Chinese authorities to revoke the title of a Shanghai bishop, who had been appointed in a rare show of consensus between the Holy See and China.
As the 85-year-old pontiff, bundled up in an ermine-trimmed red cape, gingerly stepped foot on the balcony, the pilgrims, tourists and Romans below backing St. Peter's Square erupted in cheers.
Less than 12 hours earlier, Benedict had led a two-hour long Christmas Eve ceremony in the basilica. He sounded hoarse and looked weary as he read his Christmas message and then holiday greetings in 65 languages.
In his "Urbi et Orbi" speech, which traditionally reviews world events and global challenges, Benedict prayed that "peace spring up for the people of Syria, deeply wounded and divided by a conflict that does not spare even the defenseless and reaps innocent victims."
He called for easier access to help refugees and for "dialogue in the pursuit of a political solution to the conflict."
Benedict prayed that God "grant Israelis and Palestinians courage to end long years of conflict and division, and to embark resolutely on the path to negotiation."
Israel, backed by the United States, opposed the Palestinian statehood bid, saying it was a ploy to bypass negotiations, something the Palestinians deny. Talks stalled four years ago.
Senior Palestinian official Saeb Erekat said that in a meeting with the pope last week, Palestinian President Mahmoud Abbas "emphasized our total readiness to resume negotiations." The Palestinians have not dropped their demand that Israel first stop settlement activities before returning to the negotiating table.
Hours earlier, in the ancient Bethlehem church built over the site where tradition holds Jesus was born, candles illuminated the sacred site and the joyous sound of prayer filled its overflowing halls.
Overcast skies and a cold wind in the Holy Land didn't dampen the spirits of worshippers in the biblical West Bank town. Bells pealed and long lines formed inside the fourth-century Church of the Nativity complex as Christian faithful waited to see the grotto that is Jesus' traditional birthplace.
Duncan Hardock, 24, a writer from MacLean, Virginia, traveled to Bethlehem from the republic of Georgia, where he had been teaching English. After passing through the separation barrier Israel built to ward off West Bank attackers, he walked to Bethlehem's Manger Square where the church stands.
"I feel we got to see both sides of Bethlehem in a really short period of time," Hardock said. "On our walk from the wall, we got to see the lonesome, closed side of Bethlehem ... But the moment we got into town, we're suddenly in the middle of the party."
Bethlehem lies 10 kilometers (6 miles) south of Jerusalem. Entry to the city is controlled by Israel, which occupied the West Bank in 1967.
For those who couldn't fit into the cavernous Bethlehem church, a loudspeaker outside broadcast the Christmas day service to hundreds of faithful in the square.
Their Palestinian hosts, who welcome this holiday as the high point of their city's year, were especially joyous this season, proud of the United Nations' recognition of an independent state of Palestine just last month.
"From this holy place, I invite politicians and men of good will to work with determination for peace and reconciliation that encompasses Palestine and Israel in the midst of all the suffering in the Middle East," said the top Roman Catholic cleric in the Holy Land, Latin Patriarch Fouad Twal in his annual address.
Back at the Vatican, Benedict offered encouragement to countries after the Arab spring of democracy protests. He had a special word for Egypt, "blessed by the childhood of Jesus."
Without citing the tumultuous politics and clashes in the region, he urged the North African region to build societies "founded on justice and respect for the dignity of every person."
Benedict prayed for the return of peace in Mali and harmony in Nigeria, where, he recalled "savage acts of terrorism continue to reap victims, particularly among Christians."
The Vatican for decades has been worried about the well-being of its flock in China, who are loyal to the pope in defiance of the communist's government support of an officially sponsored church, and relations between Beijing and the Holy See are often tense.
Speaking about China's newly installed regime leaders, Benedict expressed hope that "they will esteem the contribution of the religions, in respect for each other, in such a way that they can help to build a fraternal society for the benefit of that noble people and of the whole world."
Acknowledging Latin America's predominant Christian population, he urged government leaders to carry out commitments to development and to fighting organized crime.
In Britain, the royal family was attending Christmas Day church services at St. Mary Magdelene Church on Queen Elizabeth II's sprawling Sandringham estate, though there were a few notable absences. Prince William is spending the holiday with his pregnant wife Kate and his in-laws in the southern England village of Bucklebury, while Prince Harry is serving with British troops in Afghanistan.
Later Tuesday, the queen delivered her traditional, prerecorded Christmas message, which for the first time was broadcast in 3D.
At Canterbury cathedral, Anglican leader Rowan Williams delivered his final Christmas day sermon as archbishop of Canterbury. He acknowledged how the church's General Synod's vote against allowing women to become bishops had cost credibility and said the faithful felt a "real sense of loss" over the decision.
In the U.S., the Rev. Jesse Jackson brought his message of anti-violence and gun control to a Chicago jail, using his traditional Christmas Day sermon at the facility to challenge inmates to help get guns off the streets.
"We've all been grieving about the violence in Newtown, Connecticut, the last few days," he told reporters after addressing inmates, referring to the Dec. 14 school shooting that killed 26 children and adults. "Most of those here today ... have either shot somebody or been shot. We're recruiting them to help us stop the flow of guns."
In Newtown, well-wishers from around the U.S. showed up on Christmas morning to hang ornaments on a series of memorial Christmas trees while police officers from around Connecticut took extra shifts to direct traffic and patrol the town to give local police a day off. In a 24-hour vigil, volunteers watched over 26 candles that had been lit at midnight in honor of those slain at the Sandy Hook Elementary School.
At a town hall memorial, Faith Leonard waved to people driving by and handed out Christmas cookies, children's gifts and hugs to anyone who needed it.
"I guess my thought was if I could be here helping out maybe one person would be able to spend more time with their family or grieve in the way they needed to," said Leonard, who drove to Newtown from Gilbert, Arizona, to volunteer on Christmas morning.
At St. Rose of Lima Roman Catholic Church, which eight of the child victims of the massacre attended, the Rev. Robert Weiss told parishioners that "today is the day we begin everything all over again."
"We know Christmas in a way we never ever thought we would know it," he said. "We need a little Christmas and we've been given it."
In a New York City neighborhood ravaged by Superstorm Sandy in late October, some holiday traditions had to go by the wayside, but Christmas was celebrated with a special sense of gratitude.
Midmorning and noon Masses were packed Tuesday at St. Francis De Sales Church in the Rockaways; the church only recently got heat restored after Sandy flooded its basement. The bells and organ still don't work, so St. Francis De Sales is making do with a keyboard for now.
"But nobody is feeling morose or down. They're just rebuilding their lives, keeping the faith and going forward," choir member Ed Quinn said. "It's not the best of circumstances, that's for sure. But we're making the best of it.

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Daiwa CEO sees 2013 Nikkei rally on Abe economy boost

 Japan's Nikkei stock average could rally nearly 30 percent in 2013 due to an aggressive push to reflate the economy under the country's new premier, the chief executive of Daiwa Securities Group told Reuters in an interview.
While securities executives are known for their bullish market predictions, the comments from Takashi Hibino reflect an optimism among business leaders that the policies of Shinzo Abe will give Japan's sluggish economy a needed jolt.
Abe, who is set to become prime minister on Wednesday after his opposition Liberal Democratic Party won this month's lower house election, is a proponent of fiscal expansion and aggressive monetary policy to defeat deflation, which has sapped the world's third-largest economy for nearly two decades.
"If the correct policies are enacted the market will rise," Hibino said in an interview on Friday. His comments were embargoed for release on December 26.
"There has not been an administration as committed to escaping deflation. And that's why this time I choose to be optimistic."
Hibino predicted that the Nikkei, which has surged 15 percent since mid-November when elections were called, would likely trade between 9,500 and 13,000 next year. The upper limit would mark a 29 percent gain on Tuesday's close of 10,080.12.
On the back of the upturn in stocks, Hibino said he was confident Japan's second-largest brokerage would generate a net profit in the current financial year through March 2013, after losing a combined 76.7 billion yen ($904.5 million) in the previous two years.
Daiwa cut more than 500 jobs overseas starting in 2011 to stem the losses. Its biggest weakness has been investment banking, where it has struggled since ending a joint venture with Sumitomo Mitsui Financial Group in 2009.
Hibino said Daiwa, whose chief rival is industry leader Nomura Holdings Inc, was not looking for a partner in investment banking, noting that speculation it could come under the umbrella of a Japanese lender had recently died down.
He said Daiwa was not planning any further headcount cuts overseas but was shifting some staffing numbers within Europe. This included putting more people in regions such as Germany where demand for banking services was strong and trimming staff elsewhere, although he did not specify where cuts would take place.
Daiwa's biggest focus will be on encouraging customers to shift more of their savings into investment products, Hibino said. This strategy hinges in part on expanding its online bank, which has amassed 2 trillion yen in assets since its launch last year.
Japanese households hold the bulk of their 1,500 trillion yen in assets in low-yielding savings accounts, and persuading them to invest more has been a long-held ambition of the securities industry that has been slow to materialize.
Hibino believes conditions are now ripe for capturing that latent demand. He said Japanese stocks have bottomed out and the decades-long strengthening of the yen came to an end last year, boding well for corporate profits.
"Savings to investment is something that has been talked about for a long time but hasn't happened. That's because the markets have been going down," he said.

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Obama to cut vacation short to deal with fiscal crisis

President Barack Obama is cutting short his Hawaiian holiday to leave for Washington on Wednesday to address the unfinished "fiscal cliff" negotiations with Congress, the White House said on Tuesday.
As the clock ticks toward a January 1 deadline, efforts to avert a sharp rise in taxes and deep spending cuts have stalled, worrying world financial markets.
Obama and congressional lawmakers left Washington on Friday for the Christmas holidays with talks to avert the fiscal disaster in limbo.
When Obama arrives back in Washington early on Thursday, the focus will shift to the U.S. Senate after Republicans in the House of Representatives failed to pass their own budget measures last week.
Obama is expected to turn to a trusted Democratic ally, Senate Majority Leader Harry Reid, to help craft a quick deal.
White House aides began discussing details of the year-end budget measure with Senate Democratic counterparts early this week, a senior administration official said on Monday
The president will also need at least tacit approval from Senate Minority Leader Mitch McConnell to insure Republicans will permit passage of what is likely to be a stripped down bill that prevents taxes from rising on all Americans.
The measure may not, however, contain difficult spending cuts both parties had sought to speed deficit reduction. It is unclear how the president will seek to address the draconian across-the-board government spending reductions set to go into effect early in the year without a deal.
McConnell, who is up for re-election in 2014, has been a cautious participant in the process. His spokesman has said it was now up to Democrats in the Senate to make the next move.
Once clear of the Senate, the fiscal cliff legislation must also win enough bipartisan support to pass the House of Representatives, which failed last week to approve Speaker John Boehner's proposal to extend tax breaks for all Americans earning less than $1 million a year.
Conservative Republicans balked at any tax increases at all and withdrew support for the measure, which never came to a vote. Some Republican votes will be needed to pass any Senate bill.
BIG DAY THURSDAY
The next session of the Senate is set for Thursday, but the issues presented by the fiscal cliff - across-the-board tax increases and indiscriminate reductions in government spending - were not on the calendar.
The House has nothing on its schedule for the week, but members have been told they could be called back with 48 hours notice, making a Thursday return a theoretical possibility.
Obama and his family arrived in Hawaii early on Saturday and have devoted their time to spending the Christmas holiday together. First Lady Michelle Obama and the couple's two daughters are to remain in Hawaii, suggesting the president hopes to rejoin them if a deal is struck
Before the talks ran into trouble, Obama had originally been expected to stay in Hawaii - where he was born - until well into the first week of January.
But many observers are pessimistic that lawmakers, who have repeatedly come close to agreement only to see negotiations collapse, can wrap up a deal in the few days left before the end-of-year cut-off point.
The impact of a blown deadline would likely be first seen in financial markets, which wobbled last week after House of Representatives Speaker John Boehner's "Plan B" tax and spending effort fell flat.
Obama had offered a deal early last week that would have let tax rates rise for those making more than $400,000 a year, a higher threshold than the $250,000 income level he originally wanted to subject to higher tax rates. However, Boehner was unimpressed with the offer and pursued his alternative instead.
The president appears to have set consideration of fiscal cliff issues aside during his four days in Hawaii. His only public events have been to attend the funeral of long-time Hawaiian Senator Daniel Inouye on Sunday and a Christmas Day visit to soldiers at a Marine Corps base near the vacation home his family is using in Kailua, Hawaii.
He has spent his time with family and friends, with excursions to play golf, exercise, go hiking or to the beach.

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No new vote in Venezuela if Chavez sworn in late: official

Venezuela will not call fresh elections if Hugo Chavez's cancer prevents him from taking office by January 10, the head of Congress said on Saturday, despite a constitutional mandate that the swearing-in take place on that date. Chavez is recovering in Cuba from a six-hour cancer operation that followed his October re-election. The socialist leader has not been heard from for nearly two weeks, raising doubts as to whether he will be fit to continue governing. Opposition leaders may pounce on the issue of the swearing-in date to demand that authorities call fresh elections because of Chavez's apparently critical state of health due to an undisclosed type of cancer in the pelvic region. A constitutional dispute over succession could lead to a messy transition toward a post-Chavez era in the South American nation with the world's largest oil reserves. "Since Chavez might not be here in on January 10, (the opposition) hopes the National Assembly will call elections within 30 days. They're wrong. Dead wrong," said Diosdado Cabello, the National Assembly's president and one of Chavez's closest allies, during a ceremony to swear in a recently elected governor. "That's not going to happen because our president is named Hugo Chavez, he was reelected and is in the hearts of all Venezuelans." He suggested Chavez may need more time to recover from his surgery. Officials in recent weeks have recognized his condition was serious, and the garrulous leader's unusual silence has built up alarm even among supporters. The constitution says "the elected candidate will assume the Presidency of the Republic on January 10th of the first year of their constitutional term, via swearing-in by the National Assembly." It says new elections are to be called if the National Assembly determines a "complete absence" of the president because of death, physical or mental impairment or abandoning the job. The opposition believes it would have a better shot against Chavez's anointed successor, Vice President Nicolas Maduro, than against the charismatic former soldier who for 14 years has been nearly invincible at the ballot box. Chavez allies want to avoid a public debate over the president's health because his cancer has been treated as a state secret. His treatment in communist Cuba has helped keep his condition under wraps, and the Venezuelan government has given only terse and cryptic statements about his post-operation recovery. Constitutional lawyer Jose Vicente Haro said he expects the Supreme Court, which is controlled by Chavez allies, will rule that Chavez may extend his existing term without having to be sworn in with the expectation that he will eventually recover. "What they are doing is taking the debate over succession from the National Assembly, which is where it belongs, and moving it to the Supreme Court where behind closed doors they can decide the next steps are," said Haro, a Chavez critic and constitutional law professor as the Universidad Catholic Andres Bellow. Chavez has vastly expanded presidential powers and built a near-cult following among millions of poor Venezuelans, who love his feisty language and oil-financed social welfare projects. Opposition leaders are smarting from this month's governors elections in which Chavez allies won 20 of 23 states. They are trying to keep attention focused on day-to-day problems from rampant crime to power outages.

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FDA approves Aegerion's cholesterol drug with strongest warning

Aegerion Pharmaceuticals Inc said the U.S. health regulator approved its drug as an alternative treatment for patients who have a genetic predisposition to high cholesterol. The drug, Juxtapid, would carry a boxed warning -- the strongest label warning -- and will be available only through a restricted program due to risk of liver damage. Shares of the company fell nearly 4 percent to $24.76 in early trade on the Nasdaq on Monday. Aegerion will also conduct a post-approval study to test the long-term safety and efficacy of Juxtapid, the company said on a conference call. It plans to launch the drug in January. Juxtapid, Aegerion's first approved product, was backed by an advisory panel of independent experts on October 17. The panel looks at a drug's approval application and advises the FDA on whether it should be approved. The panel also recommended a drug from Sanofi SA and Isis Pharmaceutical Inc, Kynamro, to treat the same disorder on Oct 18. Aegerion's shares were down 2 percent at $25.15 in morning trade. The stock has gained about 23 percent since the FDA panel's report to Friday's close.

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