April 30, 2024

Japan Cabinet Oks Blueprint for Spending Cuts

Prime Minister Shinzo Abe has meanwhile deferred until later this year a decision on hiking Japan’s sales tax, which might help fortify public finances, but could do more harm than good if it derails the economic recovery nurtured by Abe’s government.

Japan’s public debt amounts to more than twice the size of its economy, which is the world’s third largest. Earlier this week, the International Monetary Fund reiterated its call for a “credible” fiscal plan to help bring it under control. Abe is expected to respond to that call at a summit of the Group of 20 major developed and emerging economies early next month.

The plan approved Thursday would slash social security spending and reduce public works costs by 10 percent. So far, Abe has focused on boosting spending to stimulate growth and fight deflation. Economists say the still-fragile recovery can be sustained only if the government tackles difficult reforms needed to improve Japan’s competitiveness and counter the impact of a fast-aging and shrinking population.

Abe’s ruling party controls both houses of parliament but it’s unclear whether the plan can win the approval of lawmakers without being significantly watered down. Cuts to benefits such as old age pensions are politically unpalatable for a fast-greying electorate.

Japan’s Finance Ministry and its central bank, which wrapped up a monthly policy meeting Thursday with no change in its extreme monetary easing policies, have pushed for stronger fiscal discipline, warning investors will lose confidence in the country’s financial health if the debt continues to grow.

Bank of Japan Gov. Haruhiko Kuroda said the central bank left unchanged its economic assessment that a moderate recovery is happening, but did see some signs of improvement from the month before.

Kuroda reiterated his support for going ahead with the sales tax hike, saying he expects the economic outlook to continue to strengthen. Original plans called for a 3 percentage point increase in the current tax to 8 percent next April, to be followed by another 2 point increase in 2015.

The fiscal blueprint, which is part of the budget process for fiscal 2014, would reduce the government’s deficit by 17 trillion yen ($176 billion), or half, over the next two years, to help curb the issuance of fresh government debt. A key element of that reduction would come through lower spending on social security, such as old-age pensions and welfare.

It comes as the government mulls spending hundreds of millions of dollars to contain radiation-contaminated water at a nuclear plant wrecked by the March 2011 tsunami.

Plans call for spending 30 billion to 40 billion yen ($300 million to $400 million) on efforts to solidify ground surrounding reactor buildings at the plant in Fukushima to prevent underground water from entering contaminated buildings. That would be in addition to an 8.7 billion yen ($90 milllion) budget this year for decommissioning projects including development of robots to locate and remove debris from melted reactors.

The nuclear disaster is one of several massive drains on national finances. Neglect of the country’s infrastructure has left many tunnels, dams and bridges in need of urgent repairs. Surging pension and health care costs for the growing elder population are among other pressing concerns.

So far, flooding the economy with cash appears to have helped support a recovery, with growth at 4.1 percent in the January-March quarter. Data for April-June, due for release Monday, are expected to show growth at about 3.5 percent.

But a Cabinet survey released Thursday showed that confidence among people with jobs sensitive to economic conditions, such as restaurant workers and taxi drivers, worsened for the fourth straight month in July. The government said extreme heat was partly to blame, as people stayed home rather than venturing out to eat and shop.

With the government already reining in spending to address fiscal concerns, and the sales tax hike due to dent consumer demand if it takes effect in April, future growth will depend on higher corporate investment and wages, Moody’s Investor’s Service said in a report. Otherwise, the government risks increasing debt without spurring enough growth to pay for it.

But a key adviser to Abe, economist Koichi Hamada, said Thursday that he was concerned the tax hike would cause too much of a setback.

“It would be a pretty big shock,” he told reporters.

Article source: http://www.nytimes.com/aponline/2013/08/08/world/asia/ap-as-japan-economy.html?partner=rss&emc=rss

Edul Ahmad Accused of Defrauding Guyanese Immigrants

At a prominent intersection near the border of Richmond Hill and South Ozone Park, his smiling face looked down from a large billboard that promoted his real estate services. Many residents responded, taking out high-risk mortgages that they were told they could readily afford.

In July, it all came crashing down. Agents from the Federal Bureau of Investigation arrested Mr. Ahmad, charging him with masterminding a $50 million mortgage fraud that seemed to exemplify a nationwide phenomenon of celebrated immigrant brokers who were accused of preying on their own.

Now, scores, if not hundreds, of Guyanese immigrants are facing financial ruin because of loans said to have been arranged by Mr. Ahmad, and the repercussions from the case have extended from Queens to Washington to Guyana.

Mr. Ahmad is currently engaged in intensive plea-bargain negotiations with federal prosecutors, according to court documents, but it appears that the impact of the loans will endure for years. Richmond Hill has been hit harder by the foreclosure crisis than most other neighborhoods in the city, officials and analysts said.

Mr. Ahmad’s case has also ensnared two politicians whom he considered friends: United States Representative Gregory W. Meeks, a Queens Democrat, and John L. Sampson of Brooklyn, the Democratic leader of the State Senate.

A House ethics panel is investigating Mr. Meeks for failing to disclose that he received $40,000 from Mr. Ahmad. Mr. Sampson worked as Mr. Ahmad’s lawyer and was disciplined by the New York secretary of state for notarizing a document for Mr. Ahmad without a license.

Guyana is a small nation bordering Venezuela where the largest ethnic group is of Indian descent. After Mr. Ahmad’s arrest, the ruling party in Guyana had to explain why his contact information appeared on a flier promoting a fund-raising dinner with the president at the time, Bharrat Jagdeo; the party said Mr. Ahmad was a friend of Mr. Jagdeo’s, but not a campaign donor.

Mr. Ahmad, 44, is charged with luring buyers into subprime mortgages, inflating the values of their properties and concealing his involvement by using straw buyers, like his wife and the Guyanese-born captain of the United States cricket team, Steve Massiah.

Mr. Ahmad pleaded not guilty and posted $2.5 million in bail in July. Reached by telephone recently, he would not comment.

Since 2009, more foreclosures have been filed in Queens than in any other borough, according to the Neighborhood Economic Development Advocacy Project. Five of the hardest hit ZIP codes in Queens are within a 15-minute drive of the office of Mr. Ahmad, who community leaders say once held about 75 percent of local real estate listings.

Paban Saha and Syed Husain, friends and former business partners, said they contacted him in 2006 after seeing his newspaper advertisements. They said he earned their confidence at their first meeting, when they watched him write a check to a charity.

“He set up an atmosphere where you forgot about everything,” Mr. Husain, 56, said.

Mr. Ahmad and one of his brokers offered Mr. Husain and Mr. Saha a three-family house for $880,000 but warned of another bid, Mr. Husain said. Mr. Ahmad demanded that they close within a week, insisting they use his lawyer, his appraiser and his mortgage officer, who pushed to finance 95 percent of their home at a 12.5 percent rate, Mr. Saha and Mr. Husain said.

Within two years, their finances were devastated, they said. The property was on the brink of foreclosure, the souvenir store that their families owned together went bankrupt, and they depleted savings they had accumulated since emigrating from Bangladesh in the 1990s.

“You can only imagine two households trying to keep one property afloat,” said Mr. Husain, who has filed a civil lawsuit against Mr. Ahmad. “It sucked everything dry.”

Some Guyanese people, describing their foreclosures linked to Mr. Ahmad’s services, said they were so terrified by his powerful ties that they did not want their names publicized. One man said that at times he felt suicidal.

“I don’t even trust myself to make decisions anymore,” he said. “I’ve lost everything.”

Housing experts say these cases have cropped up in immigrant enclaves across the United States, often because immigrants can be too trusting of business leaders from their own communities who hold themselves up as examples of classic American success stories.

In September, a Bolivian-born woman became the third member of her family in San Francisco to be charged with defrauding Latino immigrants in a multimillion-dollar mortgage scheme.

Los Angeles’s Thai community was victimized, community leaders said, by a prominent loan officer who cheated so many immigrants that after he came under scrutiny, he fled to Thailand.

Vijai Singh contributed reporting.Vijai Singh contributed reporting.

Article source: http://www.nytimes.com/2012/01/09/nyregion/edul-ahmad-accused-of-defrauding-guyanese-immigrants.html?partner=rss&emc=rss