Report: U.S. nuclear renaissance unlikely after Fukushima

A new study released Wednesday said that the regulatory fallout from the Fukushima power plant disaster in Japan in March will short-circuit the U.S. nuclear renaissance of new power plant construction.

The report, "Nuclear Safety and Nuclear Economics," was written and presented by Mark Cooper, a frequent critic of the nuclear power industry. The report can be found here. Cooper is a senior fellow for economic analysis at the Institute for Energy and the Environment at the Vermont Law School.

Cooper said that past nuclear disasters, such as the one at the Three Mile Island power plant in Pennsylvania in 1979, have tended to greatly raise regulatory barriers and have also severely multiplied the cost of reactor construction. After Three Mile Island, for example, the report said, the cost of nuclear power plant construction doubled in most cases and trebled or quadrupled in some rare instances.

"This is an important moment to compare what is really likely to happen over the next 10 years with the industry’s expectations" of a nuclear renaissance, said Peter Bradford, an adjunct professor specializing in nuclear power and public policy at the Vermont Law School and a former Nuclear Regulatory Commission member.

"When that comparison is performed properly, it becomes clear that we are witnessing not a revival but a collapse in expectations for new reactor construction," Bradford added.

The report comes just days after a panel appointed by the Japanese government released a scathing assessment of the reponse to the disaster, which was caused when a huge earthquake generated a tsunami that struck the facility.

The investigative panel blamed the central government and the Tokyo Electric Power Co., saying both seemed incapable of making decisions to stem radiation leaks as the situation at the coastal plant worsened in the days and weeks after the disaster.

A recently updated online report by the World Nuclear Assn. said that as few as four of the 26 new nuclear facilities that have been proposed or planned in the U.S. will be finished by 2020. But it did not mention Fukushima and instead said the primary reason was the fact that a boom in domestic natural gas production has "put the economic viability of some of these projects in doubt."

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-- Ronald D. White

Photo: The damaged Fukushima Dai-ichi nuclear power station in Japan. Credit: David Guttenfelder / Associated Press

Report says tourism in Japan is rebounding slowly

The tourism industry in Japan -- devastated by a massive earthquake and tsunami in March -- has slowly begun to rebound, with a full recovery expected by next year.

Those conclusions came from a report by the Worth Travel and Tourism Council that said the number of international visitors to Japan dropped off significantly in June and July, 36% below the average for the same period in 2010. Foreign visitors generate about $16 billion in annual spending in Japan.

But domestic travel demand dropped by only 2% in June and July, helping to keep the overall tourism numbers at just 5% below 2010 levels, the report said.

News that radiation leakage from Japan's Fukushima Daiichi nuclear power plant is under control should help improve the country's tourism business, the report said.

"In the immediate aftermath of the earthquake and tsunami, the nuclear emergency was a key uncertainty that posed a significant threat to any early recovery in international demand," the report said.

And in good news for Hawaii, the number of Japanese tourists visiting the Aloha State has started to rise, after dropping in March and April to 24% below 2010 levels. In July, the number of Japanese travelers to Hawaii was only 9% below the levels in the same month in 2010, according to the report.

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-- Hugo Martin

Photo: A ship in Kesennuma, Japan, was thrown on land by the tsunami. Credit: Carolyn Cole / Los Angeles Times

Shaky economy? Tell that to the high rollers at Tiffany & Co.

Call it the diamond defense: Helped by strong overseas sales and wealthy shoppers in its second quarter, venerable jeweler Tiffany & Co. rang up a 33% increase in net earnings.

In a “substantially higher-than-expected” boost, earnings worldwide leaped to $90 million, while sales were up 30% to $872.7 million, the company said.

Maybe it was their breakfast special that put a shine on the company’s earnings. But more likely, it was the customer base in Asia, where buyers pushed sales up 55% to $173.2 million. Even in earthquake-devastated Japan, sales were up 21%.

European jewelry lovers also helped, propelling sales in the region 32%. Sales in the Americas were also up, with a 25% gain to $438.2 million, as buyers stuffed their economic uncertainty into little turquoise boxes.

At Tiffany & Co., buyers were willing to “absorb precious metal and gemstone cost increases,” said Chief Executive Officer Michael J. Kowalski.

High-income customers have turned increasingly to retail therapy, helping the luxury market rebound, though some analysts now worry that the fluctuating market may stem the growth.

Seeing the results, investors had some extra bling in their step, lifting the company’s stock more than 7% to nearly $68 in morning trading.

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-- Tiffany Hsu

twitter.com/tiffhsulatimes

Photo: Tiffany & Co.

Japan's credit rating cut to Aa3 by Moody's

In another sign of the debt woes weighing on the world’s developed nations, Japan’s credit rating was downgraded early Wednesday by Moody’s Investors Service.

Japan’s rating was cut one notch, to Aa3 from Aa2, because of “large budget deficits and the buildup in Japanese government debt since the 2009 global recession,” Moody’s said.

Japan now is rated the same as China, Taiwan, Macau and Chile.

The move comes nearly three weeks after Moody’s rival, Standard & Poor’s, rocked global markets by cutting the U.S. government’s debt rating to AA+ from AAA. S&P’s shift marked the first time in history that America has had a credit grade below the highest possible rating.

Moody’s, however, so far has maintained its Aaa rating on U.S. debt, though with a "negative" outlook.

Japan lost the top-rung rating more than a decade ago as the government went deeper into debt to try to revive the country’s long-suffering economy.

This year, the government faces new spending pressures as Japan struggles to recover from the devastating March earthquake and tsunami.

From Moody’s announcement Wednesday:

The current government now forecasts a primary budget surplus (excluding interest payments on government liabilities) by 2020, versus the former Koizumi government's target of a budget surplus by 2012.

Headline general government budget deficits will remain approximately at or above 7% of GDP [gross domestic product] through 2015, according to the Cabinet Office's “prudent” projection, well exceeding nominal GDP growth rates and thereby contributing to the inexorable rise in the debt-to-GDP ratio.

Japan’s debt-to-GDP ratio now tops 200%, more than twice the U.S. ratio.

Still, Japan pays some of the lowest interest rates in the world to borrow because most of its debt is purchased by its own people. By contrast, the U.S. relies on foreigners to fund a large portion of its borrowing.

The yield on Japanese 10-year bonds inched up to 1.03% Wednesday from 1.01% on Tuesday. That's less than half the 2.15% current yield on U.S. 10-year Treasury notes.

-- Tom Petruno

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Asian stocks dive in early trading

Asian stocks joined the global sell-off in early trading Thursday, mirroring the renewed panic on Wall Street a day earlier.

Within about 20 minutes of opening, Japan's Nikkei 225 stock average sank 1.6%, South Korea's Kospi index fell 2% and New Zealand's NZX-50 was down 0.7%.

Asian shares saw major gains Tuesday but appear just as concerned about Europe's debt crisis that rattled U.S. markets hours earlier.  

Photo: Foreign currency dealers talk at the Korea Exchange Bank in Seoul on Monday. Credit: Truth Leem / Reuters

Asian stocks plunge on first day of trading after U.S. downgrade

Asian shares plummeted Monday on the first day of trading after an unprecedented downgrading of U.S. government credit last week, raising fears the global economy was heading for deeper trouble.

In what could be a preview of U.S. markets, Hong Kong's Hang Seng fell 2.3% to 20,464.03, Japan's Nikkei 225 stock average dropped 2.2% to 9,097.56 and the Shanghai Composite Index lost 3.8% to end at 2,526.82.

"From how fast the market is falling, I can see people are really scared,” said Chen Wenzhao, an analyst for China Merchant Securities in Shanghai. “In the short term, it may be really hard for people to overcome their worries."

The steep losses came even after global policymakers said efforts would be made to restore confidence in financial markets.

Trading on South Korea's Kospi was briefly halted after it nosedived by as much as 7.4% in the afternoon. The index ended the day down 3.8% to 1,869.45.

"We're seeing real panic selling now," said Im Jeong Jae, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $29 billion, told Bloomberg. "Concerns about global economic conditions are affecting Asian markets overall. Korea, which has relatively more liquidity, is feeling a harder pinch."

Indonesian President Susilo Bambang Yudhoyono said he would hold an emergency meeting with his Cabinet after stocks in his country fell about 5%, Reuters reported.

In other Asian markets, Taiwan's Taiex slumped 3.8% to 7,552.80, Australia's S&P/ASX 200 index dropped 2.9% to 3,986.10 and Singapore's Straits Times Index fell 2.9% by later afternoon.

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-- David Pierson

Photo: An investor in front of a stock price board at a brokerage in Shanghai earlier this year. Credit: Eugene Hoshiko / Associated Press

Markets show muted response to U.S. debt downgrade threat

Financial markets in Asia were showing a muted reaction early Thursday to the possibility of a downgrade of America’s credit rating.

Treasury bond yields were up slightly, the dollar was lower and gold edged up to a new high. Stocks were down modestly in Tokyo.

Moody’s Investors Service on Wednesday put its Aaa rating on U.S. debt under review for a possible downgrade, making good on a threat it issued on June 2.

With Congress and the White House at impasse in negotiations to cut the federal budget and lift the Treasury’s $14.3-trillion debt ceiling, Moody’s cited “the rising possibility that the statutory debt limit will not be raised on a timely basis, leading to a default on U.S. Treasury debt obligations.”

Treasury bond investors have been staring at the possibility of default for months, but seemingly refuse to believe it will come to that. Bond yields are near their lows for the year.

Moody’s announcement came after U.S. markets closed Wednesday. In Asia early Thursday the five-year T-note yield was at 1.45%, up from 1.44% in U.S. trading. The 30-year T-bond yield was at 4.20%, up from 4.17%.

The Treasury will sell $13 billion of new 30-year bonds on Thursday.

In currency trading the euro rose to $1.424 from $1.417 on Wednesday. The dollar fell to 78.59 yen from 78.98, nearing the post-war low of 76.25 reached in mid-March, when Japanese were pulling money home after the country’s devastating earthquake.

Gold, which closed at a record high of $1,585.20 an ounce in New York, added $1.20 to $1,586.40 in Asia.

The Nikkei-225 stock index was off 0.3% to 9,936. Equities were mixed in other Asian markets.

All in all, anyone hoping for a financial panic to force a budget deal between Congress and the White House will be disappointed with markets’ reactions so far.

-- Tom Petruno

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Japan may face debt rating cut, Moody's warns

Bond rating firm Moody’s Investors Service formally warned Japan on Tuesday that its rating might be cut as the country sinks deeper into debt.

Moody’s said it put Japan’s Aa2 rating on review for a possible downgrade, citing in part “much larger than initially expected economic and fiscal costs of the March 11 earthquake.”

On Friday, Moody’s rival Fitch Ratings changed its outlook for Japan’s rating to “negative” from “stable.” Standard & Poor's cut its rating to AA-minus from AA in January, the first reduction in nine years, then warned in April that the rating could drop further.

Japan lost its Aaa top rating from Moody’s in 1998, eight years into the country’s struggle to revive its economy after the real estate and stock market crashes of the early 1990s. The rating fell to A2 in 2002 before upgrades over the last few years.

Japan’s debt has ballooned since 1990 as the government has spent massively in an attempt to jump-start growth. Now, the repair and rebuilding costs from the March earthquake, tidal wave and nuclear crisis are fueling another wave of borrowing.

From Moody’s:

Large deficits and the collapse of growth since the early 1990s have led to an overhang of government debt that is by far the largest among the major advanced economies -- whether projected at 226% of GDP by the IMF, or at 174% of GDP by the Cabinet Office for 2010 (accounting practices explain the difference). Moreover, both sources project an inexorable rise in debt over the long term under current policy and growth assumptions.

Yields on Japanese government bonds were little changed Tuesday. The 10-year bond yield was 1.16%, down from a 2011 high of 1.35% on Feb. 16. U.S. 10-year Treasury notes, by contrast, pay 3.07%.

Japan’s interest rates still are the lowest in the world, in large part because the government’s debt mostly is purchased by Japanese investors. Unlike the U.S., Japan isn’t dependent on foreigners to fund a significant chunk of its debt.

Still, Moody’s worries that the day will come when Japan’s own investors will be unwilling to extend more credit to their government -- something hedge fund manager Kyle Bass has been insisting is not that far off.

Japan’s “large refinancing needs introduce a susceptibility to a credit market tipping point, which could lead to an abrupt fall in [bond] prices and a rise in yields, which would in turn result in downward rating pressures,” Moody’s warned.

-- Tom Petruno

Gold tops $1,450, silver above $39 as nervous money seeks refuge

Gold and silver powered higher Tuesday as geopolitical worries continued to pile up, driving more investors and traders to buy the metals as havens against calamity.

Gold hit a new all-time high (unadjusted for inflation), rallying $19.60, or 1.4%, to close at $1,451.80 an ounce in New York futures trading.

Silver extended this year’s hot streak, rising 69 cents, or 1.8%, to $39.17 an ounce. Before adjusting for inflation, silver is at its highest since the infamous spike of late 1979 and early 1980, when the Hunt brothers briefly cornered the market.

Silver now is up 27% year to date to gold’s 2% gain. Both metals had sold off in January before rebounding.

Anyone looking for fearful headlines didn’t have to search far Tuesday. The operator of Japan's crippled Fukushima nuclear plant said that it found severe levels of radiation in seawater. Libyan government forces continued to battle rebels for control of the oil port of Brega. And Portuguese government bond yields soared for the 11th time in 12 trading sessions after the nation’s banks threatened to stop buying the securities, moving the country closer to a European Union bailout.

After regular futures trading ended, gold and silver rose further in electronic trading following the Federal Reserve’s release of the minutes from its last meeting. Fed officials debated whether to stick with their easy-money policies but ultimately opted to continue with their most controversial economic-stimulus plan, the program of buying Treasury bonds to pump money into the financial system.

Many Fed critics say its policies will eventually fuel a surge in inflation. Gold and silver have always been considered great hedges against that risk.

Gold rose as high as $1,458 in electronic trading Tuesday afternoon while silver rose to $39.34.

Adam Klopfenstein, a strategist at commodities trader Lind-Waldock in Chicago, said the metals also may be benefiting from fear that Republicans in Congress will force a government shutdown rather than raise the federal debt limit from the current $14.29 trillion. Treasury Secretary Timothy F. Geithner warned Monday that the limit could be reached by May 16. A shutdown could occur as early as Friday if an interim spending agreement isn't reached.

The U.S. stock market has shown remarkable resilience in recent weeks despite foreign and domestic geopolitical concerns. On Tuesday the Dow industrials slipped just 6.13 points to 12,393.90 after hitting a new 34-month high Monday.

“It seems like investors want to keep their equity exposure but they’re also rotating into asset classes that provide a hedge,” Klopfenstein said. U.S. Treasury bonds might normally provide a hedge, but the chance of a government shutdown is causing some investors to shy away from Treasuries, he said.

That is drawing more haven-seekers to gold and silver, he said.

-- Tom Petruno

Photo: The Austrian national mint's gold philharmonic coin. Credit: Lisi Niesner / Reuters

Stocks push higher; some indexes hit new bull-market highs

Major U.S. stock indexes were at or near new multiyear highs on Wednesday, as the bulls stay in control with less than two trading days left in the first quarter.

The Dow Jones industrial average (charted below) was up 99 points, or 0.8%, to 12,378 at about 10:40  a.m. PDT, within easy reach of its 2 1/2-year closing high of 12,391 set on Feb. 18.

[Updated at 1:15 p.m. PDT: The Dow closed up 71.60 points, or 0.6%, to 12,350.61.]

Some indexes now have overtaken their previous peaks. The Russell 2,000 small-stock index was up 1.1% to 838.63, topping the recent closing high of 834.82 set on Feb. 18.

The Standard & Poor’s mid-cap stock index and the Dow transportation-stock index also are trading at new highs for this 2-year-old bull market.

Barring a steep sell-off between now and Thursday’s closing bell, the major indexes will post first-quarter gains of 5.5% to 8.5%. The Dow industrials are up 6.9% so far.

Stocks have overcome a barrage of dismal headlines since mid-February, including Mideast unrest, surging commodity prices, more government-debt woes in Europe and Japan’s nuclear crisis.

“This market has climbed the proverbial ‘wall of worry,’ ” said Jeffrey Rubin, director of research at Birinyi Associates in Westport, Conn.

Joe Saluzzi, a veteran trader at Themis Trading in Chatham, N.J., puts it another way: The market, he says, has done what was needed to provoke “maximum frustration” among investors who were logically anticipating a significant pullback in the face of a world of trouble.

A pullback did happen, but not the 10% or greater “correction” many analysts said was overdue. The decline ended with the Dow at 11,613 on March 16, down 6.3% from its Feb. 18 high.

Even as the market has resumed its climb since mid-March skeptics have pointed to light trading volume, suggesting there’s little conviction behind the rebound.

But Wall Street bulls say stocks’ resilience shows that most investors are staying focused on the idea that the U.S. economic recovery will continue. A report Wednesday on private-sector job growth in March helped underpin optimism.

If you buy the continuing-recovery theme, the primary alternatives to stocks -- cash accounts paying nearly nothing and bonds at relatively low yields -- don’t have much appeal, said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland.

“So people have thrown in the towel and come back to equities,” he said.

-- Tom Petruno

Consumer Confidential: Hiring up, car parts scarce, scotch whisky sales surging

Here's your wishin'-and-hopin' Wednesday roundup of consumer news from around the Web:

-- The recovery continues. Private employers added more than 200,000 jobs in March, while planned layoffs fell, according to ADP Employer Services. The ADP report, which is jointly developed with Macroeconomic Advisers, sets the table for the main course: the federal government's more comprehensive labor market report due out Friday. A Reuters poll of analysts shows a forecast for nonfarm payrolls to rise by a median of about 190,000 jobs in March, with private payrolls forecast to rise by 200,000. The data suggest that while the economy is showing signs of life, the recovery is still moving slowly and it will be difficult to make a serious dent in the unemployment rate. Still, even modest good news is good news.

-- People in the U.S. may not be facing the horrors that quake/tsunami/meltdown survivors are coping with in Japan, but there is some effect of the troubles abroad on these shores. Toyota is warning dealers that some parts suppliers are still not back to normal production, and there could be delays in getting certain parts, including body panels and shock absorbers. Toyota says it will not fill routine orders to replenish dealer stock but will accommodate emergency requests when possible. Meanwhile, Honda is cutting daily output by as much as 50%, and orders for Japanese-built models have been suspended. Mazda has suspended orders for vehicles made in Japan until further notice. And Volvo says it gets 10% of its components from Japan and can't predict what happens beyond the end of this week.

-- So, yes, times are tough. What can we do about it? Well, there's always a stiff drink. As such, I can report that scotch whisky exports rose 10% last year. The Scottish Whisky Assn. says that exports -- which account for just over 90% of production -- increased for the sixth consecutive year in value terms, but volumes dipped 2% to the equivalent of 1.06 billion standard bottles of scotch in 2010. Eight of the top 10 export scotch markets grew in value terms, with the top two markets remaining the United States and France. Maybe it's a good thing you can't get your car fixed. Probably better to stay off the road.

-- David Lazarus

Photo: When the going gets tough, the tough reach for a stiff drink. Credit: Ken Hively/Los Angeles Times