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Japan's industrial production probably rebounded from its biggest slide in 10 months, as car and electronics makers stepped up output to meet demand from Asia and emerging markets.

Production rose a seasonally adjusted 2 percent after dropping 1.6 percent a month earlier, according to the median estimate of 45 economists surveyed by Bloomberg News. The Trade Ministry releases the report on Jan. 30 at 8:50 a.m. in Tokyo.

Economists say the gains may not last as a U.S. recession could spill into Asia and other developing economies, where a growing consumer class is buying Japanese cars and electronics. Matsushita Electric Industrial Co. expects sales to China, Brazil and other emerging markets to rise 25 percent next year.

“Japan is finding more customers for its exports,'' said Richard Jerram, chief economist at Macquarie Securities Ltd. in Tokyo. Demand from Asia, Russia and the Middle East “gives hope that the slowdown over the next six months might not be too severe.''

Exports, the engine that drove almost all of Japan's third- quarter growth, rose 6.9 percent in December, as record shipments to Asia made up for a drop in sales to the U.S. Exports to Russia, which have doubled in the past two years, surged 40 percent.

Customer growth in emerging markets is one of the reasons Matsushita, the world's largest consumer electronics maker, expects sales to rise next year. The maker of Panasonic-brand electronics plans to invest in a 300 billion yen ($2.8 billion) factory to make liquid-crystal display televisions.

Toyota Production

Toyota Motor Corp., the world's second-largest automaker, has been increasing output for four months even as U.S. consumer demand wanes.

The outlook for exporters including Toyota and Sony Corp., which make about a third of their sales in the U.S., still depends on how badly the world's biggest economy stumbles, Economic and Fiscal Policy Minister Hiroko Ota said this month.

“A U.S. slowdown affects Asia, beginning with China, and via that route it affects Japan,'' Ota said. “The extent to which Japan is hurt depends on the severity of the U.S. slowdown.''

A three-quarters percentage point cut by the U.S. Federal Reserve last week hasn't fully allayed concerns over the economy. UBS AG expects the U.S. to fall into a recession in the first half of the year and exert a drag on the world's growth, including Japan's, UBS said.

UBS cut its 2008 growth estimate for Japan to 1.2 percent from 1.6 percent.

“Slower world growth suggests the outlook for Japanese production isn't great,'' said Akira Maekawa, a UBS economist in Tokyo. “And that suggests, as the Bank of Japan keeps saying, the economy will slow `for the time being.'''

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French business confidence unexpectedly held steady in January, a sign that executives in Europe's third-largest economy anticipate avoiding the worst of the fallout from a U.S. slowdown.

Insee, the Paris-based national statistics office, said today its index of sentiment was 109, the same as December. Last month's reading was revised down from 110. Economists predicted a one- point drop to 109, according to the median of 24 forecasts in a Bloomberg News survey.

“It's a slight decline, but at a relatively high level,'' said Alexandre Bourgeois, an economist at Paris-based Natixis. “You can't talk about recession or breakdown.''

President Nicolas Sarkozy's tax cuts and growth in Asian economies may sustain the French economy even as a stronger euro and higher energy costs curb competitiveness. Publicis Groupe SA, a Paris-based advertising agency, had a “very good'' fourth quarter for new business, Chief Executive Officer Maurice Levy said today.

French economic growth is set to trail the euro region for a third year in 2008, the Organization for Economic Cooperation and Development estimates. After a “weak'' first-half this year, the economy will expand 1.8 percent as fallout from a U.S. housing recession curbs the global expansion.

Production Outlook

A gauge of executives' outlook for production dropped to minus 4 from 4, the lowest since February 2006, Insee reported today. Nevertheless, an index of their forecasts for their own business climbed to 19 from 12.

“We have a hard time seeing how business leaders' confidence can hold up much longer while international economic growth slows rapidly and stock markets remain volatile,'' said Mathieu Kaiser, an economist in Paris at BNP Paribas SA. “Still, the solid business climate suggests the French economy is standing up better than the euro area.''

The French report followed an unexpected increase in German business confidence from a two-year low, according to the Ifo institute yesterday. European Central Bank council member Axel Weber yesterday expressed confidence in economic growth and Siemens AG, Europe's biggest engineering company, reported a first-quarter profit that beat analysts' estimates.

Sarkozy has sought to spur the economy by eliminating payroll charges on overtime hours and has enacted tax cuts and proposed measures to boost incomes. At the same time, he has won contracts worth more than $40 billion for nuclear-power plants, airplanes and trains following visits to Asia and North Africa.

France's business confidence index has oscillated between 106 and 111 this year, far from the record 123 reached in 2000.

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Bear Stearns Chief Executive James Cayne is resigning under pressure from shareholders upset over the firm’s losses amid a slew of problems sparked by the collapse of mortgage markets, The Wall Street Journal reported Monday.

Mr. Cayne was expected to be replaced by Bear Stearns President Alan Schwartz, a 57-year-old investment banker respected for his deal making savvy.

Mr. Cayne started notifying Bear Stearns’ board on Sunday that he plans to give up his post but remain as chairman, the Journal reported on its Web Site, citing unnamed people familiar with the matter.

Bear Stearns representatives did not immediately return phone and e-mail messages seeking comment late Monday.

Mr. Cayne, 73, had been under scrutiny since the summer, as the liquidity crisis pushed scores of mortgage lenders out of business, bled more than $100 billion from Wall Street’s books, and coaxed the Federal Reserve to cut interest rates by a full percentage point.

The company, one of the biggest underwriters of mortgage-backed bonds in the U.S., may be the Wall Street investment bank most directly exposed to this year’s credit squeeze.

But until now, Mr. Cayne had managed to keep his job even as peers like Citigroup Inc.’s Charles Prince and Merrill Lynch & Co.’s Stan O’Neal lost theirs. A nearly 40-year veteran of Bear Stearns, he took the CEO job in 1993 and became chairman in 2001.

Some people point to the collapse last summer of two Bear Stearns hedge funds set up to bet on risky mortgage debt as the trigger for the subprime mortgage crisis, which began as people with tainted or weak credit history started defaulting on their loans.

Mr. Cayne later came under fire after the Journal reported that as the two hedge funds were going bankrupt, he was playing golf and bridge without access to e-mail or a telephone.

Bear Stearns Cos.’ fiscal fourth-quarter loss, the first in its 84-year history, and the collapse of the hedge funds, prompted Mr. Cayne to pass on his 2007 bonus. Members of the company’s executive committee also did not receive year-end bonuses.

Bear Stearns’ profit plummeted 89 per cent in fiscal 2007 as the bank wrote billions of dollars of bad debt off its books. The company’s stock had lost almost 47 per cent of its value as of late December.

The company and other firms have seen writedowns from investments in subprime mortgages and fixed-income trading come in much steeper than first expected.
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