TOKYO: Toshihiko Fukui, governor of the Bank of Japan, may say no this week to an interest rate increase. It will not be his last word on the subject.

Even before the market turmoil of last week, capped by the U.S. Federal Reserves surprise move Friday to lower the interest rate it charges on loans to banks, investors were betting that Bank of Japan policy makers would forgo an increase at their meeting Wednesday and Thursday.

Still, Fukui, who is 71 and whose term ends in March, remains determined to secure his legacy of “normalizing” monetary policy by raising the lowest borrowing costs in the industrialized world.

“If Fukui cant raise rates from 0.5 percent by March, he would probably feel that he didnt do what he set out to do,” said Masaaki Kanno, a former central bank official who is now chief economist at JPMorgan Securities Japan.

Resuming rate increases in Japan would put Fukui at odds with the International Monetary Fund and the government of Prime Minister Shinzo Abe. They cite Japans renewed struggle with deflation - including five months of falling prices - as reason to keep the banks benchmark rate steady.

In addition, Abes governing Liberal Democratic Party, which was routed in upper-house parliamentary elections last month, is eager to avoid further unsettling voters and weakening its already tenuous grip on power.

The partys secretary general, Hidenao Nakagawa, told Fukui at a meeting Aug. 7 that higher interest rates had hurt regional economies and contributed to the party defeat, according to Hiroko Ota, the minister for economic and fiscal policy.

Of greater concern to Fukui is the danger that leaving borrowing costs abnormally low would fuel risky investments leading to asset bubbles, while depriving his successor of maneuvering room in case the Japanese economy stalls.

The same global market turmoil that has taken off the table the possibility of a rate increase in August reinforces Fukuis point that abnormally low rates in Japan encourage unsafe investment.

“He is concerned that if they stay so low for long, there will be the risk of resource misallocation,” said Kanno, the former central bank official.

The credit crunch that set off a global sell-off of stocks this month also drove the yen to its highest level against the dollar in more than a year. The market turmoil prompted investors to sell risky investments financed by so-called carry trades - investments paid for with low-interest loans in Japan.

As markets gyrated, major central banks, including Japans, injected billions of dollars into the banking system, followed by the Feds discount-rate cut Friday. The yen fell on speculation that the Feds action might encourage investors to resume carry trades.

While bringing the Japanese target rate closer to 1 percent would still leave borrowing costs among the worlds lowest, it would allow Fukui to leave his successor some leeway to loosen credit, if necessary.

That is a luxury he did not have when he took office in 2003. Under Fukuis predecessor, Masaru Hayami, the bank pushed the benchmark rate nearly to zero in 2001 as global growth faltered. Japan fell into a recession. Consumer prices, which had been dropping since 1999, declined for three more years.

A rate increase would be the third since Fukui embarked in July 2006 on a strategy of “gradually” raising borrowing costs. He has argued that the bank has room to raise rates now, given sustained growth and the outlook for rising prices.

“Fukui may very well achieve a positive place in history as the BOJ governor who successfully oversaw a cautious return to an interest-rate-driven monetary policy,” said Jan Lambregts, head of Asia research at Rabobank International in Hong Kong.

The latest economic data do not make that effort any easier.

The cabinet office forecast this month that the broadest measure of Japanese consumer prices would be unchanged in the year ending March 31, 2008, down from its January projection of an increase of 0.2 percent.

Ota said the figures meant that the end of Japanese deflation “has been delayed.”

Economic growth slowed in the second quarter more than economists had predicted, falling to a 0.5 percent annualized rate from 3.2 percent in the first quarter.

The International Monetary Fund further complicated Fukuis task this month when it said that the central bank need not rush to tighten credit because inflation was not a threat and Japanese interest rates were at “appropriate” levels.

Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York, said, “The IMF seems to be siding with the Japanese government over the BOJ.”

SAN FRANCISCO: Gadget enthusiasts who snapped up Apples ballyhooed iPhone before Wednesday are coping with a bitter aftertaste now that it is $200 cheaper just 10 weeks after its introduction.

The price cut, to $399 from $599 for the eight-gigabyte iPhone, immediately set off a debate on Internet technology forums between early adopters who said paying a premium price came with the territory and those who said they felt burned. The price reduction was too much too soon, some complained.

In a discussion on The Unofficial Apple Weblog site, the views were split roughly evenly.

Analysts expect that the iPhone price cut, the phasing out of the lower-end iPhone and the new iPods introduced Wednesday to help the company have yet another blockbuster holiday selling season. But the company must also deal with investors who love Apples meaty profit margins and customers who are suffering from a bit of buyers remorse.

Apple stock dropped more than 5 percent after the price cut was announced Wednesday, closing at $136.76, down $7.40. In extended trading Wednesday, the share price fell another $1.01. On Thursday, the stock was down $2.31 at $134.45 in afternoon trading in New York.

Many customers took the iPhone price cut in stride, however.

Ryan Roth, who bought one for $599 on Friday after months of research, chalked up his purchase to “the worst timing ever.”

“I realize this is not their problem. I agreed to the original price - its my fault,” said Roth, 32, of New York, who had been thinking about getting a cellphone for four years but held out until last week.

But some relief is in sight.

Natalie Kerris, a spokeswoman for Apple, said customers who purchased an iPhone within the past 14 days and had the receipt could get a full refund under Apples return policy if the product was unopened. If they have opened it, they still can get a refund of the price difference.

The steep price reduction less than three months after the iPhones introduction June 29 - and the discontinuation of the four-gigabyte iPhone, which sold for $499 - were surprising from Apple, which usually keeps prices steady while adding new features. It normally discounts products only when they begin to get old.

But analysts said that quick discounts are typical for the cellphone industry. The worlds best-selling cellphone, the Motorola Razr, for instance, debuted at $499 but models can now be bought for less than $100.

“This is about Apple learning how to become a cellphone retailer,” said Jeff Kagan, an independent telecommunications industry analyst based in Atlanta. “All of a sudden its in the cellphone business, and everyone is trying to figure out how to measure it, and we dont know yet.”

Apples chief executive, Steve Jobs, said the company was poised to sell one million iPhones in the United States by the end of September.

- ‘Educational’ DVDs for infants under review by new study
- Research finds DVDs have negative effects on infant language skills
- Parents advised to limit the time their children watch the products

EDUCATIONAL DVDs and videos which claim to enhance the cognitive development of infants may hinder rather than help their language skills, according to a study published today.

The DVDs, widely available in stores such as Mothercare, often claim to aid the development of babies’ speech and vocabulary, but parents have been warned that if they want to improve their infant’s ability to learn, they should limit the amount of time they spend using such products.

The study highlights products such as the Baby Einstein and Brainy Baby DVD ranges, and suggests overexposing children aged eight to 16 months to them may slow their ability to acquire a vocabulary.

Researchers at the University of Washington and Seattle Children’s Hospital Research Institute found that for every hour per day spent watching baby DVDs and video - which often feature disconnected images and scarce dialogue - infants understood an average of six to eight fewer words than infants who did not watch them. Baby DVDs and videos were found to have no effect on the vocabularies of children aged 17 to 24 months.

Frederick Zimmerman, lead author of the study and an associate professor of health services at the university, said of the paper, published today in the Journal of Pediatrics: “There is no clear evidence of a benefit from baby DVDs and videos and there is some suggestion of harm. The more a child watches baby DVDs and videos, the bigger the effect. The amount of viewing does matter.”

Previous research has shown that by three months of age, 40 per cent of infants are regular viewers of television, DVDs or videos and, by the age of two, this number jumps to 90 per cent.

The new study found no positive or negative effects on infants of either age group from viewing educational and non-educational media or adult television programmes.

On the UK website of Brainy Baby, one of the brands singled out in the study, the manufacturers claim the DVDs are “an entertaining way to help little ones learn educational basics, stimulate cognitive development and gain a start to learning.”

A spokesman for the Educational Institute of Scotland said:

“While we would not wish to comment on the suitability of any individual learning aid product, the EIS would support the view that there is no better method than interaction with parents or other carers in assisting young children in language acquisition.

“Visual aids such as CDs and DVDs are no substitute for genuine interaction with a parent or carer. Active parental involvement is a key to effective learning.”

The Baby Einstein brand, part of Walt Disney, has been the subject of a complaint filed with the US Federal Trade Commission against its advertising, which claims to help babies to learn.

Dr Dimitri Christakis, a pediatrics researcher at Seattle Children’s Hospital Research Institute and co-author of the study, said: “The onus is on manufacturers to prove their claims.”

A US spokesman for Disney Consumer Products said the Baby Einstein range of DVDs gave parents “interactive tools to use with their children,” but declined to comment on the details of the study. ‘I don’t think they help much, they were very basic’

SOPHIA Antonatou used the Baby Einstein DVDs for her son, Marcus, when he was less than a year old.

The titles she bought for him mostly featured musical themes. One feature, Baby Mozart, showed simple shapes, primary colours and images of toys set to classical music.

Ms Antonatou, from Edinburgh, said the DVDs, produced by Walt Disney, captured the full of attention of Marcus.

“He was switched off from everything else while he watched the DVDs,” she said. “I put them on when I had something to get on with.

“I didn’t treat the DVDs as educational aids, and I don’t think they help that much.

“They were very basic in terms of the language, but they lasted for 27 minutes, and I used them as short-term babysitters when I had something to do, and Marcus was totally absorbed.

“The programmes are obviously very interesting to children of that age, but it perhaps wasn’t good that he didn’t pay attention to anything else while watching them.

“Children need to speak with their parents, that’s the best way for them to learn language skills.”

Ms Antonatou, originally from Greece, recently bought Marcus Greek-language children’s DVDs, and believes they are aiding his development. Due to celebrate his third birthday at the end of September, Marcus also enjoys narrative-based DVDs and television.

Ms Antonatou added: “He’s moved on to children’s programmes that have a story and a narrative to them.

“I think it’s good for him to watch Thomas the Tank Engine in moderation and [it’s] better than basic baby DVDs - he learns the words the narrator uses and repeats them when he’s speaking.”

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