TOKYO: Nomura Holdings, the largest Japanese brokerage company, on Friday posted a surprise quarterly loss of $1.5 billion on its exposure to bond insurers and warned that it could still be at risk for further losses related to the credit crisis.

Nomura said the deepening global credit crunch had prompted it to set aside provisions of 132 billion, or $1.27 billion, against losses related to contracts with so-called monoline insurers, which insure against the risk of a bond or another security defaulting.

The company, whose competitors include Daiwa Securities, Goldman Sachs and Morgan Stanley, also said that it had booked 22 billion in appraisal losses on its commercial mortgage-backed securities, or CMBS, business.

“The main reason for this earnings result is the deterioration of the monoline insurers,” said Nomuras chief financial officer, Masafumi Nakada.

“We included the impact of monolines and CMBS as much as possible but we cant really say that we have no risk in the future.”

Nomura reported a net loss of 153.85 billion in the quarter through March, compared with a profit of 33 billion a year earlier.

“It is a very negative surprise,” said Wataru Kasatani, senior research analyst at Meiji Dresdner Asset Management. “Another negative surprise is that Nomura had this much exposure to monoline insurers. The market will react a lot to that.”

Nakada said the financial health of monoline insurers had deteriorated so much that they were not able to pay Nomura what they had guaranteed, forcing it to increase the provision.

Nomura posted a 111.8 billion loss from bond trading in the quarter through March, against a 97.5 billion profit in the year-ago period.

The quarterly loss dragged Nomura to a net loss of 67.85 billion for the fiscal year ended March, its first annual loss in nine years and reversing a 175.8 billion profit in the previous year.

Monoline bond insurers guarantee timely interest and principal payments on debt that can consist of municipal bonds, corporate debt and asset-backed securities like residential mortgages, which are insured in vehicles known as collateralized debt obligations.

TOKYO: The Childrens Investment Fund Management, the $10 billion British hedge fund, on Friday accused the Japanese government of manipulating public opinion to justify rejecting its bid to double its stake in J-Power.

“This outcome was predetermined,” John Ho, Asia chief of the fund, known as TCI, said at a news conference here. “Even before we applied, the decision to reject us had been made.”

He added: “The recommendation has done Japan a major disservice.”

Japan advised TCI last week to drop its request to buy more J-Power shares, invoking national security for the first time in turning down a bid some investors viewed as a test of its openness to overseas capital. Japan ranked last among major economies as a destination for foreign direct investment from 1997 to 2006, according to the Organization for Economic Cooperation and Development.

“The implication of TCI choosing the global arena to fight is an example of the frictions engendered when global capital flows encounter resistance from entrenched local interests,” said Ed Rogers, chief executive of Rogers Investment Advisors. “All of these deals need to be looked at in isolation to determine if the entire Japanese system is truly fighting globalization. I dont believe that to be the case.”

Ho said that the fund was refusing to withdraw the bid to raise its holding in the and that was seeking further talks before a final government decision, which may come by mid-May. “The process has not been fair,” he said.

TCI was not considered on its merits after Japans trade minister and his deputy made public statements opposing the fund during a review of the bid, the fund said Friday. Unidentified ministry officials were “constantly quoted” in local news reports as saying that TCIs application to double its holding in J-Power would be rejected, TCI said.

“Undefined concepts of national security and public order have been used as a pretext to block legitimate investments,” Ho said. The fund said the purpose of ministry leaks was to ensure a negative decision was “a foregone conclusion.”

Shares of J-Power, formally known as Electric Power Development, rose 3.2 percent to close at 3,920, or $37.40.

Increased foreign investment in the utility might threaten the countrys power supply, Japans advisory notice argued. In addition to its nuclear ambitions, J-Power is Japans only producer with plants nationwide, and it runs the sole transmission grid linking all four main islands. Overseas investors hold as much as 40 percent of J-Power, and TCI is the biggest shareholder.

On Wednesday, J-Power won state approval to construct its first nuclear plant, which will be the first in Japan to use recycled fuel. Ho repeated on Friday that TCI had offered to abdicate voting rights involving the nuclear plant to meet security concerns.

Trade Minister Akira Amari this month called TCIs bid “different from other investments by overseas companies” and cited a need to prevent insufficient investment in power transmission networks.

Ho said Japanese officials had “sensationalized the issue by referring to potential blackouts and power shortages, which are unfounded and unprofessional.”

J-Powers 1.77 percent return on assets lags behind the 2.20 percent of Tokyo Electric Power and the 2.16 percent of Kansai Electric Power, which serves the region around Osaka.

TCI this month urged J-Power to increase dividends, name outside directors and spend as much as 70 billion buying back shares that had lost 27 percent of their value in the past year.

The fund dismissed government concerns that steps to raise returns might hinder investment in plants and transmission.

The fund estimates that J-Power spent 68 billion - double its forecast 32 billion profit this year - buying stakes in companies like Nippon Steel. Those investments have yielded a loss of 15 billion, it said.

“This has been great in raising transparency and improving corporate governance in Japan,” said Angus McKinnon, senior partner at Tozai Investment Advisory, a hedge fund adviser based in Tokyo. “Hopefully, it may even wake up the government.” Nippon Steel forecasts profit drop

Nippon Steel has forecast a 41 percent decline in profit because material costs are rising faster than product prices can be increased, Bloomberg News reported Friday from Tokyo.

Net income will probably fall to a five-year low of 210 billion in the year through March 2009 from a record 355 billion in the previous year, the company said.

After taking criticism from activist groups over the last few months, some Olympic sponsors are starting to criticize right back.

On Thursday, Mia Farrows activist group, Dream for Darfur, issued a report card that roundly criticized most of the major Olympic sponsors.

For months, the group has been asking the sponsors to comply with requests both tame (meet with Farrow) and more involved (contact the United Nations and the International Olympic Committee regarding Darfur).

The group is calling for pressure because the Sudanese government buys its weapons from China with the foreign currency it makes from selling China its oil. China, meanwhile, protects Sudan from excessive attention in the UN Security Council.

Even after 9 of the 19 sponsors it had singled out agreed to meet with Farrow, the group said it had seen little progress from the corporations.

In the report card, it gave 16 of 19 sponsors a D or an F. The highest marks were earned by Adidas, McDonalds and Eastman Kodak. The group was “really not pleased with the progress,” said Dream for Darfurs executive director, Jill Savitt.

In response, some sponsors began criticizing the groups approach.

“For an organization that has not eased the suffering of a single individual on the ground in Darfur to criticize those who are helping thousands every day is more than ironic,” a Coca-Cola spokesman, Kelly Brooks, wrote via e-mail. “This is not a report card on sponsors good works, this is simply a report card judging companies solely on the basis of the Dream for Darfur yardstick - a companys willingness to publicly pressure a sovereign nation to intervene in the activities of another country.”

Coca-Colas chief executive, E. Neville Isdell, wrote a column published last week in The Financial Times with similarly harsh words.

Johnson Johnson also issued a sharp response to the report card.

“At Johnson Johnson, weve worked hard for years to help the people of Darfur, which is consistent with the commitment of Johnson Johnson to contribute to better health around the world. Given the complexities of the tragedy in Darfur, we are disappointed that Dream for Darfur has used such a narrow context by which to evaluate the companys response,” a spokeswoman, Lorie Gawreluk, wrote via e-mail.

General Electric joined in. “We commend Dream for Darfur for raising awareness of this tragic situation, however we strongly disagree with the organizations approach as well as the use of the Olympic Games as a political platform and the assertions made in the report card,” Deirdre Latour, a GE spokeswoman, wrote via e-mail.

The three companies pointed to their efforts in Darfur. Gawreluk said that Johnson Johnson donates cash and products to the region through organizations like Unicef and the International Rescue Committee. Brooks said that Coca-Cola has pledged more than $5 million to providing water in the Sudan, among other efforts. Latour said that the GE Foundation has donated $4 million to aid for refugees.

The sparring comes after weeks of a near impasse between activist groups opposing Chinas involvement in the Games and the companies that have paid giant amounts to sponsor the event.

Most of the sponsors have a significant stake in China. Adidas, for example, manufactures 49 percent of its shoes in China. The country is the fourth-biggest market for Coca-Cola. China was the fastest-growing region for Panasonic in its most recent quarter, with sales growth at 17 percent. McDonalds expects to open 125 restaurants in China this year. United Parcel Service has invested $600 million in China over the last five years; Anheuser-Busch has invested $1.8 billion there.

Activist groups - including Students for a Free Tibet, Amnesty International, Reporters Without Borders and Dream for Darfur - have been sending letters to the Olympic sponsors asking them to take a stance on human-rights issues.

The groups are threatening increased pressure, including protests at shareholder meetings and offices and a turn-off-the-commercials campaign during the Olympics.

So far, few of the sponsors have changed their stance, most saying that political issues are not within their purview, as Visa did Thursday. “While we appreciate Dream for Darfurs efforts to bring attention to the situation, Visa believes a lasting resolution to the crisis can only be achieved through governmental and diplomatic channels and not by Olympic Games sponsors,” Visa said in a written statement.

A few, like Anheuser-Busch, have offered more specific suggestions. “The situation in Darfur is abhorrent, and we support efforts to bring awareness to this crisis. We believe diplomatic dialogue between governments within the United Nations and dispatching additional peace-keeping troops to Darfur are essential steps in the process of improving conditions in this region, and we have expressed our position on this topic with the International Olympic Committee and support dialogue to affect change,” Francine Katz, vice president of communications and consumer affairs for Anheuser-Busch, wrote in an e-mail message.