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Japan should cut the nation's corporate tax by a quarter to encourage investment and growth in the world's second-largest economy, said Shoichi Nakagawa, former policy chief for the ruling Liberal Democratic Party.

“Even if tax revenue falls in the near term, a tax cut may help revitalize business activity and eventually lead to a rebound in tax receipts,'' Nakagawa, 55, said in an interview in Tokyo on Aug. 7. He recommended lowering the level to about 30 percent from 40.7 percent, the highest among Organization for Economic Cooperation and Development nations.

Calls to ease the tax burden on companies have grown among policy makers who want to attract investment into what European Union Trade Commissioner Peter Mandelson in April called the developed world's “most closed market.'' The government isn't likely to act soon as it struggles to meet a goal of balancing the budget by 2011 to cut the world's largest public debt.

“It's necessary to cut corporate taxes from the point of view of international competitiveness, but it's difficult to do it now because the government has pledged fiscal reform,'' said Keisuke Naito, a senior economist at Mizuho Research Institute in Tokyo. “Policy makers acknowledge they have to do something to shore up the faltering economy.''

The main focus of the discussion within the ruling coalition is now focused on whether to raise the sales tax from 5 percent to help the government to pay for swelling welfare costs.

The government said last week the economy is “weakening'' for the first time since May 2001. Prime Minister Yasuo Fukuda yesterday described the economic situation as “severe.''

`Alarmed'

“I am alarmed that the global and Japanese economies have entered into a critical situation,'' Nakagawa said. “Japan should examine all possible options.''

Nakagawa, now a lower house legislator, was LDP policy chief from September 2006 until August last year. He estimates a 10 percentage point tax cut may boost foreign direct investment by 30 percent, or about 1.2 trillion yen ($11 billion).

Foreign direct investment represented about 3 percent of Japan's gross domestic product at the end of 2007, according to the Cabinet Office. That compared with 45 percent in the U.K., 14 percent in the U.S. and 8.8 percent in South Korea. Japan's government is aiming to boost foreign investment to 5 percent of GDP by 2010.

Japan's high corporate tax rate may hurt “the vitality of Japanese companies and their international competitiveness,'' Nakagawa said. “It also becomes an obstacle to foreign companies that want to invest here.''

Japan should also broaden its tax base and increase the sales tax, which at 5 percent is the lowest in the OECD, the Paris-based organization said in its April survey on Japan.

Only One Third Pay

Only about one third of Japanese companies pay taxes and a quarter of employees are exempt from personal income levies because of “generous'' exemptions and deductions, according to the OECD report.

Nakagawa said Japan needs to find a way to broaden the tax base not only on companies but also individuals and other bodies. Still, he said Japan should also consider allowing more deductions to ease the total burden on companies by as much as 3 trillion yen.

Japan's total tax revenue was 51.02 trillion yen last fiscal year, with corporate tax of 14.7 trillion yen, according to the Ministry of Finance.

New ministers in Fukuda's Cabinet, which he reshuffled this month, have also indicated support for a tax cut. Financial Services Minister Toshimitsu Motegi said he will consider lowering taxes to attract investment from abroad and Economy Minister Kaoru Yosano said that he wouldn't rule out reductions.

The U.K., Germany, China and South Korea cut company tax this year to spur economic growth and lure foreign investment.

“Everybody in the world is cutting corporate taxes,'' said Martin Schulz, a senior economist at Fujitsu Research Institute in Tokyo. Japan “will have to do it in the long run.''

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Peter Futo, a Hungarian candy salesman turned real estate millionaire, is betting 850 million euros ($1.3 billion) he can transform a Budapest slum into prime real estate in the European Union's slowest economy.

Futo, who owns property developer Futureal Zrt. with his son Gabor, is building Corvin Promenade, Hungary's biggest development since communism fell, on the site of demolished homes near what used to be Budapest's red light district. Affluent people will live there because it's on the boulevard that borders downtown, offers easy airport access and is near the Danube, the Futos said.

“The key to success is to be able to acquire and develop a big enough piece of land that you can have impact,'' said the younger Futo. “If you are able to grab the whole thing, take it as one, and have a city vision for that, then you can really make a change.''

The father-and-son team is investing in Hungary at a time when other developers aren't. The country's economic growth was 1.3 percent in 2007, the slowest in 14 years. Hungary issued 8,956 residential building permits in the first quarter of 2008, the fewest since 2001, according to government statistics.

At the same time, the Futos have scaled back their plans in neighboring Romania, where the economy grew 6 percent last year, because they're concerned real estate prices have risen too fast and are about to tumble.

Old Homes Destroyed

Corvin Promenade was conceived by members of the local government in Budapest's Jozsefvaros district who wanted to replace the slum dwellings, the Futos said in an April 23 interview in Peter Futo's office in downtown Budapest. The council invited bids, persuaded residents to move into new homes, and knocked down the old ones, they said.

The average apartment size was 23 square meters (250 square feet), and most residents had their toilet outside the apartment, at the end of the corridor, said Peter Futo.

“The only reason why such a project is possible at all is there was a slum,'' his son said. “There was a population problem, a social problem. But that's not a location problem.''

Futureal took over the project in 2004 when it paid an undisclosed amount to acquire Corvin Rt., the developer that won the bid. The Futos hired architects including British landscape designer Robert Townshend to redesign the development and center it around retail and office space.

Mall Rights Sold

They sold the right to build Corvin Promenade's 35,000- square-meter shopping center to Klepierre SA, the French mall owner controlled by BNP Paribas SA, last year. The mall will cost an estimated 229 million euros ($313 million).

The development will include a park, restaurants, and penthouse apartments that overlook the Buda hills on the west side of the Danube. The complex has its own underground parking garage, and its website notes that with such amenities, “common downsides of city life will be avoided.''

All 820 of the still-unbuilt apartments in the first phase of the project have already been sold at an average 2,150 euros per square meter, 32-year-old Gabor Futo said. That's more than double the average price for residences in Jozsefvaros, according to a database kept by online real-estate broker Ingatlan.com.

Corvin Promenade's first phase will finish next year. The second phase will add 2,000 more apartments by 2012.

Futureal is financing each phase of the project separately, using banks including Intesa Sanpaolo SpA, UniCredit SpA, and Erste Bank AG, Gabor Futo said. The banks finance 80 percent to 90 percent of certain projects, with Futureal funding the rest from its own equity, he said. He declined to give further details.

Contrast

The contrast between the sleek lines and glass-walled balconies promised by Corvin Promenade may clash with the rundown tenements and their crumbling neoclassic facades next door, said city architect Ivan Bojar.

“It cuts into the city fabric,'' he said. “I'm keeping my fingers crossed for it, because this idea of clearing buildings for a new development has no precedent'' in Budapest.

Balazs Bazsalya, a researcher at Budapest polling company Marketing Centrum, said the new development will raise the value of the apartment he bought near the site two years ago.

There are also fewer poor neighbors than before, he said.

“There haven't been any major complaints'' about the forced relocation, Bazsalya said. “It's probably because these aren't the kind of people who have the organizational skills to mount opposition.''

Mathematician and Candymaker

Peter Futo, 62, never planned to be a developer. In the 1970s, he worked both as a mathematician and at his grandfather's candy factory, which Hungary's communist government seized in 1948, he said.

After communism collapsed in 1990, Futo founded his own confectionery company, Fundy Kft., selling gumdrop bears, frogs and dinosaurs, as well as chocolate and wafer snacks. Annual profit exceeded 2 million euros by the end of the decade, he said.

Futo sold Fundy to Van Melle NV, the Dutch maker of Mentos mints, for an undisclosed sum in 1999. He used the proceeds to create Futureal because, he said, real estate was an investment opportunity that wasn't dominated by multinational companies.

The Futos are focusing on Hungary, in spite of the country's slow economic growth, because land values in Romania are inflated and competition is “getting out of control,'' Gabor Futo said.

“It's just incredibly, incomparably and irrationally high,'' he said. “We went there to do five shopping centers. We are doing one only, because we have decided not to take the risk.''

Residential land prices in Bucharest, the Romanian capital, have tripled to as much as 3,000 euros per square meter since 2004, according to a survey by Colliers International. Futureal is selling its 118 apartments in Bucharest's Nightingale Park and “cautiously'' considering new projects, Futo said.

Even with the slower growth in Hungary, Corvin Promenade may serve as a model for further developments in the country, whose mayors have been reluctant to bring in private capital, said Miklos Nemeth, head of the Hungarian Association of Real Estate Management in a May 14 interview.

“Municipalities will realize that you need to attract private capital, and the nice things you can do with it,'' he said.

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Lehman Brothers Holdings Inc. is close to raising more than $5 billion of capital from a group of primarily U.S. investors, The Wall Street Journal reported Sunday.

The investors include the New Jersey Division of Investment, the Journal reported, citing an unnamed person familiar with the matter. This person also said Lehman (LEH, Fortune 500), the nation’s fourth-largest investment bank, is set to report a fiscal second-quarter loss of more than $2 billion. Until recently, reports pegged the loss somewhere between $300 million and $700 million.

The firm was completing final details of the capital infusion Sunday, and the investment, primarily through issuing common shares, could be announced Monday or Tuesday, the Journal reported.

The Associated Press left messages Sunday evening seeking comment from Lehman representatives and a spokesman for the New Jersey Treasury Department.

Lehman shares have fallen more than 50% this year but recovered slightly last week on reports the company may raise capital from an outside investor and allay market fears of a liquidity crisis. Investors regained confidence in Lehman after Standard & Poor’s maintained its rating on the firm, and Merrill Lynch gave it a "buy" rating.

The Financial Times reported Wednesday that Lehman would report it lost between $500 million to $700 million on certain hedging positions during the second quarter. A person familiar with the company’s earnings confirmed those figures to the AP on Wednesday. The person was not authorized to discuss the matter publicly and asked not to be identified.

Other analysts had been predicting a loss of about $300 million.

A Lehman spokesman had declined to comment Wednesday, saying the firm is in a "quiet period" ahead of its earnings, which are expected to be released the week of June 16. 

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Lenovo Group, the world’s No. 4 PC maker, said Thursday that earnings for its latest quarter rose 133% as strong sales in China and Europe offset slower growth in the United States.

Profit totaled $140 million for the three months ending March 31, the Beijing-based company said. Total revenues rose 13.5% to $3.7 billion.

"Lenovo continued to demonstrate strong execution of our strategies in the past quarter, achieving the eighth consecutive quarter of profitable growth," said chairman Yang Yuanqing said in a statement.

Yang said Lenovo will focus on boosting sales in developing countries and expanding its retail business.

Sales in China, which accounts for about one-third of Lenovo revenues, rose 18% to $1.29 billion in the quarter. Sales in Europe, Africa and the Middle East were up 30% at $879 million, the company said.

Sales in the United States and the rest of the Americas rose just 9% to $1 billion, Lenovo said.

For the full fiscal year ending March 31, earnings rose 201% to $484 million, Lenovo said. Full-year sales rose 17% year to $16.4 billion.

Lenovo has reported similar improvements in results in previous quarters, with profit growing faster than revenues, which it says is due to cost-cutting. The company said it boosted its gross profit margin last year from 13.5% to 15%.

Lenovo bought IBM Corp.’s personal computer unit in 2006 and said last year it had completed integrating the acquisition into its own business. Lenovo had the right to use the IBM (IBM, Fortune 500) name on some products but said earlier it plans to discard it this year. 

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Facebook, the world’s second-largest social networking Web site, is adding more than 40 new safeguards to protect young users from sexual predators and cyberbullies, attorneys general from several states said Thursday.

The changes include banning convicted sex offenders from the site, limiting older users’ ability to search online for subscribers under 18 and joining an existing task force seeking ways to better verify users’ ages and identities.

"The agreement marks another watershed step toward social networking safety, protecting kids from online predators and inappropriate content," said Connecticut Attorney General Richard Blumenthal, who announced the agreement Thursday with his counterparts in several other states.

Officials from Washington, D.C., and 49 states have signed on.

Facebook, which has more than 70 million active users worldwide, already has enacted many of the changes and others are in the works, its officials said Thursday.

"Building a safe and trusted online experience has been part of Facebook from its outset," said Chris Kelly, Facebook’s chief privacy officer. "The attorneys general have shown great leadership in helping to address the critical issue of Internet safety, and we commend them for continuing to set high standards for all players in the online arena."

Texas has not endorsed this agreement or a similar one reached in January among the other states, the District of Columbia and News Corp.’s (NWS.A) social network, MySpace. Texas officials have said they want quicker action on verifying users’ ages and identities than the pacts guarantee.

Millions of users: The attorneys general have been negotiating for months with Facebook and MySpace, the world’s largest online social network with 200 million users around the world, for tighter controls.

"Social networks that encourage kids to come to their sites have a responsibility to keep those kids safe," North Carolina Attorney General Roy Cooper said. "We’ve now gotten the two largest social networking sites to agree to take significant steps to protect children from predators and pornography."

MySpace, Facebook and other online networks have created a new venue for sexual predators, who often lie about their age to lure young victims to chat, share images and sometimes meet in person. It also has spawned cyberbullies, who have sent threatening and anonymous messages to classmates, acquaintances and other users.

Among other changes, Facebook has agreed to:

• Ensure companies offering services on its site comply with its safety and privacy guidelines.
• Keep tobacco and alcohol ads from users too young to purchase those products.
• Remove groups whose comments or images suggest they involve incest, pedophilia, bullying or other inappropriate content.
• Send warning messages when a child is in danger of giving personal information to an adult.
• Review users’ profiles when they ask to change their age, ensuring the update is legitimate and not intended to let adults masquerade as children.

The protections included in the MySpace and Facebook pacts could be expanded to smaller services such as Friendster and Bebo, Blumenthal said.

"We’re entering a new era in social networking safety," Blumenthal said. "This agreement is open-ended in envisioning advances in technology that will permit even stronger steps in the future toward protecting kids’ safety." 

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U.K. consumer confidence fell to the lowest in at least four years in April as the weakening housing market and higher living costs depressed shoppers, Nationwide Building Society said.

An index of sentiment taken from the responses of 1,000 people declined seven points to 70, the lowest since the survey began in May 2004, Britain's fourth-biggest mortgage lender said today in an e-mailed statement.

Home values had the first annual decline since 1996 last month after banks curbed mortgage lending to the lowest in nine years, Nationwide's house-price index showed a week ago. The Bank of England, which has cut the benchmark interest rate three times since December to avert a recession, may leave it unchanged tomorrow to keep inflation under control, economists say.

“Food and fuel prices remain high and with house prices no longer rising, it is unlikely that consumer confidence will pick up very quickly,'' Fionnuala Earley, Nationwide's chief economist, said in a statement. “Inflationary pressures mean the Monetary Policy Committee will probably prefer to cut rates at a more gradual pace than many would prefer.''

An index of sentiment on consumers' present situation dropped nine points to 65, and the gauge of their future situation declined five points to 74. A measure of willingness to make a major purchase fell two points to 65.

House prices declined in April by 1 percent from a year earlier, Nationwide said April 30. Rival HBOS Plc, the nation's biggest mortgage lender, said May 2 that prices fell 0.9 percent on the year, which was also the first drop recorded since 1996.

Loan Approvals

Mortgage approvals fell in March to 64,000, the lowest level since records began in 1999 and half the level of 1 1/2 years ago, the central bank said April 29. The International Monetary Fund forecasts U.K. economic growth of 1.6 percent in 2008, the least since the end of the last recession 16 years ago.

The labor market deteriorated last month, accountancy firm KPMG and the Recruitment and Employment Confederation said today. An index measuring placements of permanent staff fell in April after rising in March, while hiring of temporary workers increased.

“Employers are shifting away from hiring permanent staff into a more temporary workforce as a way of dealing with the current economy uncertainty and financial crisis,'' Alan Nolan, director at KPMG, said in a statement.

Concern about inflation left the central bank's rate-setting committee with its first three-way split in almost two years last month. Timothy Besley and Andrew Sentance wanted no rate change, while David Blanchflower favored a bigger cut than the quarter- point approved by the majority.

Crude Oil

Crude oil rose to a record above $122 yesterday, and United Nations figures showed food was 57 percent more expensive globally in March than a year earlier. Inflation will accelerate from the current 2.5 percent to exceed the government's upper limit of 3 percent, Bank of England Governor Mervyn King said last week.

All but five of 61 analysts surveyed by Bloomberg News predict the central bank will leave the key rate unchanged tomorrow. The rest forecast a quarter-point cut. The bank announces the decision at noon in London.

George Buckley, chief U.K. economist at Deutsche Bank AG in London, changed his interest-rate forecast yesterday to predict a quarter-point reduction this week from the current 5 percent.

“Survey evidence suggests the economy isn't as resilient as we thought it might be,'' Buckley said in an interview on Bloomberg Television. “The housing market is weakening quite sharply, and that can be the catalyst for much weaker consumption than we've seen so far.''

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Democratic presidential candidate Barack Obama is demanding that company shareholders have a say in how much executives get paid as he pushes his populist message.

Obama, in remarks he planned to make to reporters Friday morning, wants Congress to pass legislation he has sponsored that would require corporations to have a nonbinding vote by shareholders on executive compensation packages.

Under Obama’s legislation, shareholders could not veto a compensation package offered to an executive and would not place limits on pay. Rather, they would have a means to publicly express their position.

A similar bill passed the House last year.

On the campaign trail. The Illinois senator’s comments come as he embarks on the third day of a four day-swing through Indiana, which holds its primary May 6. Obama and Sen. Hillary Rodham Clinton are running even in the state and have both been making economic pitches to voters.

"This isn’t just about expressing outrage," Obama says in prepared remarks. "It’s about changing a system where bad behavior is rewarded so that we can hold CEOs accountable, and make sure they’re acting in a way that’s good for their company, good for our economy, and good for America, not just good for themselves."

Income inequality is a hot-button issue with audiences, particularly the blue-collar workers that Obama is trying to peel away from Clinton in the more economically distressed regions of Indiana and Pennsylvania, which holds its primary April 22.

The high cost of chief executive pay has drawn criticism in recent years as salaries rose, stock options paid off like lottery jackpots, and perks like chauffeured cars and private jets spread.

Rolling in dough. USA Today reported this week that the median compensation for chief executives at the 50 largest companies in the United States was $15.7 million last year, even though some of the companies were not performing well.

Investor advocates, union pension funds and shareholder groups have supported the legislation. Republican critics worry it would give activist investors an inroad to change a company’s policies.

Even President Bush last year questioned the extravagant pay of some company managers and directors, but said it was not a matter for government involvement. 

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The Food and Drug Administration on Tuesday said more than 100 patients have died while taking the blood thinner heparin since early 2007.

The agency has been investigating contamination of heparin made by the manufacturer Baxter International Inc., which it linked to 19 deaths and hundreds of allergic reactions.

New data posted to the FDA’s Web site shows the agency has received 103 reports of death with heparin made by various manufacturers since January 2007.

FDA recorded a spike in deaths beginning in December 2007 and continuing through February this year, when Baxter recalled its contaminated product.

FDA said about 40% of the deaths were associated with allergic reactions and that the remaining deaths showed no evidence of allergic reactions.

For both 2006 and 2007 FDA received 55 reports of death with the blood thinner.

A Baxter (BAX, Fortune 500) representative was not immediately available for comment.

An FDA spokeswoman said the agency decided to release the additional numbers on heparin deaths at the request of consumers. 

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Morgan Stanley (MS.N: Quote, Profile, Research) on Wednesday said first-quarter earnings fell amid write-downs in mortgages and loans, yet resilient trading results helped the second-largest U.S. investment bank exceed lowered expectations by a wide margin.

The results offer a big boost to Chief Executive John Mack, trying to help the bank recover from $9.4 billion in mortgage trading losses last year that eroded earnings and dented his reputation. It also delivers another jolt of good news to a market that had been prepared for bigger write-downs and signs that Wall Street firms were facing liquidity problems.

Morgan’s income from continuing operations fell by about a third to $1.55 billion, or $1.45 a share, in the quarter ended February 29, from $2.31 billion, or $2.17, in the year-earlier period. Quarterly revenue fell 17 percent to $8.3 billion.

Analysts on average expected Morgan Stanley to earn $1.03 a share in the quarter on $7.3 billion of revenue, according to Reuters Estimates.

Trading results fell compared with last year’s idyllic market conditions. Yet the firm’s investment banking and trading division had its third-best quarter ever, generating revenue of $6.2 billion.

Fixed-income trading revenue posted its second-best quarter ever at $2.9 billion, while equity trading revenue surged by half. Investment banking revenue rose 6 percent to $1.6 billion.

Wall Street banks have tumbled this year amid a worsening debt market, culminating in a Federal Reserve intervention last week and a nearly insolvent Bear Stearns (BSC.N: Quote, Profile, Research) announcing a shotgun wedding with JPMorgan Chase (JPM.N: Quote, Profile, Research) for just $2 a share.

Better-than-expected results from Goldman Sachs (GS.N: Quote, Profile, Research) and Lehman Brothers (LEH.N: Quote, Profile, Research) spurred a rally in financial shares on Tuesday and helped ease worries about additional bank failures. Morgan Stanley shares, down 42 percent this year, surged 19 percent on Tuesday and were up in pre-market trade on Wednesday. 

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Health care giant Johnson & Johnson’s chairman and CEO received compensation valued at $22.8 million in 2007, a 10.4% rise in a year when J&J announced plans to cut up to 4% of its work force in its biggest restructuring ever.

William C. Weldon, J&J’s chairman and chief executive officer since 2002, received compensation totaling $20.6 million in 2006.

In 2007, he received a base salary of $1.73 million, according to a proxy statement filed Wednesday with the Securities and Exchange Commission.

Weldon, 59, received stock awards and options valued at $5.34 million when they were granted in February 2007, plus another $9.19 million in annual performance bonus.

Weldon, who started his career at Johnson & Johnson in 1971, also received other compensation totaling $3.22 million. That included $2.95 million in deferred compensation called dividend equivalents, $77,625 in contributions to his retirement plan and $179,231 in various perks, from $118,653 for personal use of company aircraft to $29,753 for a car and driver.

The Associated Press calculations of total pay include executives’ salary, bonus, incentives, perks, above-market returns on deferred compensation and the estimated value of stock options and awards granted during the year. The calculations don’t include changes in the present value of pension benefits, and they sometimes differ from the totals companies list in the summary compensation table of proxy statements filed with the Securities and Exchange Commission.

J&J, which makes everything from Band-Aids and baby shampoo to contraceptives and genetically engineered medicines, last year saw a rare decline in net income, which fell by 4% to $10.6 billion.

However, sales jumped nearly 15%, to $61.1 billion, mainly because of the company’s acquisition the prior year of Pfizer Inc.’s (PFE, Fortune 500) huge consumer health business.

J&J (JNJ, Fortune 500) shares rose 11 cents to $62.55 in regular trading Wednesday, before the proxy was filed, then rose another 10 cents in after-hours trading. Its shares have traded in the range of $59.72 to $68.85 over the past 52 weeks. 

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