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Obama plan clears first hurdle, Asian markets cheer

US President Barack Obama's $825 billion stimulus plan cleared its first Congressional hurdle as the Federal Reserve eyed more extreme measures to ease credit market strains, boosting Asian stocks despite deep skepticism that a global slowdown can be quickly reversed.

Signs of corporate distress were still obvious despite the passage of Obama's bill through the House of Representatives, the first major legislative success of his new presidency.

Sony Corp was expected to follow fellow top Japanese electronics maker Canon Inc with a dismal quarterly profit report later on Thursday as fallout grows from a global crisis which has already cost trillions of dollars and threatens millions of jobs.

Bank of Japan Deputy Governor Kiyohiko Nishimura restated the need for caution as governments around the world sought more inventive ways to halt the global crisis as well as tried and true fiscal and monetary measures.

“Governments and central banks are acting promptly, but uncertainty over the outlook for the global economy, as well as the financial crisis in the United States and Europe, remains high,” Nishimura said in a speech to business leaders.

“It's not certain whether the measures taken up till now are enough,” he said. Nishimura said he expects the Japanese economy, seen headed for its longest recession in modern times, to start recovering from October.

Japan's Nikkei stock average rose 1.6% by midmorning, boosted by exporters like Honda Motor Co on a softer yen and mirroring the generally positive response to Obama's stimulus package and other measures. Stocks worldwide rose on Wednesday, due in part to optimism over Obama's plans.

Every Republican House member voted against Obama's stimulus package, with opposition lawmakers complaining that the spending component was too high and tax cuts too small.

It must still pass through the US Senate, which will likely approve an $887 billion version of the plan, and Democrats hope it will be signed into law by mid-February.

Obama's fledgling administration also floated the creation of a government “bad bank,” or aggregator bank, to absorb toxic debt and help banks recapitalize.

Obama and his economic team have also discussed tighter regulation of the banking industry, at the centre of the problems which dragged the world's largest economy into the worst recession since World War Two.

Seeking alternative measures, the US Federal Reserve also said on Wednesday it was prepared to buy long-term Treasury bonds if that would help improve credit market conditions.

Bond purchases could help lower mortgage rates and help curb the housing downturn at the heart of the global crisis.

The US central bank also held its main interest rate in a range between zero and 0.25% and said the rate could stay unusually low for some time.

The International Monetary Fund has underlined the scale of the crisis, slashing its projection for 2009 global growth to 0.5% from a November estimate of 2.2%. The IMF even said it was in danger of running out of money.

Up to 51 million jobs worldwide could disappear by the end of this year as a result of the economic slowdown that has turned into a global unemployment crisis, the International Labour Organisation (ILO) said on Wednesday.

The Philippines economy grew more than expected in the fourth quarter, boosted by Christmas spending, but analysts still saw a rate cut off at least 450 basis points later on Thursday as Manila plays catch-up with the global easing trend.

The economy grew a seasonally adjusted 1.0% in the fourth quarter from the third quarter, higher than forecasts of a 0.7% growth in a Reuters poll this week.

“Iceberg tips are misleading, and we can expect that the economy is not too far off from tipping over,” said Vishnu Varathan, an economist at Singapore's Forecast Pte.

In Wellington, New Zealand's central bank slashed rates by 1.5%age points to a record low 3.5% and left the door open for more, smaller cuts after “frontloading” since July.

“The aggressive move pre-empts a lot of the downside risk to the economic outlook,” said ASB Bank Chief Economist Nick Tuffley.

The world's biggest dairy product exporter is going through its worst recession on record. The New Zealand dollar fell around 2% to a low of $0.5190 after the rate decision.

In Japan, Canon, the world's largest digital camera maker, reported an 81% fall in quarterly profit on Wednesday and forecast a further slide in annual profit to a 14-year low.

On Thursday, Nippon Steel Corp, the world's second-biggest steelmaker, almost halved its 2009 net profit forecast to ¥175 billion from ¥330 billion.

Nintendo Co Ltd is expected to prove the exception to the Japanese corporate earnings rule with its quarterly profit report, as its Wii game console and DS handheld device have been big hits with families seeking low-budget, stay-at-home entertainment.

The message from Europe has been mixed, with new reports there showing the recession has deepened but consumer sentiment surveys in France and Germany turning positive.

But a poll of CEOs attending the annual Davos meeting of the world's business and political elite found that confidence has plunged to a new low.

The UN International Labor Organization has also said that another 51 million jobs could be lost worldwide if the global recession deepened in 2009. (Reuters)