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Credit card defaults could rise to 10% in the next quarter, as borrowers throw in the towel and stop chasing lifestyles they can't afford.

This is likely just a preamble for 2009, when default rates could spike much higher, according to Innovest Strategic Value Advisors. But even the 10% figure is much higher than previously anticipated, and credit cards could follow mortgages as the next great calamity.

The surprise is that the credit card industry's own belated attempts to whip itself into shape are causing the damage, according to Laura Nishikawa, an analyst at Innovest. She noted that credit card issuers are helping drive debtors into default by reducing credit lines, limiting access to home credit lines and, as mentioned, killing roll-overs. Nishikawa said these measures have had unintended consequences and are driving customers away from paying their bills.

Partly to blame for the upcoming correction, of course, is the credit card lifestyle. According to Innovest, since 1999, as wages have stagnated credit card debt outstanding has risen by almost 80%. It's only gotten worse as access to home equity lines have been shut down. Rather than stop shopping people have simply put their purchases on plastic.

Walter Todd, a portfolio manager at Greenwood Capital Associates was quoted by the Calgary Herald in late November, noting that there has never been this much consumer debt with unemployment nearing 8%: "It's hard to run a model because it's never happened before."

The worst is yet to come, Innovest says, because 2006's bankruptcy reforms have caused a delayed reaction in defaults. The firm expects the full tide of defaults to roll in early in 2009. Happy inauguration, President Obama.

Optimism that a prolonged global economic downturn will be averted lifted Japanese stocks Thursday, following an aggressive interest rate cut in China and assurances by President-elect Barack Obama for a swift economic rescue plan.

The benchmark Nikkei 225 stock average added 160.17 points, or 2 percent, to 8,373.39 -- its highest level in more than a week. The broader Topix index rose 1.5 percent to 829.03.

A 1.08 percentage point reduction in China's key one-year lending rate announced late Wednesday -- its biggest rate cut since 1997 and the fourth in three months -- helped boost marine transport, steel and machinery issues by alleviating fears of a slump in China's demand for raw materials.

Mitsui O.S.K. Lines Ltd., the world's biggest cargo shipper, jumped 7.4 percent to 478 yen, and construction machinery maker Komatsu Ltd. advanced 4.4 percent to 1,070 yen.

Overnight, U.S. markets reversed losses after Obama pledged he would have an economic plan on his first day in office. After filling more spots on his economic team, Obama declared: "help is on the way." The Dow Jones industrials rose 2.9 percent to 8,726.61.

Securities companies were among the day's biggest winners, with Nomura Holdings Inc. surging 5.3 percent to 680 yen and Daiwa Securities Group Inc. up 6.3 percent at 473 yen.

Still, investors were reluctant to drive stocks much higher amid ongoing concerns about the yen's strength and the latest terrorist attacks in India, said Mitsushige Akino, fund manager at Ichiyoshi Investment Management in Tokyo.

"The U.S. is spending money right now on measures to boost the economy," he said. "If geopolitical risks rise, like terrorism, then it will probably have to spend even more money in response. Then that will only further weaken the dollar."

Japanese exporters in particular have been hit hard this year by the stronger yen, which reduces profits earned abroad and makes their products more expensive in overseas markets.

Shares of Panasonic Corp. declined 4.7 percent to 1,284 yen on speculation that it planned to slash its profit outlook, which it announced after the market closed. Blaming the "rapid appreciation of the yen," the Osaka-based company now expects net profit of 30 billion yen from its previous forecast of 310 billion yen.

The dollar was trading at 95.15 yen from 95.54 late Wednesday. The euro stood at $1.2887 from $1.2889.

Even as its fourth-quarter profit beat Wall Street expectations, Warner Music Group Corp. Chief Executive Edgar Bronfman Jr. said Tuesday the company was keeping a tight rein on CD shipments ahead of what could be a rocky Christmas season.

"I don't think any of us know what the Christmas shopping season will be," he told analysts on a conference call. "We are managing inventory very, very carefully and we are not over-shipping."

Warner Music, whose artists include Linkin Park and Madonna, said lower income tax expense and increased digital revenue drove its profit for the fiscal fourth-quarter to Sept. 30 up 20 percent, although it still lost money for the full year.

Quarterly earnings climbed to $6 million, or 4 cents per share, from $5 million, or 3 cents per share. Income tax expense was nearly halved to $13 million.

Revenue slipped 1 percent to $854 million from $867 million as consumers shifted toward digital music and digital piracy continued. The company's own digital sales, which make up 20 percent of total revenue, grew to $167 million from $131 million.

The results easily beat the average estimates of analysts polled by Thomson Reuters, who had predicted a loss of 2 cents per share on sales of $837.6 million. Analysts' estimates typically exclude one-time items.

Warner shares rose 22 cents, or 7.9 percent, to $3.02 in midday trading.

Recorded music revenue dropped nearly 4 percent to $707 million, while the unit's digital revenue increased 26 percent to $156 million. Best sellers included releases from artists such as Metallica, Kid Rock, T.I. and Mariya Takeuchi.

Warner said its investment in signing and developing artists paid off as it increased its U.S. market share by 0.5 percentage points from a year ago to 21.5 percent in the quarter.

Standard & Poor's analyst Tuna Amobi kept a buy rating on the stock.

"Despite piracy, we still view digital revenue as key bright spot, though relatively small, amid (a) continued music CD industry sales decline," he wrote in a research note. "Amid retail shifts, we keep a cautious holiday outlook."

For Warner's music publishing division, revenue climbed 14 percent to $156 million as digital revenue surged 57 percent to $11 million.

Warner reported a full-year loss of $56 million, or 38 cents per share, compared with a loss of $21 million, or 14 cents per share, in the prior year. Losses from continuing operations totaled $35 million, or 24 cents per share, compared with a year-ago loss of $8 million, or 5 cents per share.

Annual sales increased 3 percent to $3.49 billion from $3.38 billion.

Looking ahead, Chief Financial Officer Steve Macri cautioned that worldwide economic volatility and the timing of Warner's release schedule "may result in back-end weighted fiscal 2009 results."

One reason the company faced a tough comparison was the sale of 5 million albums of Josh Groban's "Noel" in the fourth quarter last year, he said.

Shares of Research in Motion Ltd. rose Monday amid a broader market upturn as early indications from analysts showed strong sales for the company's new BlackBerry Storm, a hand-held designed to compete with Apple's iPhone.

JPMorgan analyst Paul Coster, who rates Research in Motion shares "Overweight," said in a note to clients that the Storm has been greeted by "unambiguously strong consumer demand that has outstripped supply."

Launched through Verizon on Friday in time for the holiday season, the Storm is priced at $199 and features a sleek touch-screen rather than the traditional keyboard of most BlackBerries.

Coster noted that MySpace, the social networking site, reported Friday that its software for the new BlackBerry had been downloaded more than 400,000 times in the first week out. He took the numbers as a positive sign that younger customers are interested in using the Storm for social networking, a departure from the BlackBerry's corporate niche.

RBC Capital Markets Mike Abramsky estimated between 100,000 and 120,000 Storm units were sold over the weekend.

"Checks at Verizon retail outlets affirm stores quickly sold out of the BlackBerry Storm after opening Friday morning, given sizable lineups and pent-up demand," Abramsky told investors in a note.

The apparent demand and limited inventory may cause some blowback, however. Both analysts noted that for customers who have to order the Storm, Verizon will only guarantee an early December shipment.

"The limited availability appears to have frustrated some buyers," Abramsky said, warning that the company risks losing out on some sales in the crucial Thanksgiving week.

Research in Motion shares rose $2.65, or 5.9 percent, to $47.45.