* China, Japan, S. Korea vow cooperation to fight crisis
* China targets 8 percent growth in '09, faces challenges
* Toyota likely to report loss in 2nd half - media
* Ecuador says will slash value of debt
By Zhou Xin and Linda Sieg
BEIJING/FUKUOKA, Japan, Dec 13 (Reuters) - Asian powers Japan, China and South Korea put aside decades of animosity on Saturday and agreed to work together to tackle the global financial crisis battering their economies.
Policy makers worldwide scrambled for new initiatives to stem the fallout from the biggest financial turmoil in 80 years, with the White House weighing emergency funding to avert the collapse of the U.S. auto industry and Europe agreeing on Friday to a 200 billion euro ($268 billion) stimulus plan.
In a further blow to investors, Ecuador said it would slash more than 60 percent off the nominal value of its foreign debt, a day after declaring a default. [ID:nN13482268]
In the United States, President-elect Barack Obama named the head of New York's urban housing agency to run the federal housing department -- a key job given the credit crunch's roots in the U.S. mortgage lending market last year. [ID:nN13480884]
"To end this economic crisis, we must end the mortgage crisis where it began," Obama said in his weekly radio address.
Obama's team is considering a plan to boost the recession-hit U.S. economy that could be far larger than previous estimates and might reach $1 trillion over two years, the Wall Street Journal reported on Saturday.
Obama has said the plan would include the largest public works program since the 1950s.
ASIAN GIANTS PULLING TOGETHER
China, whose red-hot economy helped fuel the years of global boom before the bust, said meanwhile it faced a host of challenges. It was still aiming for growth of about 8 percent next year, a senior official said.
In the Japanese city of Fukuoka, Chinese Premier Wen Jiabao, Japanese Prime Minister Taro Aso and South Korean President Lee Myung-bak pledged not to create new trade barriers over the next 12 months and backed efforts to bolster a regional web of currency swaps.
At a historic summit, the leaders promised to work more closely together, setting aside decades of rivalry and animosity between the three neighbors.
"Cooperation between ... our three countries to overcome difficulties will have real significance as the financial crisis has a big impact on economies around the world," Wen said.
In Beijing, the chairman of the China Banking Regulatory Commission, Liu Mingkang, said potential problems facing the world's fourth-largest economy included falling prices and, after years of attracting vast sums of offshore funds, capital outflows.
"China's economic and financial situation merits no optimism and Chinese banks will face stern challenges in 2009," he told a financial conference in Beijing.
A slowing pace of expansion, while still the envy of most countries, would endanger social stability in China as it would be hard to create enough jobs for the millions of people moving to cities from farms every year, he said.
Liu said China was headed for deflation after both consumer and producer price rises slowed sharply last month.
Producer inflation, which slumped to 2.0 percent growth in the year to November from a 6.6 percent reading in the previous month, was set to weaken markedly again in December, he said.
OBAMA WANTS HELP FOR HOMEOWNERS
Ecuadorean President Rafael Correa warned bondholders he would offer them much-reduced terms in a coming debt restructuring, saying current terms were immoral and had been paid back "many times" over.
In the United States, Obama said he would nominate Shaun Donovan to be Secretary of Housing and Urban Development (HUD), a department that attempts to make housing affordable for all Americans.
Obama, who takes office on Jan. 20, said one in 10 families who owns a home is now in "some form of distress" and he has charged his economic team with finding new ways to help more families stay in their houses.
Defaults on costly subprime loans began to climb in 2007, hitting the entire U.S. housing market and setting the stage for the global economic slide.
Big concerns about the U.S. auto industry remained after President George W. Bush failed to persuade senators in his own party to support a $14 billion auto bailout on Friday.
The White House said on Saturday it was studying the best way to rescue the auto sector, and an official said no announcement would be made this weekend. [ID:nN13481504]
Even without the prospect of an industry-damaging bankruptcy at one of the major U.S. automakers, Japanese peer Toyota Motor Corp was likely to post an operating loss of about $1 billion in the six months to March, Japanese media said.
German magazine Der Spiegel reported that Berlin government experts foresee a 2 percent contraction in Europe's largest economy next year and expect the budget deficit to swell as tax revenues fall and unemployment rises.
That prospect made it more likely Germany's ruling coalition would take fresh stimulus measures, it said.
However, newspaper Bild am Sonntag quoted Economy Minister Michael Glos as dismissing the reported forecast. (Additional reporting by Reuters bureaus; writing by Angus MacSwan, editing by Eddie Evans and Todd Eastham))