On Friday, emails allegedly from the kidnappers suggested Pearl was dead and earlier today his body was falsely reported to have been found near Karachi.
Rumsfeld, speaking on US television, said that while the US would do whatever it could to help find Pearl, it would not negotiate.
Speaking on ABC's This Week, Rumsfeld said: "To the extent you [negotiate], you create an incentive for people to take hostages."
Mentioning Colombia and the Philippines, he said it had become a sizable business around the world where terrorists were able to fund their activities through criminal activities.
"It isn't a good thing for countries to decide that they want to encourage people to create a business out of killing and taking hostages of Americans," he said.
Two emails were sent on Friday -- including one that claimed he had been killed -- are believed to be untrue, according to The Wall Street Journal.
Paul Steiger, managing editor of the Journal, said: "Based on reports from Pakistan, we now believe that both of the messages received yesterday about Danny were false. We continue to believe that Danny is alive. Yet, we have not heard from Danny's captors in two or three days."
Steiger repeated a request to the kidnappers to release Pearl or to at least show that he was alive, following the emails claiming he had been executed and his body dumped in a Karachi graveyard.
The kidnappers are demanding $2m and the release of the former Taliban ambassador to Pakistan.
A team trained in the US in anti-terrorism tactics and crisis management has been formed to find the reporter and FBI agents are also thought to be involved.
The 38-year-old reporter was born in Princeton, New Jersey and graduated from Stanford University with a bachelor's degree in communications. He joined the Journal in November 1990, initially as a reporter in the Atlanta bureau. Then, in 1993, he moved to the Washington office to cover transportation. Between 1996 and 1998, he was based in London before moving on to Paris and then Bombay.
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