Re: Japan

["Charles Jannuzi" <jannuzi@xxxxxxxxxxxxxxxxxxxxxxxxx>]

> THE JAPANESE GOVERNMENT'S latest package of emergency measures
> to prop up the ailing economy will not meet its goal of reining
> in the crippling deflation afflicting the nation's battered
> companies and debt-paralyzed banks.

I think their imagery is a bit messed up. I don't think you rein in
deflation. It doesn't gallop. I think we need to find a better image and
metaphor.

But it will likely help
> prevent a financial crisis from erupting before the end of the
> financial year on March 31. "I think it's highly effective, I
> just think it's misnamed," says Ronald Bevacqua, an economist at
> Commerz Securities in Tokyo. "It's not a deflation policy, it's
> a stockmarket-support policy."

First analytic stooge for foreign capital.

>
> The package, titled "Emergency Countermeasures to Deflation,"
> was presented on February 27, one week after Prime Minister
> Junichiro Koizumi told United States President George W. Bush he
> would "never slacken" in his drive for structural reform. But
> analysts say the package shows Koizumi, whose hold on power has
> been weakened in recent weeks as his public-approval rating has
> plunged, is unwilling to deal head-on with the massive and
> politically sensitive bad loans at the heart of Japan's economic
> malaise. "This plan buys them time," says Bevacqua. "That's all
> it does."

Stooge repeats himself.
>
> The package sparked a rally in the Nikkei 225 stock index by
> tightening restrictions on margin trading and short-selling of
> stocks, which is when investors sell a borrowed stock expecting
> to be able to buy it back at a lower price at a later date. By
> keeping stock prices high the government eases the pressure on
> banks, which hold huge amounts of stock and have traditionally
> counted on those holdings to boost profits.

Banks, in fact, have unwound a lot of their stock holdings. Like with the
rise and fall of the Nikkei, there is considerable foreign money coming into
the Nikkei again (and it might stay for a while this time).

>
> But this has nothing to do with deflation, which has been eating
> away at the Japanese economy for almost three years. The
> nationwide consumer price index fell 1.4% in January from a year
> earlier. Prices in Tokyo fell 1.7% in February, marking 30
> months of continuous decline.

Right, and the thing that correlates so utterly monolithically with
deflation is the high yen (though I admit restructuring of procurement and
distribution and retail also play a part in it).

Bankruptcies have soared in recent
> months sending the unemployment rate higher and damping consumer
> spending, forcing companies to cut prices to attract customers.

A lot of price cutting, though, is big retailers trying to get back market
share. COMPETITION IS VERY, VERY INTENSE.

> Some economists fear this series of events could spiral out of
> control if action is not taken to break the chain.

Right, so put your money into hedge funds and access capital bets.

>
> But on two key issues the latest package proved a rehash of
> often-stated positions. The government said it would continue to
> push banks to deal with their bad-loan problems and would
> "implement specific and effective measures in a bold and
> flexible manner" to prevent a crisis. Koizumi and his ministers
> have been repeating this vague statement since the start of the
> year, vowing to take all necessary steps to avoid a financial
> crisis should one appear imminent.
>
> NOT ENOUGH BITE
> Many analysts had hoped this package would provide those steps.
> Bad loans at Japanese banks totalled ·36 trillion ($270 billion)
> at the end of September, according to the Financial Services
> Agency. That was up ·3.2 trillion from six months earlier even
> though banks wrote-off soured debts.

But if banks can show capital adequacy ratios of 8% or more, why should
anyone give a crap about the total estimated values of these loans?

The package "lacked any
> real measures" to deal with the crisis, says James Fiorillo,
> senior banking analyst at ING Barings in Tokyo. "

Second foreign stooge for capital. Wonder where he puts his bonuses?

Building up the
> momentum to put such policies and packages in place takes time,"
> says Fiorillo, who downgraded his outlook for the industry on
> February 27. "It probably means that there's going to be some
> time before there's another attempt."

Right, and don't you dare bet against his downgrade!
>
> Meanwhile, the government is counting on the Bank of Japan to
> prevent a crisis. Pressure has been building for months on the
> BOJ to ease monetary policy in the hope that this will spark
> inflation and encourage consumers to start spending.

Why don't they do something about banks raising the interest rates of loans
on companies? Check out Ripplewood's Shinsei or the Aozora Bank to see what
is really happening with 'modern risk assessment'.

On February
> 28 the BOJ said it will increase its buying of government bonds
> to ·1 trillion a month from ·800 billion to boost market
> liquidity. But analysts say the move will have little impact, as
> the market is already awash in funds.

Which is why I posted the piece from the Todai professor talking about
oversupply of funds for lending when no one wants to borrow and risk
restructuring or foreclosure from vulture cap.
>
> BOJ Governor Masaru Hayami has consistently said that monetary
> policy alone cannot solve Japan's problems and has urged the
> government to push reforms that would clean up the banks. "The
> government should decide to inject taxpayers' money into banks
> quickly to stabilize the entire system," he told reporters on
> February 28.

They should just nationalize accounts and loans using the postal systems and
let the really bad banks go. This won't happen because the MofF and the BoJ
wouldn't dare admit that that a rival ministry has a role to play in this.
>
> The Financial Services Agency is now conducting a special
> inspection of the banks that are to be completed this month.
> Yasuhisa Shiozaki, a Liberal Democratic Party MP, supports a
> bank bailout and says Koizumi hasn't acted thus far because he
> lacks the data needed to assess the problem-but the agency's
> inspection may change that.
>
> "Toward the end of March there should be some major changes of
> policies towards financial issues," Shiozaki says. "Something
> must be done and something will be done. But I'm not sure
> whether it will be enough or not. Probably it will not. That
> means we have to keep muddling through."

A 'bailout'? What does that mean? Well according to the guys who came on the
heels of O'Neill and Dubya, it's now up to western equity to recapitalize
the failed banking system. These were the soundbites and textbytes in the
media. I am not jesting.

It's a winning hand for the vultures. If they get their way and screw
everything up, they can just say Koizumi did too little too late. If they
don't get their way but still manage to screw up what Koizumi did, they'll
say no one would listen to them. If they don't get their way and don't
manage to screw everything up, they'll just start working on building up
another panic and crisis in the western press.

What's most striking about this truly awful FEER piece is , for all their
obsession about 'deflation', notice how they didn't really say what Koizumi
or the BoJ should actually do about it. The yen is the no-no word, as
O'Neill already made clear.

Charles Jannuzi