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Strategies & Market Trends : John Pitera's Market Laboratory
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To: John Pitera who wrote (3860)5/17/2001 5:09:26 PM
From: John Pitera  Read Replies (1) of 33421
 
there is pretty heavy foreign buying of Japan equities lately, and Japan ponders supply side solutions to the
economy

Aside from the overnight strength in Japanese equities, some of the modest pullback in dollar/yen today may be related to a report in the Nihon Keizai Shimbun that Japanese former Japanese FinMin Miyazawa advocated currency intervention at an April meeting of Asian finance ministers to dampen the strength of the dollar . We know the Nikkei site like the back of our hand and have not actually been able to find the article, but since everyone is talking about it, we will throw our hat into the ring. As far as we concerned, Miyazawa's concerns about yen weakness are largely irrelevant with the reformist mentality of the new Koizumi administration. Remember, there has been a good deal of euphoria surrounding the prospects for reform in Japan. While we think that some of this exuberance may have to be worked off over the near-term, it is becoming increasingly clear that the investment community has bought into the notion that supply side policies now represent the only road to recovery in Japan. This is easily evidenced by the fact that foreign investors loaded up on a net Y1.1 tln worth of Japanese securities in April, the highest monthly total since February of last year. In other words, while expectations for reform may stumble ahead of nearby election and political wrangling concerns, the Finance Ministry may actually be forced to weaken the yen if a portfolio reweighting of Japan fosters a stronger Japanese currency that could exacerbate some of the inevitable deflationary pressures associated with restructuring.
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