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Pastimes : Ask Mohan about the Market
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To: Rational who wrote (8152)11/16/1997 6:32:00 PM
From: Zeev Hed  Read Replies (2) of 18056
 
Sankar, are you telling us that BOJ is allowed to actually buy preferred stock in the main japanese banks? (as an aside, I hope these are not floorless convertible like CTYS <VBG>). This is quite irregular to say the least. In this country we would have conspiracy theorist all over poor AG (and the poor guy is Jewish on top of it <G>).

What I expect them to do is to simply sell those treasuries (and buy some yen with the receipts) and deposit these yens in the japanese banks to improve their liquidity, I do not think they can actyually take a risk position as preferred stock or any equity.

Now, if that is indeed is going to happen, we will have a Temporary blimp in our interest rates (and that is a process that will take few months, thus my scenario of very week late Jan and whole Feb), but the japanese will eventually be faced with the need to let the yen fall back and maybe re: the dollar go above the critical 130 yen/dollar. My reasoning is that if they do not a good chunk of their export will be at a competitive disadvantage (remember 40% of their export is to the rim). This is one reason I am saying they should soak this export deficit they are going to experience (and by that I mean loss of some 10% of this export) in their own economy by reducing taxes and increase consumption.
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