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Pastimes : Ask Mohan about the Market
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To: Snowshoe who wrote (8347)11/17/1997 7:52:00 PM
From: Rational  Read Replies (3) of 18056
 
Greg:

I agree with that quote. It implies that Jap Banks have become so bad in their business that pulling out of the international arena does not worsen their condition.

The main concern so far has been that the markets have trashed the Jap Banks who used to have cross-holdings of each others stocks that have depreciated in value to the extent of depleting the capital. Japanese banks must show profitability and restore confidence of Japanese (at least). If these banks cannot survive, when they can borrow at 1.5%, imagine what would happen when the Jap Govt Bonds fall in value. US financial institutions' find Jap Gov Bonds as easy shorts -- I heard this from a prominent investment banker on CNBC.

Jap Bonds are going to fall and Jap Banks are headed for more trouble. The extra preferred stock capital infusion will save them to build up the capital/assets ratio, but if their banking business is not great, how will they survive.

I know an economist friend at BOJ was telling me how backward the BOJ's research arm is -- no where near the US Fed. The whole Japanese banking system is quite backward, less computerized, with no research for operations. These banks are simply beaten up by the likes of Citicorp.

I do not know how well to link a failure of the Jap banking system to US stock markets, except to presume that Jap Govt will sell US Treas -- I am not absolutely sure that they will, but I do not know how else they will manage.

Sankar
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