J.G. --
Are you our resident economist? If so, what's your take on this from Japan?
Financial Times:
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THURSDAY JULY 2 1998ÿÿEquitiesÿ
Japanese hopes lift World markets
By Gillian Tett in Tokyo and Philip Coggan in London
World stock markets moved ahead strongly yesterday on hopes that the Japanese government was finally committed to take action to boost its ailing economy and banking system.
Reports in the Japanese media said the ruling Liberal Democratic party wanted to announce 3,000bn ($21.7bn) in permanent income tax cuts soon, in addition to the recent Y16,700bn stimulus package.
The government yesterday denied it had firm plans for tax cuts. But Ryutaro Hashimoto, prime minister, said Tokyo was now committed to a review of personal and corporate income tax to create a more balanced and "fair" system.
His comments helped drive the Nikkei 225 index, the key stock market indicator, up 3.36 per cent to 16,362.89.
The yen also strengthened slightly against the US dollar to close at around 138 in late Tokyo trading, near the levels it reached after the surprise intervention by the US Federal Reserve and Bank of Japan to support the currency last month.
European markets took their lead from Tokyo's rally with bourses in Brussels, Frankfurt, Paris and Zurich reaching new peaks and the FTSE Eurotop 100 index hitting a record high.
Expectations of more reforms are focused on the LDP's plans, which should be announced today, to create a "bridge bank" to take over the assets of failed banks.
LDP officials yesterday indicated that the bridge bank would operate through a "two-step" process. The first step would occur when the Financial Supervisory Agency, the recently established regulatory agency, declared a bank collapsed.
The failed bank would then remain in existence, managed by government administrators, for up to two years, with shareholders protected. During this period the FSA would inspect the bank's books and oversee liquidation of the bad loans.
Loans to sound borrowers would be maintained in the hope of preventing a bank failure from triggering a "credit crunch" among healthy companies.>>>> |
