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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (26705)	9/22/1999 4:29:00 PM
From: Jon K.	Respond to of 99985

Anyone from NY City? An SI member needs your help! beta.siliconinvestor.com Thanks

To: Les H who wrote (26705)	9/23/1999 4:32:00 PM
From: Les H	Read Replies (2) \| Respond to of 99985

ANALYST: YEN RISE TO CONTINUE DESPITE RISKS TO JAPAN RECOVERY PARIS (MktNews) - The yen will continue to rise until domestic investors, especially life insurance companies, stop repatriating yen-denominated assets, the chief economist of the French national financial institute Caisse des Depots et Consignations said Thursday. "It is very likely that the yen will continue to appreciate for structural reasons, because the Bank of Japan has stopped buying the U.S. dollar," said Patrick Artus, who is also economic advisor to the prime minister and finance minister. "As long as Japanese life insurers do not diversify (portfolios), they will continue to repatriate yen-denominated assets," he said. The currency appreciation will dampen the economy before the structural problems can be attacked. At Y109 to the dollar, the Japanese currency is already well above the Y120 level justified by fundamentals, he told Market News. Signs of imminent economic recovery, which triggered the rise of the yen, are deceiving, since the stimulus is coming mainly from public investment, Artus argued. Even private investment is being artificially bolstered through state guarantees for bank loans. Current Nikkei stock index levels around 17,000 are more than twice as high as business fundamentals would justify, he argued. Now that some investors have realized this and are selling the Nikkei, the "beginning of a correction" may be under way. The yen continues to be buoyed by current account surpluses of $12 billion and the repatriation of $10 billion in yen assets each month. "To stop the rise of the yen, the Bank of Japan would have to increase its dollar reserves by nearly $20 billion a month" or more than $400 billion a year, Artus said. "But what would (the central bank) do with $400 billion?" he asked rhetorically. Selling these reserves would undercut the dollar, which is exactly what the central bank wants to avoid. This why the Bank of Japan stopped buying the dollar in August. The central bank's decision to leave monetary conditions unchanged last week can be explained by the surplus liquidity of Japanese banks, which do not pass on the money in the form of loans. The central bank's refusal to buy government bonds creates a risk of a rise in long-term yields next year, he warned.