To: John Pitera who wrote (1883 ) 5/31/2000 2:33:00 PM From: John Pitera Respond to
MacroEco talk..... another Japanese Insurance co goes under...and a possible reason why the BOJ wants to move Public orders fell 39.3% while private orders rose 16.6%. Japan April housing starts rose 0.1% y/y versus a 3.6% y/y contraction in March. Meanwhile, in Korea May CPI fell 0.1% m/m and was up 1.1% y/y largely thanks to oil prices.---BOJ?s Taya said Japanese rates were set to rise until deflation concerns have disappeared. He said this was dependant on a revival of capital spending and self sustained private demand. In this respect he noted that ? private demand is becoming self sustaining supported by capital investment? so employment and wages should recover. As with the IMF and OECD we have our doubts about Japanese self sustained recovery and would like to believe that the BOJ is gearing the market up for an eventual move when the situation eventually shows more concrete signs of improvement. However, Taya's view that 'zero rates may rise before a spending revival is seen' indicates that the BOJ may well be a lot closer to ending sero rates than a large part of the financial community assume . ----- its 0.9410 high of the corrective move posted yesterday to a low so far at 0.9280. the three day range low stands at 0.9241 whilst below there the former key breakout to the preceding move up, now support, stands at 0.9200. Whilst above the 0.9200 level the outlook is set to remain supportive. Although the moving averages and MACD indicator remain positive, the more sensitive and therefore shorter term rate of change and RSI indicators suggest that a period of consolidation is now due . We would therefore remain dip buyers against stops below 0.9200 or possibly the uptrend from 0.8850 which is met at 0.9170. ---- inclined to say yes, but when considering that the market has been underpinned by thoughts that the economy may finally be starting to show some signs of slowing, we would have to say no . Keep in mind that the idea that the economy may not be invincible had manifested itself into the notion of a less aggressive Fed, suggesting that some sense of reality may need to return to the market.------ deterioration of the Japanese economy. Rumors quickly became reality as mid-size life insurer Daihyaku Mutual Life Insurance confirmed that it would seek bankruptcy protection. Japan's Financial Supervisory Agency (FSA) said that Daihyaku would be ordered to suspend some operations, given that its solvency level, the measure of an insurance company?s ability to cover liabilities, dropped below the key 200% level. Not surprisingly, the news also helped to dent the yen, and made BoJ comments (we will get to this one in a second) regarding an imminent shift away from the zero-rate policy look even more ridiculous .----the irony is that the BoJ may be aggressively laying the groundwork for such a move in an effort to prevent more insurance failures like Daihyaku. Officials at the company were quick to point out that because of the prolonged low rate environment, they have been earning less on their investments than they have been paying out to policyholders. Keep in mind that is an industry-wide problem in Japan, and while we have not heard much of negative rate differentials in a while, it is the type of dynamic that is likely to elicit a further reduction of Japanese exposure down the road .----
