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To: Les H who wrote (1313)	1/17/2002 11:18:31 AM
From: Les H	Respond to of 29592

Japanese firms to repatriate funds Chisa Fujioka Thursday, January 17, 2002 at 09:30 JST TOKYO — Japan could see a huge influx of funds repatriated by local financial institutions before the end of the fiscal year in March, flows which would provide support for the frail yen in coming months, analysts said. However, it remains to be seen whether the flows will be able to lift the currency much above recent three-year lows. Year-end repatriation in Japan — an annual phenomenon as companies look to dress up balance sheets before books are closed — is tipped to be especially big this year as earnings suffered heavily from the economic slump. Japanese banks were also expected to bring capital back home in order to finance their disposal of bad loans and as mergers led to a consolidation in overseas businesses. Proceeds from four recent high-profile stake sales by Japanese banks added up to some $3.9 billion and financial institutions were expected to continue offloading foreign bonds and equities as the end of March drew near. A large amount of that could be converted into yen. "The flows will push the yen higher for a while, although it may not be enough to change the current trend (for a weak yen)," said Koji Fukaya, chief currency analyst at Bank of Tokyo-Mitsubishi. Major Japanese bank Sumitomo Mitsui Banking Corp (SMBC) said last week it would make $650 million in profit from selling its shares in U.S. investment bank Goldman Sachs. A spokesman for Fuji Bank said it made $967 million profit from a stake sale in a U.S. financial unit, while Dai-Ichi Kangyo Bank saw $1.03 billion in profit from a similar deal. UFJ Holdings said it made a profit of 170 billion yen ($1.28 billion) from selling Bank of California. Banking mergers, like the one that saw Sanwa Bank formally merging with Tokai Bank this week to create UFJ's commercial banking unit, were expected to result in a slimming-down in overseas branches. On the securities side, preliminary capital flow data from Japan's Ministry of Finance showed local investors were net sellers of 1.3 trillion yen worth of foreign stocks and bonds in November and December. In comparison, foreign investors sold a net 566.9 billion yen of Japanese stocks and bonds over the same period. While the flows may help the yen turn around, analysts said it was unclear how far it would go. An unwinding of hedge positions on the investments may dull the market impact and some analysts guessed that banks could keep some profits in dollars given forecasts of a weak yen this year. Repatriation may push the yen to around 125 per dollar but further gains would probably be blocked by dollar-buying interest, perhaps combined with official intervention, they said. "Most foreign securities investment is hedged, so that means repatriation would not pressure the dollar much," said Taisuke Tanaka, chief currency strategist at Credit Suisse First Boston. "But if the yen were to strengthen too much, Japanese authorities would intervene, and if the dollar were to fall past 125 yen, there would be plenty of foreign investors willing to buy," he said. Some also said a lack of favourable investment alternatives at home would see Japanese banks holding on to foreign securities investments. Bank of Japan data showed Japanese banks have steadily accumulated foreign securities, holding some 25.1 trillion yen ($191.5 billion) at the end of October, up 50% from a year earlier. "While Japanese banks will need to clean up their balance sheets, we think that the amount of repatriation will only be a fraction of the foreign securities that Japan will continue to buy overseas," said UBS Warburg in a recent research report. (Reuters News) japantoday.com