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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Mitch Blevins who wrote (11112)	12/8/1997 4:24:00 PM
From: Cynic 2005	Read Replies (1) \| Respond to of 94695

And, they deny it: Japanese Act to Dispel Report of U.S. Bond Sales By JATHON SAPSFORD Staff Reporter of THE WALL STREET JOURNAL TOKYO -- Finance Ministry officials moved quickly to throw cold water on reports that Japan's ruling party may recommend selling some government holdings of U.S. Treasury bonds to help Japanese banks that are having trouble obtaining dollars. A ministry official said such sales, though conceivable, would only be conducted through repurchase agreements, under which the central bank would buy back the securities at a preset date. Such a measure, while temporarily providing Japanese banks with a fresh source of dollars, wouldn't increase the long-term supply of U.S. Treasuries on the open market. The proceeds from repurchase agreements could "theoretically" be deposited at Japanese banks, a ministry official said, to help them meet the seasonal, year-end demand for funds. But ministry officials noted that no firm plans have been set at this point. U.S. markets have been rattled in the past by talk of the Japanese selling their huge Treasury holdings to help out Japan's beleagured banking sector. But the most recent comments concern government holdings of such U.S. securities, and don't affect the far bigger private U.S. securities portfolios at Japanese financial institutions. Japan's bankers have said repeatedly that even though they might face short-term funding and capital shortages, they aren't willing to sell their U.S. securities, which are among their best performing assets. Nikkei News and Kyodo News agency quoted officials of the Liberal Democratic Party, including Taku Yamasaki, chairman of its policy affairs research council, as saying dollars raised by selling Treasury bonds could be deposited at Japanese banks. A substantial amount of Japan's foreign reserves, which stood at $228 billion at the end of November, is invested in U.S. Treasury bonds. In addition, on Monday, Haruhiko Kuroda, director-general of the ministry's international finance bureau, told reporters Monday: "It isn't unthinkable." He said that if such a scheme were implemented, funds would be raised through Treasury repurchase agreements, not through outright sales of Treasurys. Mr. Kuroda declined to comment on whether such action with Japan's foreign exchange reserves was actually being taken now. Mr. Yamasaki said casual comments by Prime Minister Ryutaro Hashimoto earlier this year about Japan selling U.S. Treasury bonds had pushed the dollar down sharply against the yen. Traders viewed Mr. Yamasaki's comments as a step to prop up the yen, which has lost 12% of its value against the dollar so far this year. Japanese sales of U.S. Treasury bonds effectively mean selling dollars for yen because the proceeds would be repatriated into the Japanese currency. Talk of selling U.S. Treasurys to raise funds to stabilize Japan's financial system shook the dollar off intraday highs in Tokyo Monday. The reports triggered early profit-taking on dollar positions, pushing the currency as low as 129.50 yen. But Japanese institutional investors were among those who bought the dollar off its lows. Late in Tokyo, the dollar was trading at 130.77 yen, not much changed from 130.200 yen late Friday in New York. Prices of U.S. Treasurys in Tokyo were flat to lower Monday afternoon with selling weighing in the short end, traders said.