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Strategies & Market Trends : JAPAN-Nikkei-Time to go back up? -- Ignore unavailable to you. Want to Upgrade?

To: chirodoc who wrote (589)	12/18/1997 6:41:00 PM
From: goldsnow	Respond to of 3902

Full story Japan may lack ammunition to defend yen--traders 04:26 a.m. Dec 18, 1997 Eastern By Tatsuo Ito TOKYO, Dec 18 (Reuters) - After firing a broadside that scattered currency traders in confusion, Japan's monetary mandarins may be short of ammunition in the form of further ways to keep the yen rising, traders say. Sales of dollars for yen by the Bank of Japan (BOJ) on Wednesday succeeded because the action was taken in concert with a surprise income tax cut -- a dramatic shift in macroeconomic policy. The move wiped nearly six yen off the value of the dollar at one point. Traders say the authorities are expected to keep intervening to strengthen the yen, but for this to be effective they have to convince markets that economic policy will be in line with such moves. But they say there may be no more surprises in store. Japan has apparently used up all its economic policy changes that could further support dollar/yen interventions, and this will eventually corner authorities into fighting a losing battle to defend the yen, they say. ''Intervention could continue to take place, since the dollar/yen has not reached the target 120-125 yen range that they appear to want to confine it to,'' said Shinichi Abe, foreign exchange manager at Nikko Securities Co Ltd. But Abe said the dollar is unlikely to fall below 120 yen because that would be harmful to the economy and could trigger a sell-off of foreign assets held by Japanese investors. Other dealers agreed that the authorities were not satisfied with the current dollar/yen rate. In fact, the central bank again stepped in to sell dollars for yen in afternoon trade on Thursday, pushing the dollar down below 127 yen briefly. It was at about 127.45 yen in late afternoon trade on Thursday. There was vague rumour that the BOJ might slash its discount rate from the current record low of 0.5 percent as part of desperate efforts to eradicate concerns about Japan's financial system. But many traders said this is unfeasible. Masuhisa Kobayashi, vice president at Merrill Lynch in Tokyo, said: ''A further cut in the discount rate is highly unlikely unless Japan goes into a deeper depression.'' ''Moreover, such action would reduce returns on savings and be inconsistent with Wednesday's decision of to make a special two trillion yen cut in personal income taxes,'' he added. Dealers said Japan's Finance Ministry appeared to be struggling hard to see how intervention could be made as effective as possible. Central bank officials made frequent phone calls to commercial banks on Thursday morning to try to ascertain precisely the currency positions at each bank, dealers said. The Finance Ministry, under the strong command of influential Vice Finance Minister Eisuke Sakakibara, has earned a reputation for being ''invincible'' to market forces whenever it conducts currency intervention, which is made at its behest by the central bank. But a spot trader at a major Japanese bank said currency intervention without the right policy mix would merely give market players a good chance to pick up bargains, with heavy buying interest seen from U.S. funds and Japanese investors below 125 yen. ''In order to kill these buyers, the BOJ would need to sell a bigger amount of dollars than it did on Tuesday,'' he added. But such action would risk hurting the U.S. Treasury market as well as U.S. stocks because Japan needs to liquidate holdings of U.S. Treasuries for dollar sales. The BOJ was estimated to have sold more than $3 billion worth of dollars for yen in intervention on Wednesday, the first time it had taken such action since August 1992. Dealers said Japan's economic and currency measures on Wednesday were mainly designed to help restore market confidence to Japan and other Asian nations whose currencies fell sharply, economies and the financial sector were reeling. Economic linkage between Asian nations and Japan has deepened both in trade and financial markets, and the yen's fall would deepen currency turmoil in the region. ''The intervention has helped improve sentiment in Asian currencies but it is questionable that they will lead to a restoration of confidence,'' said Mikio Yasutake, manager at Bank of Tokyo-Mitsubishi Ltd. Asian nations have internal problems that should be resolved by themselves, such as improvements in disclosures in the financial sector, he added. ((Tokyo Treasury Desk 81-3-3432-1396 newsroom+reuters.com)) ^REUTERS@ Copyright 1997 Reuters Limited. All rights reserved.

To: chirodoc who wrote (589)	12/18/1997 7:30:00 PM
From: goldsnow	Read Replies (2) \| Respond to of 3902

''Basically, Japan didn't do anything .... They gave a small tax cut that's really not going to show up -- except in people's mattresses with $200 more in their pocket,'' said a dealer at a French bank Dollar Rebounds, Ends Higher Vs. Yen 07:03 p.m Dec 18, 1997 Eastern NEW YORK (Reuters) - The dollar rebounded from Wednesday's sharp sell-off to rise against the yen Thursday amid questions about whether the Bank of Japan would prop up its currency and concerns that Japan's measures to stimulate its economy were not enough. The dollar's strength against the yen was felt against some European currencies, and the U.S. unit edged higher against the German mark. The dollar rose to 128.65 yen in late trading from 127.12 yen late Wednesday, but it was off its intraday high of 129.45. It edged higher against the mark to 1.7745 from 1.7740. Analysts said Japan's ailing economy could persist despite Prime Minister Ryutaro Hashimoto's recent announcement that a special 2-trillion-yen, one-time income tax cut would be included in an economic stimulus package. Some economists had commented that a cut of 5 trillion yen would have been better. ''Basically, Japan didn't do anything .... They gave a small tax cut that's really not going to show up -- except in people's mattresses with $200 more in their pocket,'' said a dealer at a French bank in New York. ''They had a tax increase earlier this year and they took away a small portion of that.'' Analysts said the dollar's exchange rate to the yen may yield to intervention, but it would eventually reflect the true state of Japan's underlying economy. Some economist's forecasts for 140 yen to the dollar in 1998 make current levels look cheap, they said. Traders spent the session weighing chances for another intervention by the Bank of Japan in defense of its currency similar to Wednesday's sales, which were believed to have totaled $3.4 billion. While still wary of another move, dealers said the BoJ would forego Thursday's dollar strength and wait for a moment of weakness to intervene, thereby maximizing the impact. ''The question is how committed is the Bank of Japan to sell dollars and some people are saying it doesn't seem that they are at this time,'' one trader said. The trader cited a story by Market News Service that quoted sources saying the BoJ intervention lacked full support from Group of Seven nations needed for a coordinated effort. The BoJ was rumored to follow up its massive intervention with smaller-scale selling near the 127.50/70 level. Traders estimated that an exchange rate closer to 130 yen would fuel more fears of big dollar sales. In the commodities markets, U.S. grain prices fell sharply Thursday after a major Japanese grain company filed for bankruptcy and traders feared that other firms might follow suit. Gasoline prices rose on rumors that a gasoline unit at a huge refinery on the Caribbean island of St. Croix was shut down. Silver at New York's Commodity Exchange topped $6.00 an ounce on strong demand and shrinking supplies. Wheat, corn and soybeans were lower at the Chicago Board of Trade on concerns that the bankruptcy filing by Japanese grain firm Toshoku Ltd. -- the fourth-largest bankruptcy in postwar Japan -- could point to trouble at other Japan grain firms. ''Everybody is talking about the Toshoku bankruptcy,'' said Vic Lespinasse, a trading specialist for A.G. Edwards and Co. ''That put pressure on everything on the floor.'' Japan is the largest buyer of U.S. agriculture commodities, taking $10.7 billion worth in fiscal 1997, and traders feared bankruptcies by other grain firms could prompt cancellations of grain that has been sold but not shipped. Soft red winter wheat for delivery in March closed down 11-1/4 cents at $3.34-1/4 per bushel. March corn was off 5-1/4 at $2.67-1/4 per bushel. January soybeans closed down 12 cents at $6.77-1/2 per bushel. Gasoline prices at New York's Mercantile Exchange sped higher on buying inspired by talk in the market that a large catalytic cracker at Amerada Hess Corp.'s St. Croix refinery was shut due to an operational snag, dealers said. ''The refinery news was the spark we needed to run higher after the market has been so oversold,'' said John Kilduff, a trader with Chicago Corp. in New York. January gasoline finished up 1.75 cents at 57.28 cents a gallon. Amerada Hess declined to comment on the 130,000 barrel per day catalytic cracker, though spot dealers said the company was trying to procure gasoline in the New York Harbor, a common procedure when a refinery is unable to make its own product. The St. Croix refinery, dubbed ''The Gasoline Machine,'' has total capacity of 545,000 barrels per day and is a large producer of the gasoline deliverable against the NYMEX contract. The rise in gasoline pulled crude oil and heating oil prices higher. January crude oil rose 33 cents to $18.52 a barrel. NYMEX January heating oil rose 0.86 cent a gallon to 52.64 cents. Silver prices jumped more than 10 cents an ounce, surpassing the $6.00 level, in reaction to shrinking warehouse supplies and increased industrial demand. ''Silver is a real strong buy,'' a floor trader said. ''It's going to be a long time before we see silver below $6.00.'' Silver supplies have been tightening for months as industrial demand remains strong and the available supplies come under the control of fewer and fewer players. On Thursday, the COMEX reported silver warehouse stocks declined 961,336 ounces to 117,775,779 ounces, a new 12-year low. COMEX March silver prices rallied 10.5 cents Thursday to close at $6.073 an ounce, the first close above $6.00 since May 1995. Copyright 1997 Reuters Limited. All rights reserved.