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

To: Lucretius who wrote (773)	3/14/1998 9:25:00 AM
From: chirodoc	Respond to of 3902

David DeRosa: Year-End Shenanigans with the Nikkei By David DeRosa Special to TheStreet.com 3/13/98 12:18 PM ET The word in Japan is that the central planners have decided it would be best if the Nikkei finishes the fiscal year (March 31) at 18,000 or higher. So now we are in the annual Nikkei ramping season. Last night was interesting. They got the index up almost 500 points with a story that they are going to use the postal system's fund to buy stocks. Part of this money is to come from the Postal Savings Bank. As an aside, it should not be lost on Nikkei traders that the timing of the rumor/announcement coincided with the index future expiration, called "SQ" (special quotation). SQ has some special meaning similar to the old S&P expiration that the U.S. financial press dubbed the "triple witching hour." All things considered, not a bad time to stage a short squeeze. Now the story is that the Postal Bank's enormous resources -- which is the public's money -- will be used to buy stocks in a massive way. And all of this is to achieve the critical 18,000 level so that banks and other financial institutions can avoid taking accounting losses on their positions that have to be marked to market. Excuse me! This is a little strong to swallow even for this TSC columnist, who has gone on record exposing all kinds of international financial mischief. Bottom line is the government wants to use public trust money to ramp up the market so the financial year ends on a not-so-bad note. Better yet -- one justification for this move is that it will allow Japanese banks to qualify as satisfying BIS net capital ratio tests. Really? I want to know whether the world (and the BIS) are going to be fooled by this all-too-obvious boldfaced scam. Maybe I should ask Dave Kansas to move my column today to the new TSC Wall Street scam alert section. I am reminded of one of J.P. Donleavy's characters, Schultz. This guy is an American in London who produces West End plays that flop every time. The scene I remember is one in which his backers have given him an ultimatum that some minimum number of tickets have to be sold or the play will be closed. So there is Schultz on the phone to the box office buying tickets under phony names. And he is ever so careful to buy just enough and not one seat too many. Except for the part about using the Postal Bank's funds to jack up the market, none of this is new. Ever since the top of the market eight years ago, the authorities have managed the yearly accounting losses by interfering with stock prices in March. Somehow this year they seem more desperate. Maybe it is the looming slowdown in Japan from the Asian currency crisis. Or maybe it is all the scandals at the Ministry of Finance and Bank of Japan. I have to admit that I share their concerns for Japan. But cooking the books by burning up public money is not the solution. Now I come to the real question: Will this work? If this is all that is supporting the stock market, the best they can hope for is that they can keep the jig up until month-end. But remember that on March 20 there is supposed to be some announcement of the details of the stimulus package. If it is seen as a dud, then the Nikkei will not hold. Then there is the political fallout from the planned use of the public's money in this scheme. Note the story in yesterday's New York Times on the uproar over the Japan Rail share fracas. Here we have a new name to watch, Mr. Masatake Matsuda, president of East Japan Railway Co. The basic issue is that the government has decided to foist $2.85 billion worth of debt onto the backs of the shareholders of the rail companies -- and Matsuda-san is fighting them tooth and nail. He is even threatening the government with that most distinctly American weapon, a lawsuit. Could this be the beginning of a grassroots uprising of a public shareholders' rights movement? If so, maybe the government had better think twice before using public money to solve Japan Incorporated's bookkeeping problems. My bottom line is that I am looking for good opportunities to short the Nikkei. But please be careful if you decide to try this yourself because you are fighting the government on this and they only play hardball in March. It is also important to recognize that if you short Japan, you will have a lot of company in the trade. I think a lot of people are going to want to do the same trade. So even if you are right, the exit from the trade could be messy. Quote of the Day The award goes to Mr. Koji Omi of the Ministry of Economic Planning. Omi-san told the press today, "The idea of the country taking measures [to support] stock prices is questionable." In Japan, that is a polite way of saying "you guys are nuts." (Japan is a highly civilized and polite society. Omi-san cannot come out and sound like a guess on Crossfire.)