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To: goldsnow who wrote (8507)	3/18/1998 9:31:00 PM
From: goldsnow	Read Replies (1) \| Respond to of 116814

"Japan's influential Vice Finance Minister for International Affairs Eisuke Sakakibara reiterated his recent assertions that Japan would not tolerate a big yen slide." infoseek.com

To: goldsnow who wrote (8507)	3/18/1998 9:39:00 PM
From: goldsnow	Respond to of 116814

FOCUS-Top rating ceiling beckons for EMU hopefuls 12:13 p.m. Mar 18, 1998 Eastern By Clelia Oziel LONDON, March 18 (Reuters) - Credit prospects for six countries hoping to join European economic and monetary union (EMU) were boosted by Moody's Investors Service on Wednesday. The agency said it would upgrade from May the foreign currency ceilings of six likely members -- Belgium, Finland, Ireland, Italy, Portugal and Spain -- currently below the top-notch Aaa. The move is largely technical in that it alters the rating ceilings rather than ratings themselves, bringing them into line with rating ceilings for core European nations. More importantly, Moody's changed the outlooks for Italian and Spanish domestic and foreign currency bonds to positive, citing the ''strong improvement both governments have demonstrated in fiscal performance.'' The euro single currency, due to debut in January 1999, is widely expected to include Austria, France, Germany, Luxembourg and the Netherlands along with the six countries Moody's statement affects. ''Once monetary union begins, the foreign currency ceiling for the EMU bloc as a whole...will be Aaa,'' Moody's said. This is warranted because the 11 countries together ''represent a massive net-creditor monetary bloc.'' Triple-A, reflecting the lowest risk of default, commands the best price from investors. Benchmark bonds issued by Belgium, Italy, Portugal and Spain all showed slightly smaller yield premiums against underlying government bonds after the news. Moody's plans to treat the euro as a local currency for EMU members rather than a foreign currency. This approach differs from rival agency Standard & Poor's. Moody's also said it may raise the outstanding foreign currency government bonds of Ireland, Finland and Portugal. Their foreign currency ceilings are currently restrained below their local currency rating levels. Analysts said any benefits from EMU on the credit quality of peripheral European governments were likely to be temporary. ''It's a bit more of a rough ride than the politicians have led everybody to believe,'' said John Butler, chief fixed income strategist at WestLB in London. The ceilings act as upper limits on ratings for any foreign currency borrowers in a given country, and are different from a country's own sovereign rating. David Levey, managing director of sovereign risk unit at Moody's, said he expected foreign currency issues by EMU members to be gradually phased out. ''The actual immediate rating impact is small,'' Levey said at a news conference. The EMU bloc would also represent a ''very stable'' political environment, with a ''very strong'' institutional framework. The decision on which countries will join EMU will be announced in May. Moody's said a key question was whether EMU will affect the domestic currency ratings of individual participants. ''At present, the Aaa ratings of local currency-denominated treasury securities of Austria, Finland, France, Germany, Ireland, Luxembourg, and The Netherlands appear secure.'' But it said their fiscal performance would be monitored as demographic trends posed a greater social-welfare burden. A loss of monetary sovereignty might have a negative effect upon a highly indebted country, although participants would still retain sovereignty in the power to tax and spend. ''This might become critical during a period of crisis, when we usually witness a flight to quality,'' it said. EMU countries would benefit from increased market access but on balance, during times of stress, it was ''highly unlikely'' that such gains would compensate for the negative effects created by the loss of monetary sovereignty, Moody's said. WestLB's Butler said this issue was being overlooked. ''This (EMU) is very positive for credit quality but it is a honeymoon effect, and a honeymoon by definition lasts only a short period of time,'' said Butler. ''When the honeymoon is over and reality sets in and these governments have to compete on a level playing field with some obviously higher quality credits investors are going to demand some spread and rating agencies will have to be prepared to respond to differences in the business cycles, political setbacks etc.'' ((International Bonds +44 171 542 8663 fax +44 171 542 5285, uk.governmentbonds.news+reuters.com))