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To: Alex who wrote (9278)	4/3/1998 8:22:00 PM
From: goldsnow	Read Replies (2) \| Respond to of 116770

Alex, allow me to give you my read on the current gold sentiment. Clearly upcoming May EMU decision on gold reserves plays a major role in rapidly changing sentiment for gold but also other commodities.. Aside from debatable concept that this would leave Greenspan virtually no choice at the next Fed meeting other than follow the market there is a Japanese situation...And here is my spin..All that silent war beatween Rubin and Japanese is not all about tax cut or nothing..Japanese know that tax cuts are not going to work in their society..All this petty cash will go right into their savings even worse..abroad once foreign markets will be open...Rubin must know this too..So the war must be about buying time for this administration to survive before the unavoidable judgement day.. Japan must sell Treasuries, it must strengthen yen (even if it means raising interest) and to do all of that while holding gun of relentless expansion into USA and USA dominated markets..dealing Russian Commodity game (oil, gas) for assistance (not in dollars one must add) None of the above is to Rubin liking..and I doubt if Clinton survives Zippergate his administration will be out of luck in Japanesegate...as translated into "obstruction of justice"

To: Alex who wrote (9278)	4/3/1998 8:32:00 PM
From: goldsnow	Respond to of 116770

Global Intelligence Update Red Alert April 3, 1998 Sony's Chairman Warns of Impending Collapse of Japanese Economy Norio Ohga, Chairman of Japan's Sony Corporation, warned today that Japan's economy was close to collapse and that Japan's collapse could lead to a worldwide recession. According to Ohga, the Japanese economy was facing its most difficult time ever. He compared Japanese Prime Minister Hashimoto to Herbert Hoover: "What President Hoover was saying then, there are so many similarities with what Prime Minister Hashimoto has been saying recently. Hoover triggered worldwide recession. I just hope remarks by Prime Minister Hashimoto won't trigger worldwide recession". According to Ohga, the central problem facing Japan is deflation, driven by a lack of consumer spending in Japan. Ohga therefore called on the Japanese government to stimulate the economy, increasing consumer spending and stabilizing prices. Ohga has merely stated the obvious. Japan has been stagnant throughout most of the 1990s and its condition is worsening. The Bank of Japan's "business condition diffusion index," which tracks business sentiment has fallen to the worst level since 1994. This understates the problem. The extended malaise of the Japanese economy is wreaking structural damage as time goes on. Both Daiwa and Tokai banks announced cuts in lending to large companies while it was announced that capital spending in general would decline in 1998. As with the United States in the 1970s, the decline in the availability of capital triggered by the banking crisis means an increasingly aging and less efficient industrial plant. As this happens, Japan's exports become less competitive, increasing pressure on the yen. As the yen declines, the willingness of investors to invest in yen denominated paper declines, increasing the capital crisis. The obvious answer is to stimulate the economy, as Ohga suggested. But Japan's financial condition is much worse than the U.S. condition in the early 1980s. Stimulating consumption must come at the expense of the savings rate. A high savings rate at low interest is now and has always been the foundation of the Japanese banking system. The availability of nearly free money to banks that are in dire trouble is the only thing that permits them to continue functioning. Eliminate the constant infusion of savings and the banking system would collapse and with it the inefficient, linked companies who depend on cheap money to maintain their balance sheet. Increasing domestic consumption is the long-run solution, but as the Japanese bureaucrats understand very well, it is not clear how to get there from here. Increased consumption would stimulate the economy, but only after knocking the bottom out of the banking system. Ohga, who heads one of Japan's more successful companies, is not completely sensitive to the precarious condition of most other Japanese companies. This means that Ohga's warning should be taken seriously while his solution cannot be. Ohga's warning is an important turning point in the Japan story, since it represents a dire prediction from a leader of the Japanese business community, someone who cannot be dismissed as merely a sensationalist or alarmist. If Ohga is worried, everyone should be. The problem is that there does not appear to us to be any way out of Japan's dilemma. This is not the first time Japan has faced this dilemma. During the 1920s, a very similar banking crisis took place. The result was a devastating recession and the emergence of political extremism. Until this point, analysts have been focused on the question of whether or not Japan can avoid economic disaster. It has been our position that Japan's economic fate has been sealed ever since the Japanese government decided to follow a strategy that refused to deal with the emerging banking crisis--that is, since around 1992. Now, Sony's leader has come close to the same conclusion, at least in the sense of facing the magnitude of the crisis. From our point of view, the central question is no longer whether the Japanese economy is facing calamity, but rather what the consequence of that calamity is going to be. One aspect of this is its effect on the rest of the world. We are not certain that Japan's decline will have an enormous negative effect outside of Asia. The second aspect is its effect on Japan itself. Since the end of World War II Japan has been a liberal democracy, a system imposed by the United States. If Japan goes into a depression, it will be a very different country than the prosperous and cocky Japan of the 1980s. With that difference will come wrenching political changes. We urge analysts to study the 1920s in order to get a sense of the possible evolution of Japan, should Ohga be correct. ___________________________________________________ To receive free daily Global Intelligence Updates or Computer Security Alerts, sign up on the web at stratfor.com, or send your name, organization, position, mailing address, phone number, and e-mail address to alert@stratfor.com ___________________________________________________ STRATFOR Systems, Inc. 3301 Northland Drive, Suite 500 Austin, TX 78731-4939 Phone: 512-454-3626 Fax: 512-454-1614 Internet: stratfor.com Email: info@stratfor.com

To: Alex who wrote (9278)	4/3/1998 8:44:00 PM
From: goldsnow	Read Replies (2) \| Respond to of 116770

Japan PM to mull bold steps for economy - agency 07:04 p.m Apr 03, 1998 Eastern LONDON, April 3 (Reuters) - Japanese Prime Minister Ryutaro Hashimoto vowed on Friday he would consider bold fiscal and financial measures for Japan's economy and that he would do what he must to revive it, Jiji news agency reported. Hashimoto, speaking exclusively to journalists who accompanied him to the Asia-Europe (ASEM) summit in London, was responding to calls for tax cuts vociferously urged by prominent officials at home and abroad. ''I would like to consider specific measures which have both real substance and impact, with fiscal and financial measures at the core,'' the Japanese news agency quoted Hashimoto as saying. ''In view of the current economic situation (in Japan), we are thinking about what it really needs...We will do what we must do and take bold action.'' His comments follow a stream of shocking news on the Japanese economy in recent days, which prompted U.S. President Bill Clinton to urge Japan on Friday to break with its past and take bold action to revive its economy. Clinton described a ''raging battle'' between Japan's bureaucracy and its business community on the policies needed to bring the Japanese economy out of its moribund state. A recent survey by Japan's central bank showed the nation's business sentiment was at its worst in three and a half years. The chairman of Sony Corp said earlier in the week that Japan's economy was ''on the verge of collapse.'' The latest blow came earlier on Friday when credit rating agency Moody's sounded a warning note on Japan's sovereign debt rating of AAA, the highest possible. Moody's changed its outlook on Japanese debt from stable to negative. It said its action was based on the uncertainty of Japanese authorities' ability to achieve a policy consensus that would help the economy. Also on Friday, Japan faced renewed pressure to cut taxes to reinvigorate its economy, which has been struggling for years. European Commissioner Sir Leon Brittan called for Japan to implement ''permanent and substantial tax cuts.'' The United States has often repeated this chorus, as have many politicians and business leaders in Japan. On the issue of tax cuts, Hashimoto stopped well short of making any commitments. But he expressed his willingness to reconvene in the near future his fiscal reform council -- a panel which he heads himself and which last year devised a law which required the government to cut down its snowballing budget deficit. This was the result of his administration putting great emphasis on improving the nation's fiscal condition, and so the government is currently in a straitjacket as far as tax cuts are concerned. But resumption of a debate by the reform council could give him the political cover to cut taxes and yet avoid an about-face on policy. ''After the budget for fiscal 1998/99 is enacted, I would like to convene the Fiscal Structural Reform Council as quickly as possible,'' he was quoted as saying. Japan's national budget for the fiscal year ending March 31, 1999 is due to be enacted on April 18 at the latest. He warned, however, that tax cuts must be considered in a broad context. ''What measures to take on taxes and when to implement them -- this must be judged taking into account the issue of fiscal reform, the state of the economy, consumer spending, company profits and the Asian crisis,'' Jiji quoted him as saying. REUTERS