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To: robnhood who wrote (9802)	4/12/1998 8:33:00 PM
From: goldsnow	Respond to of 116762

Russell, with huge Chinese projects budgeted for 98/99 and Japanese Public Projects budgeted for the same, and collapsing Russian deliveries I wonder if commodities inflation is just around the corner? Gold lurking 6-12 months ahead? Japan package seen no panacea for metals demand 11:17 p.m. Apr 11, 1998 Eastern By Nao Nakanishi TOKYO, April 12 (Reuters) - Japan's record economic stimulus package is unlikely to bring about a quick turnaround in the base metals industry, which is suffering because of dwindling consumption and high inventories, traders say. ''These measures are not enough. It will at best stop a further decline (in demand),'' said an aluminium trader at one of Japan's leading trading houses. ''It's not going to change our forecast for a 2-3 percent fall in Japanese demand for aluminium ingots this year.'' Metals traders were unimpressed by a 16 trillion yen ($125 billion) government package designed to beef up the country's ailing economy. Prime Minister Ryutaro Hashimoto announced the package on April 9. Hashimoto said measures would include income tax cuts of four trillion yen, and the total amount of real spending in the stimulus -- tax reduction and public works spending -- would be 10 trillion yen. Though traders agreed the plan should help lift the economic doom and gloom hanging over Japan, they said its real effects on the base metals sector would not be felt until next year. ''For aluminium, it's the housing and related sectors that are important,'' said the first trader. ''You can't expect much activity there unless people have certain prospects for their long-term income. The employment problem is pretty serious.'' Japan's jobless rate rose to a record 3.6 percent in February as economic ills took their toll, particularly in the manufacturing and construction industries. Japanese demand for copper has been hit by the demise in the construction sector, which is expected to suffer a fall of two percent in new housing starts to 1.3 million this year after a plunge of nearly 20 percent last year. ''All I can say now is it would be nice if our economy picked up in the second half of this year,'' said an industry analyst. ''Unless the economy grows by more than three percent, we in the industry cannot really feel it.'' A copper trader at a Japanese trade house added: ''We won't see much impact (from the stimulus package) before next year. It will take months before they really start constructing buildings under such public investment projects.'' Though the government package is generally expected to add one percentage point to Japan's economic growth this year, the Paris-based Organisation for Economic Co-operation and Development last week predicted a 0.3 percent fall in the country's 1998 gross domestic product. Another serious blow to the base metals industry came with production cuts in Japan's huge automotive sector that pushed down aluminium, copper and zinc consumption. Last month, Honda Motor Co Ltd said it would cut production by more than 10 percent in April and May from year-ago levels, while Japanese media have reported that Toyota Motor Corp, Japan's biggest automaker, would slash its April output by 20 percent. ''I don't see much (in the government package) for zinc,'' said a zinc trader at a European house. ''To raise demand for galvanised steel sheets, you need construction of factories. And you have to see rising car production again.'' The trader said Japanese 1998 demand for zinc might drop to as low as 680,000 tonnes this year from more than 740,000 tonnes last year. ($1 - 128 yen) ((Tokyo Commodities Desk +81-3 3432 6179

To: robnhood who wrote (9802)	4/12/1998 8:39:00 PM
From: goldsnow	Read Replies (1) \| Respond to of 116762

Amid Japan gloom, some warn of too much pessimism 12:45 a.m. Apr 12, 1998 Eastern By Linda Sieg TOKYO, April 12 (Reuters) - Amidst the gloom which greeted Japan's latest effort to turn its economy around, a few people are warning that the real risk might be on the upside. ''It's like a 'Titanic' movie of packages,'' says Richard Jerram, chief economist at ING Barings in Tokyo of Japan's latest and biggest-ever batch of economic stimulus steps. ''It costs a fortune, it's widely expected to flop and in the end, it's surprisingly successful.'' Confidence in Japan's economy has been battered by a string of gloomy data in recent weeks, with some doomsayers warning the world's second-largest economy was on the brink of a 1930s-style Great Depression. Critics have dubbed Prime Minister Ryutaro Hashimoto the ''Herbert Hoover'' of Japan, opposition politicians touted a ''New Deal'' platform, and some pundits invoked the ghost of Franklin Delano Roosevelt adviser Harry Hopkins for guidance. Against that gloomy backdrop, financial markets were left longing for more after Hashimoto decided last week to put fiscal reform on hold and include an extra four trillion yen ($31.0 billion) in once-off income tax cuts in a package worth 10 trillion in fresh stimulus. Behind the pessimism is the belief that while Hashimoto's proposals will rescue Japan from recession and worse, the list of structural ills that needs to be cured is far too long. Among the Herculean tasks many agree must be carried out are broad tax reform including permanent income tax cuts and a speedier reduction of corporate taxes, faster deregulation and the creation of a leaner and more efficient government. Without those changes, such reasoning goes, the foundation for a sustainable recovery cannot be laid. ''Why are things so bad? Because there are not only cyclical factors, but also structural problems and those are getting worse,'' says Susumu Takahashi, a senior economist at Japan Research Institute, a private think-tank. ''It's not enough to just increase demand, the structural ills must also be cured.'' Few would deny that structural faults need to be fixed. But some warn that pessimism can feed on itself. ''People aren't giving them any credit for some of the things they are doing,'' says Larry Duke, a vice president at Citibank in Tokyo. ''I'm not saying that things are going to be booming, but there is potential for more positive growth than the markets expect. They are under-discounting the good news and over-discounting the bad news.'' ING Barings' Jerram argues that too many economists are extrapolating backwards from preconceived forecasts that the economy will not recover -- no matter what. ''Three months ago, the argument was the government won't spend money, so the economy won't recover. Two months ago, the argument was the government will spend money, but not enough. Two weeks ago, it was the government will spend a lot of money, but on the wrong things. Now the argument is they're cutting taxes, but the cuts aren't permanent,'' Jerram says. ''Obviously, there are structural problems, but that doesn't mean fiscal policy is ineffective and the economy never grows.'' Those prepared to look on the bright side point out that while Hashimoto hasn't promised permanent tax cuts, he hasn't ruled them out either. ''I think we could have given Hashimoto's proposals a somewhat higher grade,'' says Masatoshi Kikuchi, a senior market analyst at Daiwa Institute of Research. ''Hashimoto said tax reform would be discussed...and I think there will be more drastic reforms and permanent cuts emerging later in the year,'' Kikuchi added. Others, meanwhile, argue that a magnificent obsession with the admittedly massive problems of Japan's financial firms obscures the relative robustness of its manufacturers. ''Of course the financial industry is in bad shape,'' says Hajime Karatsu, a professor at Tokai University. ''But the financial industry is worth five percent of Japan's GDP (gross domestic product) while the manufacturing industry is worth 25 percent of GDP...and many manufacturers are very buoyant.'' The national financial daily Nihon Keizai Shimbun reported in its Friday evening edition that Hashimoto had said he might ask the government and the ruling Liberal Democratic Party to discuss the possibility of making the promised income tax permanent. ((Tokyo Newsroom +81-3 3432 8022 tokyo.newsroom+reuters.com)) ^MORE@ Copyright 1998 Reuters Limited.