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

To: Elmer who wrote (1055)	5/28/1998 9:32:00 AM
From: chirodoc	Read Replies (1) \| Respond to of 3902

just be careful comparing japanese market and japanese banks to u.s. banks. the percent of bad loans held by chase, CCI 10 years ago was measurable and not as serious as those held in japan. that being said, let's watch and see what happens in the upper house elections next month. they may throw hasimoto a curve ball. if hash is out this year and a reform party comes in and deregulates, allows some bad banks to go under, and institutes long term tax cuts. we can start buyings. read below to find out why you might not want to equate u.s. banks 10 years ago with japan, just yet: Here is a hot one -- the market is just beginning to figure out that the Indonesian banks are, let us say, in distress. How did Moody's say it? "Largely insolvent." Between 30% and 70% of loans are nonperforming and at least $20 billion will be needed to fix the banks. No soup, Sherlock! The spread between those estimates -- 30% and 70% -- indicates that Moody's must be working with information that's just about worthless. I would lift the 70 before I would sell the 30. What's even more surprising is that the general public in Indonesia took so long to figure it out. Last night there was what looks to television cameras like an old-fashioned run on BCA, the largest commercial bank in the country. Angry depositors on long lines. The whole banker's nightmare. The most important thing to watch is how this will affect Japan. Got to look not just at the banks but at the big trading companies. The Asian Wall Street Journal is reporting that the exposure of Japanese banks to Indonesia is bigger than what is commonly believed. Koji Omi of the Japanese Economic Planning Agency says the number is $23.3 billion. But that has to be for conventional loans. What about the off-balance sheet transactions? Are they part of that number or are they a whole separate nightmare? Anybody who has ever looked at the kinds of deals that trading companies do has been surprised at how complex they are. They can key off of all kinds of commodity prices and foreign-exchange rates. A major failure off-balance sheet could be just as serious as the failure of a conventional commercial bank loan. And will we ever know unless some bank comes crashing down? My question is on Korea -- a while back I wrote that there are some very scary estimates of the size of the nonperforming domestic debt. Big debate and nobody has real numbers. I raise the question again -- if the Indonesian banks are insolvent, what's the story with the Korean banks? And the off-balance sheet hypothesis may be even more important in the case of Korea. Meanwhile, traders in Japan are telling me that Sakakibara is now reduced to making "private speeches." What is he trying to do, put me out of business? Anyway, the much scrutinized Mr. Yen is calling for government-bond yields at 3% and the dollar at 130. The thing about Sakakibara is that the is a man on a mission: He stands by this idea that Japan needs higher interest rates and a stronger yen! The sad thing is that for as long as there is no recovery in sight, he will continue to say that if everyone had listened to him, Japan would have already been in the black. Meanwhile, I am sure that Sakakibara wasn't too pleased to see a story in the Nihon Keizai Shimbun reporting that the EPA has calculated the purchasing power parity for the yen at 143 (not that I think purchasing power parity has any practical relevance). Now that is suspicious. Are we being prepared for a capitulation on the yen? Maybe the piece in U.S. News & World Report was right about dollar/yen 140-150, after all.