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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets! -- Ignore unavailable to you. Want to Upgrade?

To: FJB who wrote (5796)	6/10/1998 10:38:00 PM
From: Jess Beltz	Read Replies (1) \| Respond to of 10921

I would like to offer some small bit of comfort, since I have railed pretty hard against Japan Inc. the last couple of days. I do not think that the US will allow Japan to go under if it can be avoided. I think Reuben has a pretty good grasp of the entire Asian situation, and full well knows the importance of Japan. However, I do believe the following: (1) The Japanese economy cannot avoid full scale depression if the banking sector disintegrates. (2) With a declining economy (=> a falling Nikkei and possibly increased loan default rates in the domestic loan portfolio) and a declining yen, there will be further weakening of the regional currencies (=> increasing rate of loan defaults in the foreign loan part of the loan portfolio), and both of these things will lead to further weakening of the assets side of Japanese bank balance sheets. That represents a real impairment of these banks ability to function as financial intermediaries. They are all already in violation of international capital standards. They have terrible lending practices. The "Japanese way" of allocating credit is bankrupt, which is why their banks are. The Japanese government has said that it will stand by depositors to avoid a systemic bank-run. That has proved ineffective as far as stopping investors from pulling their money out of Japan, because depositors still earn virtually nothing on their deposits, hence the free fall of the yen. The only viable course of action that I can see for Japanese banks is strong alliances with healthier western credit institutions. My fear is that they will resist this to the end, or until its too late to make a difference. The US cannot help if the Japanese will not accept the help that is needed. jess. PS - Tiger, good call on the dollar-denominated loans question.