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To: Henry Volquardsen who wrote (13330)	6/17/1998 2:40:00 PM
From: paul ross	Read Replies (1) \| Respond to of 116856

Hi Henry- A couple of questions- "...central banks will likely sterilize impact on their money markets...". How is this done, a CB to CB transaction? "...depreciate the Yen..." By increasing the money supply? Others have speculated that this would have the effect of increasing the Yen's value as the Japanese economy kicks in. Also, wonder what Japan's part of the deal is. Will this be looked upon as the US doing Japan a favor? PR

To: Henry Volquardsen who wrote (13330)	6/17/1998 10:44:00 PM
From: ahhaha	Read Replies (3) \| Respond to of 116856

Depreciate the yen? Isn't that why everyone is so concerned? The yen is depreciating rapidly. What good is that? Makes Japanese assets attractive to foreigners. Why does japan need that? Don't trot out this silly excuse about ailing banks. That has nothing to do with anything. All it means is that some banks have non-performing loans. They aren't getting the income that they expect. So what? Infusion of capital doesn't solve the monetary problem, the problem of falling demand and the problem of Japan's failure to purchase foreign goods. Earlier today I stated the reason for intervention: to prevent the tigers from devaluing and thereby make the US even more non-competitive. They aren't buying any time. When Summers and McDonough tell the MOF that they need more fiscal policy reforms, the MOF will yawn. In several days the market will start selling yen again and then the US has to decide whether it will raise interest rates. Bilateral intervention is headed for disaster. If the US won't raise interest rates, then they should at least get out of the way and let the market decide where rate equilibrium lies. You don't say who is going to raise global inflation. Japan and US in concert? That can't be a policy objective, but it will be the result of these incompetent clowns and their pretense to knowledge. You don't mention another option which is the only rational way to proceed. That way is unilateral monetary policy conducted by the BOJ. If the FED will raise fed funds a little in conjunction, that would help. The BOJ needs to lower reserve requirements and purchase short term government securities for immediate settlement. They need to discourage demand deposits by lowering interest on them. The MOF should get serious about cutting corporate taxes immediately and the Administration needs to provide incentives to Japanese to buy foreign goods even if that means direct subsidy, negative tariff. The private banks need to encourage currency transactions and the BOJ and MOF can help along the lines of changing the currency percentage of reserve requirement. These actions would reverse the negative psychology and would be the first steps to open Japan. The immediate effect would be a rising yen and hence a falling dollar. In face of that the FED needs to lean against ease. They can give the market confidence by showing leadership through raising fed funds and advertise the intent beforehand. The market would find this on its own, but this suasion affirms the value of the Central Bank to the market through responsible action and then the market doesn't freak out and go to extremes. I predict they won't choose your alternatives. That would be the best of all gold worlds. They won't do what I suggest because the BOJ is fearful and the US doesn't want a strong yen. The US prefers to deny the existence of a growing inflation problem. Besides, the Unions have a lot of fairness yet to achieve. Clinton is mad so he needs to throw the slobs a bone. What they will do is more of what has been going on until a crisis situation exists. Regardless of what people think, there is no crisis in Japan or anywhere else except basket case countries, Indonesia, Russia, Iraq, Pakistan, etc. The failure to implement what I've stated will precipitate a real crisis just when we can least afford to address the problem. That's when the BOJ will unilaterally do what I've stated, but the damage will be done and the result of the belated attempt to right the sinking ship will cause inflation in Japan. Our own inflation will be out of the bag and racing upward while the FED chases it with higher rates. That gives us a golden world too.