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To: Gary H who wrote (17887)	9/6/1998 10:11:00 PM
From: goldsnow	Read Replies (1) \| Respond to of 116779

So they drop rates in hope that Stocks soar....We shall se if they will, if Japan any example 40000 to 14,000 (lowest rates ever :) US signals rates to ease By Alan Deans, New York Hopes have strengthened that official US interest rates will fall, after the Federal Reserve chairman, Dr Alan Greenspan, played down the risk of inflation breaking out and warned that the American economy would feel the effects of spreading global financial turmoil. Dr Greenspan said the Fed now had a balanced view about inflationary pressures. That could indicate that the rate-setting Federal Open Market Committee has already altered the bias towards lifting interest rates it had adopted earlier this year. At a speech given at the University of California, Dr Greenspan said: "It is just not credible that the United States can remain an oasis of prosperity unaffected by a world that is experiencing greatly increased stress. "Developments overseas have contributed to holding down prices and aggregate demand in the US in the face of strong domestic spending. "As dislocations abroad mount, feeding back on our financial markets, restraint is likely to intensify." Investors pushed market yields and the US dollar down last week on expectations that the plunge in Wall Street equity prices would force the Fed to lower rates. Any move by the central bank would be welcomed internationally because it would encourage capital to leave the safe havens in the US to which it has recently fled and return to some battered economies starved of funds. Dr Greenspan's remarks came after US stocks fell on Friday for the fourth time in five days as concern mounted that a global economic slowdown would cut into corporate profits. The Dow Jones Industrial Average rebounded from a 186-point loss to close down 41.97 points at 7640.25. Speculation about a possible Fed rate cut has also contributed to a recent weakening of the $US. After reaching a high of 147.26 on August 11, the $US has lost almost 8 per cent, falling as low as 133 in trading on Friday. Dr Greenspan said that the FOMC had previously been concerned that rising inflation was the primary threat to the continued expansion of the US economy. "By the time of the committee's August meeting the risks had become balanced and the committee will need to consider carefully the potential ramifications of ongoing developments since that meeting." The FOMC is not due to meet again until September 29 and the minutes from the August meeting will not be released until a few days later. Those minutes should confirm whether the Fed has indeed adopted a neutral or easing bias on interest rates. Dr Greenspan's speech was his most pessimistic assessment yet. Figures released on Friday by the Labor Department showing a rebound in US employment in August disguised a decline in factory jobs that analysts said may herald a slowdown in job growth. The National Association of Purchasing Management's factory index signalled the manufacturing economy contracted for the third month in a row in August, as the recession in Asia hurt export orders. Dr Greenspan's comments also came as top US economic officials pleaded with Japan to stimulate its economy, saying it held the key to defusing the global crisis. Dr Greenspan joined a meeting in San Francisco on Friday night between US Treasury Secretary Mr Robert Rubin and the Japanese Finance Minister, Mr Kiichi Miyazawa, at which Japan offered no new pledges to revive its economy. In his University of California speech, Dr Greenspan also cast doubts on the ability of companies to extract productivity gains because of a backlog of investments. He said this would weaken expectations of securities analysts that profits would grow at 13 per cent annually during the next three to five years. He also counselled caution in the wake of the large swings on Wall Street. "We have learned in recent weeks that just as a bull stockmarket feels unending and secure as an economy and stockmarket move forward, so it can feel when markets contract that recovery is inconceivable," he said. "Both, of course, are wrong." afr.com.au

To: Gary H who wrote (17887)	9/7/1998 8:02:00 PM
From: goldsnow	Read Replies (2) \| Respond to of 116779

U.S., Japan deepen dialogue of mistrust 04:15 p.m Sep 07, 1998 Eastern By Linda Sieg TOKYO (Reuters) - Maybe they should have stayed at home. That, at least, was the reaction of some cynics to a meeting of U.S. and Japanese finance chiefs that appears mainly to have deepened mistrust among policy-makers in the world's two biggest economies. ''They might as well have done this by video conference,'' said one foreign economist commenting on the outcome of talks between Finance Minister Kiichi Miyazawa and Treasury Secretary Robert Rubin in San Francisco on Friday. ''The United States is exerting more pressure and Japan is reacting by saying the world's problems are not its fault,'' the economist said. ''It's a ... dialogue of mistrust.'' Little emerged from the talks besides familiar -- if more strident -- U.S. demands for Japan to fix its economy and its banks to help avert global disaster and insistence by Tokyo that it is doing all it can given domestic constraints. U.S. calls for action have grown increasingly shrill over the past year as Asia's financial crisis has worsened, Russia has slid into turmoil and contagion has threatened to engulf Latin America's emerging markets. ''The U.S. side has become more open, more direct and less diplomatic,'' said Chris Calderwood, chief economist at Jardine Fleming Securities in Tokyo. In response, some Japanese officials counter that Tokyo is being unjustly cast as the ''culprit'' behind global financial woes, the source of which they say lies beyond Japanese shores. ''It's time to end the pattern of always making Japan the culprit,'' one Japanese government source said after the talks and a dinner in which Rubin and Miyazawa were joined by U.S. Federal Reserve Chairman Alan Greenspan, a long-time friend of Japan's 78-year-old finance minister and former premier. Behind the mounting mutual recriminations, analysts say, are both U.S. fears that emerging market turmoil will seriously damage America's economy and Japanese political deadlock, which is foiling swift action on the banking system -- even if policy-makers were prepared to take it. ''Miyazawa has a real problem -- he can't make promises and deliver on them,'' said Robert Feldman, chief economist for Japan at Morgan Stanley. ''It's a fundamental lack of consensus on policy (in Japan) that is the difficulty.'' Domestic critics, meanwhile, share much of the U.S. impatience with Japanese authorities' apparent inability to implement policies to clean up a banking system burdened by heaps of bad loans eight years after the nation's asset price bubble burst. ''Now is the time for all politicians to make a kind of unanimous agreement,'' Keikichi Honda of the Institute for International Monetary Affairs, a private think tank, said last week. ''Time is of the essence in coping with this kind of crisis.'' Japan's ruling Liberal Democratic Party, which failed to win control of parliament's Upper House in an election in July, is in fact desperately seeking to forge a compromise on banking policy with a fragmented opposition and avoid being forced to call a snap poll for the more powerful Lower House. The government approach calls for mergers subsidized by public fund injections for troubled big banks such as the ailing Long-Term Credit Bank of Japan Ltd and public takeovers of failed smaller banks. The opposition wants to leave banks to the markets and the courts, but would provide for nationalizing banks if their collapse might disrupt the financial system. Signs of a potential deal between the LDP and the opposition emerged last week -- but some analysts say a Lower House election may ultimately provide the only hope of resolving Japan's policy deadlock. ''It would be nice if the financial situation were resolved, either through an agreement between opposition and ruling parties or with an election,'' Calderwood said. ''The danger, of course, is that we will just exchange one government for another and still have a fragmented situation,'' he added. ''The LDP is the biggest single party in the Upper House and can just as obstructionist if they choose.'' Copyright 1998 Reuters Limited.