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To: Alex who wrote (17948)	9/7/1998 3:55:00 PM
From: goldsnow	Read Replies (2) \| Respond to of 117113

Russia reeling as central bank governor resigns By Andrew McCathie in Moscow Russia's political and economic crisis deepened yesterday with the resignation of Mr Sergei Dubinin, the governor of the country's central bank. His departure immediately prompted a further steep fall in the rouble, forcing the central bank to again suspend trading of the national currency, which has lost well over 60 per cent of its value since the crisis emerged three weeks ago. The news arrived too late to upset the strongest day's trading in Asian sharemarkets in months, which saw: The Australian dollar maintain its hold above US59›. Japan's Nikkei Index gain 5.3 per cent. Hong Kong's Hang Seng lift 7.8 per cent. The Malaysian Composite surge 22.5 per cent to record its largest one-day gain on record as the Government moved to lower interest rates. "I think the local market's gains reeked of an aggressive short squeeze," said one Australian trader. "Nothing has fundamentally changed around the world." The All Ordinaries Index closed 65.2 points up, the sixth-biggest point rise on record, hitting 2569.2 as $10.8 billion was added to share values. "This is one of the most volatile periods the market has ever seen," said another Australian share trader. Mr Dubinin's decision to stand down, reported by Russian news agency Interfax, came as the country's political leaders battle it out over forming a new government and followed criticism of his handling of the rouble slide from Mr Viktor Chernomyrdin, who is President Yeltsin's choice to be prime minister. But Mr Chernomyrdin's candidacy has run into stiff opposition from communist deputies, who are the major bloc in the Parliament's lower house, the Duma. The Duma was expected to vote overnight Sydney time on Mr Chernomyrdin's nomination. However, with both Mr Yeltsin and the communists standing their ground and the horsetrading continuing, there were signs yesterday that the Duma's expected vote might be delayed until later this week. Despite the mounting pressure on Russia's economy, the country has no government, no economic program and now no central bank governor. What is more, any new candidate for the bank governor's post will also have to be approved by the Duma. With Russia having been a prime factor in the recent upheaval on global financial markets, members of the Group of Seven leading industrial nations are to hold an emergency meeting in London at the weekend. The growing criticism of Mr Dubinin apparently came to a head on Sunday night when Mr Chernomyrdin took to Russian television in an attempt to shore up support for his candidacy to be prime minister. A surprisingly animated Mr Chernomyrdin said he wanted a new central bank governor. He followed up his comments on Monday during a break in the political negotiations with the communists over the prime ministership, attacking Mr Dubinin for what he said was the central bank's inconsistent policy. with Michael Mullane afr.com.au

To: Alex who wrote (17948)	9/7/1998 3:56:00 PM
From: goldsnow	Respond to of 117113

Japan Inc contemplates $750bn pensions black hole By Tony Boyd, Tokyo A little-known financial black hole in the balance sheet of Japan Inc is now estimated to have grown to 60 trillion yen ($750 billion), almost rivalling in magnitude the bad loan problem of the nation's banks. The black hole, which takes the form of unfunded defined benefit pensions promised by corporate Japan, poses a risk to investors and will likely be the trigger that strips Japan of its triple-A sovereign credit rating within the next month. Although the unfunded liabilities are private, ratings agency Moody's Investors Service believes the problem is so huge that it may be treated as a contingent claim on the Japanese Government. Japan's most respected pension industry analyst, Mr Shinji Watanabe of Nikko Research, has told The Australian Financial Review that the size of the problem is now 60 trillion. Japan's Ministry of Health and Welfare says it is only 1.2 trillion but that is based on a series of unrealistic assumptions including 5.5 per cent investment returns and 5 per cent economic growth. "Unfunded pension liabilities are Japan's second bad loan problem," Mr Watanabe said. The Government's estimates of the size of the problem have been shown to be wildly optimistic by the disclosure of Japanese companies with American Depositary Receipts which are forced to adopt US accounting standard FAS 87. Under the US Financial Accounting Standards Board's FAS 87 standard, companies must reveal in their accounts the actuarial present value of pension obligations, the accumulated benefit obligation, the projected benefit obligation and the fair market value of plan assets at balance date. A study by Nikko Research Centre this year of the Japanese companies with ADR programs shows that all 23 companies have inadequate assets to cover their projected benefit obligations. The shortfall of assets over liabilities was 3.9 trillion at March 31 and for some companies the level of unfunded liabilities was equal to more than their net worth. For example, Mitsubishi Electric, which is ranked as one of the top 100 companies in the world by revenue, has unfunded liabilities of 676 billion. That is more than its net worth. As a percentage of shareholders' equity, the shortfall in pension reserves averaged 23.8 per cent for the 23 companies. According to Nomura Research Institute, that represents a major risk factor for management and investors alike. Japanese companies will not be obliged to reveal their retirement income liabilities until fiscal year 2000. Mr Watanabe said the shortfall in assets to cover pension liabilities was growing as more and more companies cut the assumed annual rates of return on their pension assets to more realistic levels. Mr Masao Tamura, a certified pension actuary with Nomura Research Institute, said that while it was prudent to cut the expected rate of return, this pushed up the projected benefit obligations. He said that each 1 per cent cut in the expected rate of return increased the projected benefit obligation by about 20 per cent, which in turn pushed up the shortfall on plan assets. As well as cutting their assumed rates of investment return on pension benefits, Japanese companies are cutting the total level of pension benefits paid. This year Sumitomo Chemical, Hitachi, Nissan Motor, Nippon Steel and Kawasaki Steel all cut their pension benefits. Mr Tamura, who is one of only 300 actuaries in Japan compared with 2,100 in Australia, warned that the safety net for pension fund beneficiaries was "totally inadequate" and that there was no law which would protect the interests of beneficiaries. Disappearing pension benefits will only serve to exacerbate the precautionary savings motive driving sluggish consumption in Japan, according to Ms Kathy Matsui, equity strategist at Goldman Sachs (Japan). Ms Matsui said the exact size of the unfunded pension liabilities of corporate Japan would not be known until 2000 when Japanese accounting standards would be brought into line with the US standards. "Obviously the smokestack industry companies will be the most vulnerable because the average age of employees is much higher and they will have a much higher liability," she said. "So far we have only seen the tip of the iceberg." Japan's corporate pension fund market consists primarily of two types of corporate pension plans: employee pension funds and tax qualified pension plans. EPFs number about 1,800 and cover 12 million workers while TQPP number about 92,000 and cover 11 million workers. Both of these plans are defined benefit schemes that qualify for certain tax exemptions covering their earnings and their payouts. Private pension plans are expected to grow in importance and popularity because of the crisis in the public pension system caused by the rapidly aging population. afr.com.au