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To: Moneysmith who wrote (69693)	10/6/1998 7:17:00 PM
From: Paul A	Read Replies (1) \| Respond to of 176387

is there any truth to conference call with analysts tomorrow? any confirmation would be appreciated. Any additional drop in this naz. will put us at a new low... me worry?!

To: Moneysmith who wrote (69693)	10/6/1998 7:36:00 PM
From: LWolf	Read Replies (1) \| Respond to of 176387

Ken... since you mentioned Japan and the yen.... thought you might be interested in this item from TheStreet.com The Invisible Mouth: Japan Is the Key By James Padinha Economics Correspondent 10/6/98 4:26 PM ET Pen Pals JACKSON HOLE, Wyo. -- Japan is really the key to everything. And, thankfully, your narrator gets to play God to all kinds of informed market Margarets (all apologies for the obscure Judy Blume reference). Here's a recent (one-sided) correspondence with one of them herewith: Dear James (Sept. 28): The Japanese are running a little more scared from events over the weekend. The collapse of LTCB's subsidiary, Japan Leasing Corp., forced an agreement on banking reform. JLC's creditors pulled back financing as it appeared that the Diet would deny new funding. This collapse will cause at least 20 creditor banks and insurance companies to absorb significant losses. That will aggravate the credit crunch. Also, LTCB has two more subsidiaries just like JLC -- as do several other large banks -- that are likely to face the same fate. Note that the share prices of Mitsubishi Trust & Banking and Toyo Trust both fell sharply today (by Y79 and Y62!). While it is positive that the opposition has agreed to injections of capital into "solvent" institutions to recapitalize, this came at the expense of the current Y13 trillion ($98 billion) plan, which is to be scrapped with the creation of a more stringent law. With the Tankan likely to emphasize the dark side of the economy again on Thursday, legislators are running out of time. Troubled in Tokyo. Dear James (Sept. 29): Don't put much credence into the rumors about joint intervention. Rubin does not want to make things easier on Japan. It seems the only thing the government reacts to is market-induced pressure. Not only will intervention not work long term, it will likely have limited near-term value as well. Just look at what is going on in Japan. The failures of these leasing companies and other businesses are further intensifying the credit crunch. Credit demand is increasing while capital is being destroyed. The only way for the Bank of Japan to satisfy this demand is to circulate more yen -- and that is exactly what it is doing. This process will continue to chip away at the currency's value. Troubled in Tokyo. Dear James (Sept. 29): Came across a perfect passage in The Far Eastern Economic Review: The analogy of a sick patient needing medicine no longer suits Japanese banks; for the most part they more closely resemble crumbling buildings that need to be torn down and rebuilt. Troubled in Tokyo. Dear James (Sept. 30): Recent yen jawboning from Rubin and other authorities speaks to a fear of substantial downside for the currency over the coming weeks. Officials hope to slow the pace of decline in the yen rather than signal a new policy shift. Look at what is coming up this week -- Tankan and unemployment. Both are expected to speak volumes about a weak economy. The tactical verbal campaign is likely an attempt to prevent a swift run for the exits once these reports come out (and once Japanese corporate books close today). But there are still plenty of bearish yen factors. Only a 25-basis-point cut in American rates. Disappointed the market and kept a floor under the dollar. Rubin knew the likelihood of only 25 basis points two days ago when he made his comments. Tankan report will provide further proof of how deep Japan's recession is becoming. The failure of Japanese Leasing Corp. is a bigger event than most market participants realize. The possibility that banks will call in loans to JLC -- despite strong opposition by the Ministry of Finance -- could signal a new trend and provide other financial failures as well as worsen the credit crunch. Global deleveraging (due to LTCM), repatriation of Japanese assets (due to half-year-end), and the Clinton crisis have all led to yen strength. These factors will all dissipate. Under the new rules scheduled to go into effect on Jan. 1, 1999, it will be even easier for ordinary citizens to invest their savings abroad. Look at the bank stocks. Yasuda is at Y70 -- that's about 53 cents! -- and Mitsui is at Y121. Greenspan surely (and Rubin probably) welcomes a gradual yen weakening on the way to solving the banking crisis and restoring economic growth in Japan. The opposition parties are pressing to force banks and insurance companies to value their securities holdings at market price rather than purchase price. Can you imagine the effect of this? Credit lines are drying up for Japan's banks. Some companies are being charged four times more than others to borrow money overnight. Lenders with low credit ratings are paying twice as much on three-month CDs. Earlier this month Japan's central bank governor claimed that "only three or four" Japanese banks are still able to borrow in overseas markets. The Japan premium has risen to 0.583% over for three-month Libor (up from 0.375% in July). (Narrator's note: This means that Japanese banks have to pay 0.583% over what other banks pay on three-month dollar borrowing in the Libor market. Today the Japan premium rose to 0.6146% over.) Shoji Kitta, president of Totan Research, an arm of Japanese money broker Tokyo Tanshi, reports that only three or four banks can borrow in Japan's overnight money markets at the government's target rate of 0.25%. Some have to pay as much as 1.0%. Troubled in Tokyo. Dear James (Oct. 1): The Tankan survey was obviously bad. Large companies are planning to reduce capital investment by 2.3%, and small firms, the heart and soul of Japan's economy, are thinking about retrenching capital investment by 16.7%. Also note the vanishing access to capital that the survey hints toward -- and note that the survey was taken in early September, before the harsh bank reform bill and subsequent plunge in the Nikkei. In short, hard as it is to believe, this sinister-looking Tankan paints a more optimistic picture of Japan than the quickly deteriorating economic reality. Meantime the financial sector has grown more dour on the economy's prospects (if you can believe this is possible) as a result of political dithering and a lack of understanding by the opposition parties regarding bank reform. Banks, for example, will now have an incentive to maintain a capital-adequacy ratio above 8%. But to do this they will call in loans and reduce risk-weighted assets, and that introduces the possibility of further credit crunch intensification. Troubled in Tokyo. The latest out of Japan? (1) The Economic Planning Agency reckons that GDP will fall 1.8% during fiscal 1998 on the heels of a 0.7% contraction during fiscal 1997. (2) Household spending was declining at a 2.4% year-over-year rate as of August. Such spending has now fallen for 10 straight months. As for Happy Monday, well, why not skip all the pussyfooting and proceed directly to soma? © 1998 TheStreet.com, All Rights Reserved.