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Strategies & Market Trends : JAPAN-Nikkei-Time to go back up? -- Ignore unavailable to you. Want to Upgrade?

To: John Carson who wrote (1508)	10/9/1998 4:14:00 PM
From: chirodoc	Respond to of 3902

good try, and a great hypothesis greenie and rubie would not go for that imho lots of info indicates that japanese hedge funds needed to unwind long dollar short yen positions they sold massive amounts of dollars also many japanese invetors sensing that bank bailout was at hand and dollar was weakening (clintongate, u.s. recession on the horizon) repatriated massive amounts of dollars to yen but your analysis was accurate minus the fed curtis

To: John Carson who wrote (1508)	10/12/1998 12:24:00 AM
From: chirodoc	Respond to of 3902

Japan Big BANG Phase II By Martin A. Armstrong -------------------------------------------------------------------------------- April 1st brought Phase I of Japanese Big Bang, which marked the deregulation of the securities industry. Commissions on transactions in excess of 50,000 yen are now negotiable and this is already causing a serious issue of competition. The likelihood of numerous small brokerage houses in Japan rolling over is quite high. Without new forms of western style products, they will be the first victims of Big Bang over the next 12 months. Phase I has also sparked some fears in the hearts of the Japanese securities industry. We have seen a rash of new commodity fund activity in Japan. A commodity fund in Japan is a futures fund. There is a regulation that 51% must be invested in commodities at all times and the balance can be invested in financial futures not commodities. The schemes used to meet these requirements are largely a cash-and-carry business in gold. In other words, 51% of the cash is invested in gold, which is then sold forward. In reality, this earns interest and has not exposure to commodities at all. However, a cash-and-carry gold-repo meets the requirements for a 51% commodity investment with the remainder being prohibited from trading in commodity futures. Therefore, those who have got themselves all excited how Japanese will now buy the metals aggressively had better look a little closer. A Japanese commodity fund is a fund that is not allowed to invest in commodities if you understand the inner workings of these products. While deregulation of the securities industry has now allowed the issue of these futures oriented products; we are still talking about a few billion dollars and nothing serious. The big money lies in Phase II of Big Bang due to arrive in December 1998. Phase II will be the deregulation of the trust funds currently some US$9 trillion under management in Japan. Anyone questioning why we are warning that the dollar/yen could reach 278 by 2003 had better get familiar with Phase II of Big Bang. The investment trusts in Japan are the equivalent of the mutual fund industry in the west. Currently, the total amount of funds in this area amounts to JPY1,200 trillion (equivalent to US$9 trillion) of individual financial assets in Japan. It has been the stiff regulations in this industry that has prevented massive amounts of capital leaving Japan in search of higher yield and opportunity. While foreign investment trusts management companies (ITMC) in Japan have demonstrated favorable performances over and above their Japanese counterparts, the amounts of funds raised thus far has still been minimal in comparison. Goldman Sachs ITMC has captured only JPY410 billion (US$3 billion), Alliance Capital ITMC has attracted JPY523 billion (US$3.84 billion) at the end of March 1998. While such inroads have been impressive, the amount captured by foreign fund managers is still quite small in comparison to the potential. In Japan, interest in asset management is increasing significantly. In case of young Japanese investors, they are ready to take risks and try to increase assets by moving offshore. This trend has been helped by uncertainty in the future whether their expected pensions in Japan will ever be realized. Confidence in Japan, both public and private, is starting to collapse. We see this trend similar to that which occurred in the US a decade ago when the public trust in social security began to decline. A CNN poll of several years ago in the United States taken among of the younger generation showed that over 50% believe that stood a greater chance of seeing a UFO than their first social security check. In Japan, the same feeling is starting to rise significantly. Among this generation, its is expected that the investment trusts will grow from the current level of JPY40 trillion (US$294 billion) to JPY200 - 250 trillion (US$1.47 - 1.84 trillion) in the coming 10 years. This is yet another opportunity for Phase II of Big Bang. The key word in Phase II is "Deregulation" in December 1998. Sales of investment trusts through city banks counters will be completely liberalized. So far securities companies have monopolized sales of investment trusts. Now, banks and life insurance companies will be able to sell investment trusts managed by themselves or by third parties from December this year. In other words – Big Bang has just begun. We believe that NO degree of government intervention will succeed in preventing the dollar from rising to pre-G5 levels of 278 over the next few years.

To: John Carson who wrote (1508)	10/18/1998 11:06:00 AM
From: chirodoc	Read Replies (2) \| Respond to of 3902

October 18, 1998 MARKET INSIGHT Elizabeth Allen of Japan Fund By KENNETH N. GILPIN ntil the Federal Reserve Board cut interest rates again and Congress agreed to more than $90 billion in financing for the International Monetary Fund, the biggest development last week in the effort to stave off global recession seemed to be made in Japan. After numerous false starts, Tokyo announced a $500 billion plan to rescue ailing Japanese banks. Western officials, who have been pressing the Japanese to shore up their banking system, hoped it would help pull the Japanese economy out of recession. Those were the hopes. But as the details filter out, the plan appears to offer less rather than more. Elizabeth Allan, a portfolio manager at the Japan Fund for the last 11 years and a student of the country for more than a quarter-century, put it in perspective during a telephone conversation from Tokyo early Friday morning. Q. What role do you think Asia, and Japan in particular, played in the decision by the Fed chairman, Alan Greenspan, to cut rates? A. I think the reason he did it is because the Japanese stock market has reacted so weakly to the bank package. As of Thursday, the market was actually below where it was when the package was announced. Q. The bank program was billed as one that would reform Japanese banks, allowing the healthy to survive and the weak to fail. It doesn't do that, does it? A. This is a bailout, not reform. I think the system needs to be reformed, but the politicians have a different view. They much prefer a muddle-through approach rather than a dramatic one, and seem to have retreated from an approach which calls for a stringent inquiry into the health of the system. Q. Still, we're talking about half a trillion dollars. Won't that help? A. On a short-term basis, it does look as though the stimulus that is part of this announcement will have some positive impact on the economy, even though it will help most of the country's traditionally strong interest groups the most, like agriculture and real estate interests. Q. Consumers are seen as another troubled element in the economy. Have you seen evidence that demand is picking up? A. I have been here about a week on this trip, and one of the things I have been looking at is the retail sector. As I wandered around shops last weekend, there were mobs and mobs of people out, but not many were walking out of the stores with shopping bags. That tells me people are interested, but in terms of actual purchases it looks somewhat subdued. Q. What was the talk? A. One of my favorite sources to find out what folks are thinking is taxi drivers. I had one on Thursday who was utterly scornful of the bank package, saying that everyone involved in the package lied to the people. He also said that until there is confidence in the system, there will be no change, and that consumers are not so easily fooled. That is exactly the point. Until there is some way of knowing which banks are solvent, the whole economic infrastructure is suspect. Q. You are not exactly describing an economy on the mend. How do you invest the Japan Fund's money under such conditions? A. We have tried to maintain a balance between unexciting but attractively valued domestic names, and there are some, even in a weak economic environment. I have also been looking at Japanese pharmaceutical companies, which until recently had a fairly low profile on the international scene. Some of the larger-cap names are Takeda, Yamanouchi and Chugai. Q. A year ago, some people were saying Japanese stocks were cheap. They are even cheaper now. What sort of advice do you give to someone considering investing? A. It is important to be very selective investing in Japan at this point and has been for some time. But for those with a time horizon of five years or more, it is important to realize that at some point Japan, an important country with many strengths, will come out of this. Q. What sort of indicators suggesting a turn is coming are you looking for? A. The most important ones are a reduction in capacity in many areas, starting with the banking system. If they try to keep every bank alive then even the best ones will be hard pressed to make a profit. But it is not limited to banking. It is also true in a number of other sectors, from agriculture and retailing to manufacturing. Q. Will the rest of Asia remain sick until Japan gets well? A. Most people would say the rest of Asia can't rebound without Japan. A stronger Japan would be a positive. But Asia is going to need to think about planning for its short- and mid-term future without the help of a stronger Japan.