JIN-268 -- Year-End Optimism and the Currency Leak

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Issue No. 268
Wednesday, March 31, 2004
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CONTENTS

@@ VIEWPOINT: Year-End Optimism and the Currency Leak

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@@ VIEWPOINT: Year-End Optimism and the Currency Leak

It's been a pretty frenetic end to the financial year, but with plenty
of good news to keep things buoyant. Taking aside the great currency
conspiracy for a second (in which the BOJ would reportedly cease its
yen interventions), corporate news has been very encouraging indeed.

The monthly tally of bankruptcies has started, at long last, to fall.
Toyota will this year become the first Japanese company in history to
post profits of 1 trillion yen. The Bank of Japan is talking confidently
about sustained recovery and the Financial Services Agency is finally
muttering about the end to the bad loan problems that have held the
banks -- and therefore the rest of the economy -- in this long and
frustrating limbo.

Now (we still aren't talking about currencies here), what makes the
end of this financial year more remarkable than any of the past
30 years is that the stock market seems to be perfectly happy on its
own. The Nikkei index is high and heading higher, and for once it
is because investors seem to like Japan. In years gone by, the end
of each fiscal year was marked by the most appaling manipulation
on the part of companies hoping to add some momentum to share
prices. That practice dates back to the very recent time when every
company had major cross-shareholdings with at least one other, and
the value of their assets was calculated at current market
values.

From the boardrooms of the mightiest car manufacturer to the lowliest
flower delivery firm, it was in everybody's interest to give the
market a little boost before the books were closed on the financial
year. And because investors knew that was coming, the buying started
some weeks before the end of March.

Prime Minister Koizumi has his fair share of critics, and sometimes it
does seem that his reform program is more impressive on paper than in
action. But here we are looking at serious long-term change to
corporate activity, and it would take a very po-faced, reactionary
LDP die-hard to declare that we were better off in the old days.
Companies are gradually becoming more transparent and the proof
is that US and European investors -- still smarting from Enron,
Ahold and Worldcom -- are prepared to accept the risk of Japanese
corporate norms.

The only sore spot in all this is the currency intervention issue.
We have our own view on this week's fuss.

When the London Times said that BOJ sources had declared an end to
the intervention spree, we believed it. Of course the BOJ does not
set forex policy (as the government first noted in its denials),
but we know perfectly well that no decisions are taken without close
collusion between the BOJ and MOF.

Who was the whistle-blower to the Times? We will never know. It is
important to remember, however, that the byline for the story
includes the name Robert Thomson -- the current Editor-in-Chief
of The Times and an old Asia hand.

In the course of his recent visit to Japan, Thomson met, among
other key figures, the Prime Minister and the Foreign Minister. It
is a safe assumption that whoever he met at the BOJ was a level or
two above the press office.

-- The Editors

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EDITORS
Written and edited by Roland Kelts and
Leo Lewis (editors@japaninc.com)

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